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England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Ingenious Media Holdings Plc & Anor, R (on the application of) v HM Revenue & Customs  EWHC 3258 (Admin) (25 October 2013)
Cite as:  BTC 3,  EWHC 3258 (Admin),  STC 673,  STI 3400,  ACD 65,  WLR(D) 410
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| The Queen on the application of
(1) Ingenious Media Holdings plc
(2) Patrick McKenna
|- and -
|The Commissioners for her Majesty's Revenue & Customs
James Eadie QC, David Pievsky (instructed by HMRC Solicitor) for the Defendant
Hearing date: 9/10/13
Crown Copyright ©
Mr Justice Sales :
i) Mr Mostrous began by explaining that The Times had been doing a lot of work looking into tax avoidance, the persons involved in it, the sort of schemes being used and the sums involved. He said that they had built up a lot of evidence about different sorts of schemes and wanted to find out about HMRC's "reaction and interaction with those schemes". The discussion proceeded to touch on proposals for introduction of a general anti-avoidance rule in the United Kingdom, other legislative responses to tax avoidance and the resources available to HMRC to address tax avoidance and tax evasion;
ii) The journalists then taxed Mr Hartnett with the suggestion that HMRC had agreed unduly lenient settlements of tax liability with some taxpayers. Mr Hartnett denied this vigorously, and gave as an example the way in which HMRC were prepared to stick to their guns in their dealings with a named individual whom Ms Schlesinger had indicated was of interest in The Times' investigation. The name was redacted in the transcript: I will refer to him simply as X. Mr Hartnett said that he had met and engaged with X, because X promoted tax avoidance and HMRC wished to stop tax avoidance: "we engage with people who promote tax avoidance because we want to stop them" (that is to say, not in order to try to make "cosy" deals with them). He then said that there was one other notable individual in the field of film schemes whom the journalists had not mentioned, "but I've seen him too". Ms Schlesinger immediately identified this person as Mr McKenna and Mr Hartnett in substance confirmed this. He emphasised that he had not seen either of Mr McKenna or X on his own, but only with lawyers and investigators present. Mr Tomlinson sought to suggest that by introducing Mr McKenna into the discussion in this way, Mr Hartnett singled him and his company, Ingenious Media, out for discussion in an unfair and improper way amounting to abuse of power. I do not accept this suggestion. In my view, on a fair reading of the discussion in the transcript, Mr Hartnett only referred to Mr McKenna (without initially naming him) in order to demonstrate to the journalists that he was being open with them in the course of rebutting the suggestion that he met those involved in tax avoidance to arrange "cosy" deals with them. He did not refer to Mr McKenna in order to target him in an inappropriate way. Reference to him in the context of tax avoidance involving film investment schemes was appropriate and natural in the context of the discussion with the journalists. It was immediately clear that the journalists were already well aware of the identity of Mr McKenna and his involvement in promoting film investment schemes;
iii) Mr Hartnett said that film investment schemes were a £5 billion risk for HMRC, meaning that use of them put the collection of that amount of tax at risk;
iv) Mr Mostrous asked if Mr McKenna was operating any active schemes, to which Mr Hartnett said that he did not know, but confirmed that he had never left "his radar";
v) Mr Mostrous asked Mr Hartnett what he thought of Mr McKenna, and Mr Hartnett replied:"He's an urbane man, he's a former Deloitte partner, he's a clever guy, he's made a fortune, he's a banker and all of that but actually he's a big risk for us so we would like to recover lots of the tax relief that he's generated for himself and other people. Are we winning? I would say beginning to "
vi) Mr Mostrous asked if that comment applied to Mr McKenna as well as film investment schemes in general, and Mr Hartnett replied:"I think we'll clean up on film schemes over the next few years. You may end up laughing at that statement because maybe we'll lose it in the courts, litigation's a hell of a risk, but you won't find anybody here at all, even the most pro-wealthy people, and I'm not sure we've got any, who thinks film schemes are anything other than scams for scumbags."At this point in the briefing Mr Franklin and Mr Hartnett both emphasised that Mr Hartnett was speaking off the record, and Mr Mostrous commented that it was a shame to waste the final phrase off the record;
vii) There was then some general discussion about film investment schemes before Mr Hartnett and the journalists went on to discuss other forms of tax avoidance or tax planning schemes and other matters. At the end of the meeting Mr Hartnett asked the journalists for the information they held about the matters discussed during the briefing. That request was followed up later, but in the event the journalists did not provide HMRC with the information they had.
