TAXPAYER confidentiality has a long history of protection in the UK. It is a fundamental part of the tax system. It has been considered invaluable by the executive for the efficient collection of taxation, protected by Parliament since the Income Tax Act 1799 and recognised by the courts as a “vital element in the working of the system” (Inland Revenue Commissioners v National Federation of Self-Employed and Small Businesses Ltd. [1982] A.C. 617, 633, per Lord Wilberforce).
Historically, the justification for imposing taxpayer confidentiality was robustly State-centric: confidentiality encourages detailed taxpayer disclosure of highly sensitive information, which enables the tax yield to be greater than would otherwise be the case. The Supreme Court considered the scope of taxpayer confidentiality in R. (Ingenious Media) v Commissioners for Her Majesty's Revenue and Customs [2016] UKSC 54; [2016] 1 W.L.R. 4164 and favoured quite a different rationale, holding that confidentiality was a common-law fundamental right of taxpayers, with the effect that the power of HM Revenue and Customs (“HMRC”) to disclose information was curtailed in circumstances where HMRC reasonably considered disclosure would ultimately help it to increase the tax yield.
The leading judgment of Lord Toulson is interesting and important for two reasons as part of a re-emerging trend to recognise fundamental rights in the common law. First, the reasoning of the Supreme Court suggests a shift away from a historically facilitative approach of the courts to the disclosure of confidential information pursuant to public functions and towards a far more restrictive approach to such disclosure. Rather than treating the existence of public functions as part of the analysis of the public interest, as a defence to breach of confidence, the Supreme Court favoured an analysis of statute as overriding a common-law fundamental right to confidentiality. The result was a narrow interpretation of the power to disclose in connection with the statutory function. Second, the scope of the judgment in Ingenious Media is potentially very wide indeed. This has significant implications for the very many other statutory powers to disclose information gathered pursuant to legal power or public duty. The full implications of the Supreme Court's reasoning were not considered in the judgment.
The case concerned the proper interpretation of the Commissioners for Revenue and Customs Act 2005, s. 18. Section 18(1) provided that “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”. It was subject to several exemptions, including s. 18(2)(a)(i), which permitted disclosures “made for the purposes of a function of the Revenue and Customs”.
The applicants complained that the Permanent Secretary for Tax had disclosed information to journalists about their tax activities and HMRC's attitudes towards those activities, derived from information held by HMRC in connection with its functions. Although their meeting with the Permanent Secretary for Tax was off the record, the journalists subsequently published some of the information that had been disclosed to them during that meeting in a national newspaper.
The Permanent Secretary for Tax argued that limited disclosure to journalists served the functions of HMRC because it enabled HMRC to establish good press relations, to communicate its view of elaborate tax avoidance schemes to the public, and to create opportunity for journalists to share information of value to HMRC. That analysis had found favour in both the High Court and the Court of Appeal, which had held that a decision under s. 18(2)(a)(i) was an evaluative judgment within the discretion of HMRC and, on the facts, had been a proportionate interference with Article 8 ECHR and Article 1 Protocol 1 ECHR.
The Supreme Court rejected HMRC's wide interpretation of s. 18(2)(a)(i). Lord Toulson referred to the case of Marcel v Commissioner of Police of the Metropolis [1992] Ch. 225 as authority for the
well established principle of the law of confidentiality that where information of a personal or confidential nature is obtained in the exercise of a legal power or in the furtherance of a public duty, the recipient will in general owe a duty to the person from who it is received or to whom it relates not to use it for other purposes.
Lord Toulson cited In Re Arrows (No 4) [1995] 2 A.C. 75 to observe that Marcel confidentiality could not prevent disclosure that is required or authorised by statute. The judgment then continued that HMRC's favoured broad interpretation of s. 18(2)(a)(i) was subject to a more fundamental criticism. Marcel confidentiality would then “have been very significantly eroded by words of the utmost vagueness”. This was contrary to the principle of legality as articulated in R. v Secretary of State for the Home Department, ex parte Simms [2000] 2 A.C. 115 by Lord Hoffmann: “Fundamental rights cannot be overridden by general or ambiguous words.” The Supreme Court therefore favoured a narrow interpretation of s. 18(2)(a)(i), limiting it to HMRC's primary function of revenue management and collection, Lord Toulson emphasising that “public bodies are not immune for the ordinary application of the common law”.
The Supreme Court's judgment marks an important shift towards a more restrictive approach to Marcel confidentiality and its understanding of the role of statute. Earlier case law understood the statutory context as part of the analysis of the public interest undertaken by the court when deciding whether a public interest defence applied. This jurisprudence was markedly more facilitative of disclosures which were reasonably connected with public functions.
In Hellewell v Chief Constable of Derbyshire [1995] 1 W.L.R. 804, Laws J. considered that the public interest defence provided a “better analysis” of Marcel. In that case, Laws J. held that it was “unarguably in the public interest” as “reasonably directed to the prevention of crime” for police to disclose the photograph, taken while in custody, of a known shoplifter to local shops. In Woolgar v Chief Constable of Sussex Police [2000] 1 W.L.R. 25, Kennedy L.J. held that a “countervailing public interest” existed to Marcel confidentiality where the police, “in their reasonable view”, considered that it was “in the interests of public health or safety” to pass information to a regulatory body. In both these cases, the public functions of the disclosing or recipient public authority formed an important part of evaluating the public interest in disclosure. The cases show deference to the reasonable view of the public authority as to where the public interest lies.
Additionally, public functions were often understood broadly in the earlier case law. In Marcel itself, Nolan L.J. observed that police powers were “wide and varied” and “if the hands of the police were too strictly tied with regard to the use of documents and information acquired under compulsory powers then the public interest would suffer”. Despite the fundamental rights context, no attempt was made to construe police powers narrowly. Again, the early case law reflects an approach that facilitates the disclosure of information in the context of public functions.
Ingenious Media reflects a different strand of thought, more restrictive of public authorities. The judgment conceptualises confidentiality as a fundamental right, which a clear legal basis is required to override, rather than an equitable right that gives way to the public interest, with deference to statutory power as demonstrating where the public interest lies.
This is a highly significant development in the common law. The formulation of the Marcel principle is very broad: confidential information obtained in the exercise of any legal power or public duty. It is not the mere recognition of taxpayer confidentiality, which has a much longer pedigree, as a fundamental right. It is a fundamental right to the confidentiality of information collected by the State in the exercise of its power and the narrow reading of legislative powers to disclose that information. This arguably affects a large amount of information held by public authorities. The result is that the scope of many statutory powers to disclose information may need to be re-evaluated in light of Ingenious Media. The common-law right to Marcel confidentiality marks a shift towards more restrictive legality standards in the interpretation of statutory powers to disclose information and away from a facilitative approach to the public interest. The implications of this for other statutory disclosures were not considered by the Supreme Court, nor indeed were Hellewell or Woolgar.
Ingenious Media is to be welcomed on its facts as a defence of long-standing expectations of taxpayer confidentiality, which enables HMRC to carry out its functions. Whether, and how strictly, the Ingenious Media approach should apply more broadly to the confidentiality of other public authority disclosures where the public interest otherwise lies in disclosure is, however, questionable and its scope will undoubtedly be the subject of future litigation.
