HMRC can talk about individual taxpayer’s affairs – so what they’ve said to the PAC is wrong

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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.