The legal framework and grounds of challenge
(1) Revenue and Customs officials may not disclose information which is held by the Revenue and Customs in connection with a function of the Revenue and Customs.
(2) But subsection (1) does not apply to a disclosure -
(i) is made for the purposes of a function of the Revenue and Customs, and
(ii) does not contravene any restriction imposed by the Commissioners "
"In this Act
(a) 'function' means any power or duty (including a power or duty that is ancillary to another power or duty), and
(b) a reference to the functions of the Commissioners or of officers of Revenue and Customs is a reference to the functions conferred
(i) by virtue of the Act, or
(ii) by or by virtue of any enactment passed or made after the commencement of this Act."
"This manual will provide you with guidance on the circumstances in which information may be disclosed outside HMRC, and within HMRC. Please read and understand the guidance in this manual before making any disclosures of HMRC information.
Following this guidance will help you disclose in a lawful way. There are sanctions for those who disclose information when there is not lawful authority to do so, including criminal sanctions for more serious cases."
"IDG40430 Sharing information outside of HMRC: disclosure for HMRC's functions: disclosing customer information
HMRC may disclose customer information (i.e. information which identifies a HMRC customer, or allows the recipient to deduce information about the identity of a customer) where such a disclosure is necessary for the purpose of HMRC functions.
How can I determine whether a disclosure is "necessary" for HMRC's functions?
Whether or not a disclosure is necessary can be a difficult judgement to make but the main consideration is whether making the disclosure will enable you to carry out the functions of the department. You should consider each disclosure on a case-by-case basis and if you are content that the disclosure is required to enable you to carry out your duties, then you can lawfully disclose. If in doubt seek guidance from Information Policy and Disclosure (see IDG80100).
Examples of necessary disclosure include:
- passing HMRC debt details to the Official Receiver in bankruptcy work
- providing the police with details of a forthcoming visit so they can assess the health and safety risk (see IDG40460),
- making inquiries about a HMRC customer with a third party (see IDG30400)
- carrying out distraint in a public place.
In these cases, the disclosure of identifiable personal details is directly necessary for the performance of HMRC's functions.
What if there is more than one way to carry out HMRC's function?
"Necessary" is not restricted solely to situations in which the only way to carry out a HMRC function is to make the disclosure. There can be situations where a number of ways forward may be available, some of which involve disclosure of customer information and some of which don't.
For example, if by not making a disclosure HMRC were to be less effective in carrying out its own functions then the disclosure should be made. A situation like this might be where a tax enquiry could be concluded more quickly by revealing information obtained from a third party. We should not wait until forced to reveal this information, such as by an order in court proceedings if, by disclosing it earlier, the HMRC customer is more likely to recognise and agree to their true tax liability. An early disclosure is more resource efficient for both HMRC and the customer.
Similar examples may apply where HMRC is seeking to be more effective, i.e. HMRC could carry out its functions without the disclosure, but by making the disclosure, those functions are carried out more effectively.
Proportionality (see IDG40160 and IDG40140) is a particular consideration here too. Consider the infringement of the individual customer's rights to privacy against the necessity of the disclosure. Is the infringement necessary and proportionate to the objective being sought? Seek advice from Information Policy and Disclosure if in doubt (IDG80100).
How to make a lawful disclosure of customer information
It will be lawful to disclose customer information provided that:
- only the minimum level of information about the customer is disclosed to allow the function to be carried out, and
- the making of the disclosure is necessary (as described above) for the exercise of HMRC's functions.
Common situations where a disclosure of customer information would not be lawful
There are many situations where the function of HMRC can be carried out without making the disclosure, yet the disclosure would nonetheless bring broader benefits. An example here might be the provision of information about cash seizures to the police. Providing cash seizure information is not necessary for HMRC to carry out its functions, or to help progress particular cases, but it may help the wider fight against crime and so benefits would accrue to law enforcement (perhaps including HMRC) from the disclosure.
But for the disclosure of customer information this is not sufficient. There must be a more direct connection to HMRC's functions. Such disclosures cannot be made for the purposes of HMRC's functions, but often there will be another lawful method of disclosure such as a legal gateway (IDG40320) or public interest (IDG60000).
Particular difficulties can occur where the functions of HMRC and another person or government department are closely tied together. Distinguishing whether disclosure supports HMRC's functions, the other person's functions, or indeed the functions of both, is problematic. Where disclosures in such situations are contemplated, further guidance should be sought first (see IDG80100)."
"Right to respect for private and family life
1. Everyone has the right to respect for his private and family life, his home and correspondence.
2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others."
