As many readers of this blog will know, the standard response of HMRC when asked about the affairs of companies like Google, Amazon and Starbucks at the Public Accounts Committee and elsewhere is that they cannot discuss individual taxpayer's affairs. It's a wonderful let out. What we also now know is that it is wrong because of a decision reported just over a week ago but which I've missed to date from a judicial review.
The judicial review was brought by Ingenious Media. As the summary of the hearing notes:
This is an application for judicial review of a decision of the Defendants ("HMRC"), acting by one of their most senior officials, the Permanent Secretary for Tax at the relevant time (David Hartnett - "Mr Hartnett"), to disclose information relating to the First Claimant (" Ingenious Media ") and the Second Claimant ("Mr McKenna") in an "off the record" briefing with two journalists from The Times newspaper on 14 June 2012. The journalists, Alexi Mostrous and Fay Schlesinger, published articles in The Times on 21 June 2012 regarding tax avoidance schemes, including film investment schemes, in which they named Ingenious Media and Mr McKenna, among others, as the promoters of such schemes. In their articles, Mr Mostrous and Ms Schlesinger drew upon and quoted statements made by Mr Hartnett in the briefing regarding the Claimants. The Claimants seek declaratory relief that the disclosures made by Mr Hartnett were unlawful.
In effect, what was being decided was whether or not Dave Hartnett could talk about an individual taxpayer's affairs to the press, or not, whether or not the press was meant to quote him specifically, or not. The Revenue defended Hartnett.
The critical decisions are in a series of paragraphs starting at 43, and say (I have edited for the sake of brevity):
I consider that Mr Hartnett could properly and rationally take the view in the circumstances of the briefing that it would assist HMRC in the exercise of their tax collection functions to seek to foster a spirit of co-operation with the journalists, and that to do that it would be desirable to discuss the matters in which they were interested and about which they were already well informed with measured frankness. Mr Hartnett could properly and rationally take the view that the limited disclosures which he made in relation to the Claimants were directly relevant to the discussion with the journalists and were appropriate to be made to foster such a spirit of co-operation.
In general, it is legitimate for HMRC to seek to maintain good and co-operative relations with the press. The efficient and effective collection of tax which is due is a matter of obvious public interest and concern. Coverage in the press about such matters is vital as a way of informing public debate about them, which is strongly in the public interest in a well-functioning democracy. HMRC have limited resources to devote to the many aspects of their tax collection work, and it is legitimate and appropriate for them to seek to maintain relations with the press and through them with the public to inform public debate about the tax regime and the use of HMRC's resources. It is also relevant to the exercise of HMRC's functions to provide proper and accurate information to correct mis-apprehensions or captious criticism regarding the exercise of their functions (such as any misplaced suggestion that they had engaged in unduly lenient "cosy deals" with certain taxpayers), in order to maintain public confidence in the tax system. If such confidence were undermined, the efficient collection of taxes could be jeopardised, as disaffected taxpayers might withhold co-operation from the tax authorities. These considerations provided good objective grounds for Mr Hartnett's decision to participate in the briefing and to seek to foster the spirit of co-operation with the journalists to which I have referred.
Mr Hartnett's wish to encourage the journalists to share information with HMRC about tax avoidance, which could be of direct assistance to HMRC in relation to their tax collection functions by helping to inform them about where to focus their attention and investigations, was a further legitimate basis for that decision. He could rationally and lawfully take the view that the journalists would be unlikely to assist HMRC in this way unless HMRC for their part demonstrated a degree of measured frankness about the topics under discussion in return.
In addition, I consider that Mr Hartnett could lawfully and rationally take the view he did regarding co-operation and sharing information with the journalists at the briefing so as to encourage them to understand and convey to the public the negative attitude which HMRC had to participation by taxpayers in film investment schemes.
All the claims made by Ingenious were dismissed.
