HMRC guilty of breaching taxpayer confidentiality
After failing to persuade the Court of Appeal that HMRC had acted unlawfully by discussing a film investment scheme with Times’ journalists, Ingenious Media has now won its appeal in the Supreme Court.
Ingenious Media promoted film investment schemes in the form of partnerships which intended to allow its participants to take advantage of certain tax reliefs and exceptions. Needless to say, HMRC believe the schemes to be tax avoidance schemes that are ineffective and that wealthy individuals taking part in them are not allowed the reliefs and exceptions claimed.
HMRC estimate that film schemes represent a £5 billion risk to revenue and Ingenious Media have been aware of HMRC’s scepticism for over four years and indeed HMRC have challenged their validity at Tax Tribunal.
In early 2012, two journalists on The Times contacted HMRC’s press office to request a background briefing on tax avoidance schemes. This resulted in a 75 minute “off the record” interview on 14th June of that year with Dave Hartnett, then the Permanent Secretary for Tax. Prior to the meeting The Times told HMRC that it had amassed a good deal of information about tax avoidance schemes which could be of value to HMRC. The newspaper also made clear that one of the subjects to be discussed was film schemes.
During the meeting one of the journalists mentioned the name of Patrick McKenna, the chief executive of Ingenious Media and the following conversation ensued:
“Hartnett: We engage with people who promote tax avoidance because we want to stop them. I’ve been involved with successive governments with film schemes from about 2004. There’s another notable individual in the field who you haven’t mentioned but I’ve seen him too.
Journalists: Patrick McKenna?
Hartnett: Ah.
Journalists: No?
Hartnett: There is only one other notable individual in the field.
Journalists: With McKenna do you think he is enacting any active schemes or any schemes that could be used to deprive the Revenue of tax now?
Hartnett: I don’t know.
Journalists: He’s not on your radar?
Hartnett: Oh, he’s never left my radar.
Journalists: What do you think of him because he presents a very different profile?
Hartnett: 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, but actually he’s a big risk for us so we would like to recover lots of tax relief he’s generated for himself and other people. Are we winning? I would say, beginning to. I think we’ll clean up on film schemes over the next few years.
Journalists: That applies to Mr McKenna as well as film schemes in general?
Hartnett: 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.”
The following week, The Times published two articles on film schemes and tax avoidance which identified Patrick McKenna as one of two main providers of film investment schemes in the UK and informed readers that such schemes had enabled investors to avoid at least £5 million in tax – a figure that had been provided by Hartnett.
The Supreme Court considered the scope of the duty of confidentiality owed by HMRC in respect of the affairs of taxpayers. Although HMRC officials may not disclose taxpayer information there are a number of situations where this duty can be put aside. These include where a disclosure is “made for the purposes of a function” of HMRC, with ‘function’ given a broad and general definition. There are also a number of more specific situations, such as for the purposes of civil or criminal proceedings.
It was considered by the Supreme Court that an impermissible disclosure of information is no less impermissible because the information is passed on in confidence, or “off the record”. The information supplied by Hartnett to the journalists about Mr McKenna and Ingenious Media was confidential in nature and therefore HMRC owed a duty of confidentiality. Even though Hartnett did not anticipate his comments being reported this was no justification for making them. Nor was there sufficient justification for the disclosures. Which were borne out of the desire to foster good relations with the media and to publicise HMRC’s view about tax avoidance schemes and speculation that the journalists may have subsequently informed Hartnett about other such schemes.
Good! about time someone took it to HMRC, they continue to throw there government backed weight around without any threat of retribution/recourse of grievance from contractors. Who they continue to bully into submission with threats of legal action to such an extent the contractor submits for a quite life. The next step would be for the (HMRC) individual or there line manager to face some sort of retribution (disciplinary action) for the distress they cause to contractors, while they are in pursuit of there own individual targets and bonuses.
Bit rich of Hartnett to call others “scumbag.” After all his sweetheart deals I think he’s a massive *@NT myself.
Indeed, he does sound like a rather smug – and stupid – scumbag.
Hartnett’s comments provide an insight into the spiteful culture of HMRC. There’s a clear presumption of guilt and certainty that money is owed irrespective of the law.
The comment “even pro-wealthy people, and I’m not sure we’ve got any” is especially revealing. HMRC see themselves as arbiter of what defines wealth and who should be allowed to have it. The scumbag comment is also interesting given that he left HMRC to take up a job in banking.
“Hartnett did not anticipate his comments being reported”, “come, come Mr Hartnett” I hear Paxman saying “you were talking to journalists, is it not their job to report things they hear?”. The man is clearly at best naïve.
“The scumbag comment is also interesting given that he left HMRC to take up a job in banking.”
Well, no doubt he honed his skills at being one whilst employed by hector… I can’t think of a better training ground.