"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."
(i) Breach of section 18(1) of the 2005 Act, read with section 18(2)(a) Ground 1(A)
"Is it for the court to make the necessary evaluative judgments as primary decision-maker or is the proper approach for the court to treat HMRC as the primary decision-maker for making such evaluative judgments , having regard to the evidence before them, and subject only to review by the court to ensure that their judgment was not an irrational one? In my judgment, the latter is the correct approach on an issue of this kind. HMRC are the body entrusted by Parliament with the role of administering the tax system, who have made the relevant decision . They have experience and expertise in making evaluative judgments of the kind in question here. .."
(ii) Unlawfulness under section 182 of the 1989 Act Ground 1(B)
(iii) Breach of legitimate expectation in relation to IDG40430
"There is another class of case, in which an absence of detrimental reliance on the part of the individual may be irrelevant. Where one is dealing with a general statement of policy (i.e. at the other end of the spectrum of assurances from the present case) and there is no question of the public authority changing that general policy (so it is not an In re Findlay [ AC 318] type of case), then ordinary rules of public law preventing a public authority from acting arbitrarily and capriciously will have the effect that the authority will not be entitled to disapply that policy in an individual case where there is no rational basis for distinguishing that case from the general run of cases covered by the policy: cf Mullen [ UKHL 18;  1 AC 1] at . Like cases should be treated alike, and in such a situation the individual will have a good claim to be entitled to the benefit of the policy in his case even though there has been no detrimental reliance on his part (and, indeed, even if he was not personally aware of the policy). This seems to be the sort of case contemplated by Sedley LJ in Begbie [ 1 WLR 1115] at 1133D-E ("I have no difficulty with the proposition that in cases where government has made known how it intends to exercise its powers which affect the public at large it may be held to its word irrespective of whether the applicant had been relying specifically upon it") and by Bingham LJ in another leading case in this area, R v IRC, ex p. MFK Underwriting Agencies Ltd  1 WLR 1545, at 1569C-D ("No doubt a statement formally published by the Inland Revenue to the world might safely be regarded as binding, subject to its terms, in any case falling clearly within them"). It is a position which accords with well recognised general principles."
Also see R (Lumba) v Secretary of State for the Home Department  UKSC 12;  1 AC 245, in particular at .
(iv) Breach of section 6 of the HRA, taken with Article 8 ECHR Ground 1(D)
"53. The Court recalls its judgment in the case of Chauvy and Others v. France, no. 64915/01, § 70, ECHR 2004-VI, where in the context of a complaint under Article 10, it explicitly recognised for the first time "the right of the persons to protect their reputation, a right which is protected by Article 8 of the Convention as part of the right to respect for private life." This was confirmed in Pfeifer v. Austria, no. 12556/03, § 38, ECHR 2007-XII where the Court held that States were under a positive obligation to protect individuals' right to reputation, as an element of their "private life" under Article 8 of the Convention.
54. In Sanchez Cardenas v. Norway, no 12148/03, § § 33 and 38, 4 October 2007 the Court found that a passage in a domestic judgment which "conveyed information to the effect that the High Court, having regard to the state of the evidence, held a suspicion that the applicant had sexually abused" his son, was in the context of an authoritative judicial ruling "likely to carry great significance by the way it stigmatised him and was capable of having a major impact on his personal situation as well as his honour and reputation." Consequently, the Court took the view that the facts underlying the applicant's complaint fell within the scope of Article 8 of the Convention.
55. The Court explained its approach to such cases in its judgment in A. v. Norway, no. 28070/06, § 64, 9 April 2009, holding that in order for Article 8 to come into play, the attack on personal honour and reputation must attain a certain level of gravity and in a manner causing prejudice to personal enjoyment of the right to respect for private life (see Sidabras and Diautas v. Lithuania, nos. 55480/00 and 59330/00, § 49, ECHR 2004-VIII). Similarly, in Karakσ v. Hungary, no. 39311/05, § 23, 28 April 2009 the Court considered that reputation had been deemed to be an independent right mostly when the factual allegations were of such a seriously offensive nature that their publication had an inevitable direct effect on the applicant's private life. This has been more recently confirmed by the Court in its judgment in the case of Polanco Torres and Movilla Polanco v. Spain, no. 34147/06, § 40, 21 September 2010 (not yet final)."
(v) Breach of section 6 of the HRA, taken with A1P1 Ground 1(E)
(vi) Abuse of power hostile targeting of the Claimants Ground 2