But let's be clear what that means, which is that HMRC are now clearly at liberty to discuss a taxpayer's affairs if it is in the public interest to do so, tax compliance is promoted as a result, understanding of other taxpayers is enhanced as a consequence and the Revenue's approach is better understood as a result of the discussion.
I agree with that. But it also means that all those HMRC officials who have sat in front of the PAC and said they cannot comment on an individual taxpayer's affairs are wrong to have done so. If HMRC is at liberty to be open with the press on such matters then they have a duty to be so with the PAC. That has not been the case.
I'd have Ed Troup back in front of the committee if I was chair of the committee to explain past excuses. The idea that HMRC can be open with the press abut not with parliament is wholly unacceptable, and has to be squashed once and for all.
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I suggest that the committee is happy for the excuse to continue. They don’t want their affairs to be looked into.
Is it correct that people don’t pay tax on company shares, like Mrs Hodges claimed on Channel 4.
The latter is far too complex to be summarised in one line – sorry
Isn’t there a tax on capital gains, or is this a totally different issue to that?
Taxes on corporate capital gains are not the same as personal ones
The judgement has only just come out and unlikely HMRC would have fully digested the implications at the time of the recent PAC meeting. Add to the that the fact this is a high court ruling and Ingenious have sought leave to appeal, it is no wonder HMRC have stuck to the line that they can’t disclose at this point in time.
even i, the Office Cat, knew that Hartnett briefed journalists all the time. how did The Times get details of Jimmy Carr’s tax affairs in the first place? go and read Redknapp’s book on how the media accompanied HMRC when they raided his home at dawn. the truth, as the judgment shows, is that HMRC ‘leaks’ when it suits them and cries ‘taxpayer confidentiality’ when it’s convenient.
As a matter of fact, Mr Harnett and Ms Homer insisted before the PAC on 27 June 2012 that had no discretion to discuss the tax affairs of Goldman Sachs and others, even in private for the sake of maintianing public confidence in the tax system as suggested by Margaret Hodge, 10 days after Hartnett had spent 75 minutes discussing the tax affairs of Ingenious Media with two journalists from The Times’ journalists. See below and note Q7:
http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/c385-ii/c38501.htm
Q7 Chair: I think we can pursue this. I simply have to record what I think is the Committee’s view: there are at present so many question marks hanging over whether or not the settlements are in the public interest and properly defend the taxpayer’s interest, and are fair and equal before the law, that it would really help you to satisfy Parliament and, through Parliament, the public, if you were able to disclose to us, even in private-and we would keep it in confidence-some of the papers that have given rise to enormous questions about whether your Department-the Department for which you are now responsible and accountable-is really acting properly and protecting the taxpayer’s interest.
What do you mean by ‘The judgement has only just come out and unlikely HMRC would have fully digested the implications at the time of the recent PAC meeting’? Have you read the judgment? The judge AGREED WITH HMRC that they had the discretion to disclose taxpayer confidential info in the public interest.
This judgment is not some bolt from the blue that HMRC has to digest: the judge can only have come to these conclusions after hearing HMRC argue for them in court. To think it worthwhile defending the case, they must have had reason to believe that the statements they made to the PAC regarding their discretion were false; and in defending it, they were actually insisting that they were false.
Ok – I don’t think the original purpose behind film schemes was a dishonourable one. I accept that over time they were abused eg the funding of soap operas. However, HMRC were willing to take action to stop tax leakage here.
However, the decision by Dave Hartnet smacks of rank hypocrisy.
Rightly or wrongly the message that it is coming cross to me is as that if you are big enough ie a globe trotting multi national, you are allowed to do what you like and we, HMRC, won’t say boo to a goose. However, if you are not in the “premier league”, we, HMRC, are going to do what we like, and we’re slate you to the media if we wish!
Sorry, I’m sick and tired of our two tier tax system. It’s time HMRC starting having a go at Google, Apple et al as well as small fry such as Ingenious Media!
May I suggest that you notice the difference between Ingenious Media, headed by Mr McKenna which advises investors on, inter alia, schemes with “tax benefits” and Incisive Media which is a respectable publishing house before the latter’s lawyers notice your typo?
Thank you
Probably an autocorrect error
Either way, appreciated
Whilst the court case might clarify the things, the important issue is that HMRC clearly THOUGHT (rightly or wrongly) that they could make disclosures to the press. If they thought that, then logically they should think that they can make disclosures to the PAC (again, rightly or wrongly). To believe the first, but not the second smacks of double standards.
Exactly my point
Odd how you can get it and some can’t
To paraphrase – there are none so thick as those who don’t want to understand.
If you deal with the HMRC you will learn very quickly that they don’t think.
Actually the large, almost overwhelming, majority of humans in HMRC with whom I have spoken do think – it is their computer systems (which cannot, by definition, think) that are so appalling.
“But let’s be clear what that means, which is that HMRC are now clearly at liberty to discuss a taxpayer’s affairs if it is in the public interest to do so”
If you read paragraphs 49 and 50 of the judgement you will see that the Judge in the case which you say supports your view does, in fact, say the complete opposite.
A brief extract demonstrates.
“Thus, for example, it would have been a matter for grave concern and close scrutiny by the court if Mr Hartnett had given the journalists (even in an “off the record” briefing) access to the full tax files of Mr McKenna and Ingenious Media , with all the private information which they had supplied to HMRC about themselves, even if he did think that such a course might help in some way with the collection of tax.”
It would help if you read what I wrote
I did not ask for details
I asked that policy issues be discussed before the PAC as HMRC proved they can do with the press
That does not for one minute conflict with a thing the ruling states in any way at all
Then the headline is misleading. As the ruling notes, HMRC cannot talk about an individual/firm tax affairs.
But that, as I have already noted, is not the point being made by me, if the judicial review
So why are you wilfully missing the point?
That’s not actually what you said above, Richard, you said that:
“HMRC are now clearly at liberty to discuss a taxpayer’s affairs if it is in the public interest to do so, tax compliance is promoted as a result, understanding of other taxpayers is enhanced as a consequence and the Revenue’s approach is better understood as a result of the discussion.”
That, on it’s own, is not a sufficient summary of the case’s ratio; you have to add that HMRC are still not entitled to pass on any private information that taxpayers provide to HMRC in order to agree their tax affairs (para 51).
I agree that it should stop some of the silly “take a hypothetical coffee shop company with a Netherlands coffee-roasting subsidiary” nonsense; it should be possible for HMRC to tell the PAC how they look at transfer pricing issues when dealing with Starbucks. What it doesn’t do is allow any revelation of, for example, the mark-up originally used, what it was reduced to, etc. I’m not sure I can see any specific information the PAC could now legitimately ask HMRC to disclose which they were not prepared to previously, other than being more open about names.
See comment elsewhere
I do agree by the way that it smacks of hypocrisy – Tell journalists on the one hand and say you can’t disclose to the PAC on the other. I suspect in front of the PAC they have to spout the party line since that is (sort of) part of their charter and to deviate would open them up to criticism on that angle from the PAC. Damned either way as by disclosing to the media they have really just shot themselves in the foot and shown their duplicity in such matters.
All very odd as Richard points out in his subsequent blog.
Isn’t it more the case that the senior management of HMRC are out of their depth?
Would they get top jobs in the private sector? I think not. My opinion is that they are headless chickens who under public pressure really don’t know what to do or say next.
Probably some truth in that – Too much of a CMA attitude.
… and let’s not forget that HMRC’s top lawyer, Anthony Inglese, was forced by the PAC to swear an oath to tell the truth, when he claimed repeatedly that he couldn’t explain his role on the Goldman Sachs and Vodafone deals on the grounds of taxpayer confidentiality:
http://www.bbc.co.uk/news/business-15630606