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Taxpayer confidentiality: Hartnett sets out HMRC view for MPs

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HMRC’s top tax official has written to MPs setting out the department’s view of the law surrounding the disclosure of taxpayer information to a Parliamentary committee.

Dave Hartnett, Permanent Secretary for Tax, insisted during three recent select committee meetings that he was unable to answer detailed questions raised by MPs concerning the tax affairs of Goldman Sachs, Vodafone and other companies.

In a letter to the Public Accounts Committee, Hartnett reproduced the provisions of the Commissioners for Revenue and Customs Act 2005 relating to taxpayer confidentiality. In a lengthy explanation of HMRC’s legal position, Hartnett said:

  • the legislation provides a strong regime for ensuring the confidentiality of information in HMRC's hands, particularly where the information relates to an identifiable person's tax affairs. The prohibition in CRCA 2005 s 18 is backed by the criminal offence set out in s 19. Although it is a defence to the criminal offence that the information was already lawfully in the public domain, ‘this does not make a disclosure by HMRC lawful for the purposes of s 18’;
  • the s 18(1) prohibition is disapplied only in the situations specified in s 18(2);
  • there is no provision in CRCA 2005 to prevent onward disclosure once information has been disclosed by HMRC, but some bodies (such as the NAO) are themselves subject to legal restrictions on onward disclosure;
  • where a disclosure is not prohibited, the effect is not to require disclosure but to ‘trigger a power, rather than an obligation, to disclose’; and
  • in exercising that power, the decision maker is bound act ‘consistently with both public law principles and other statutory obligations’.

HMRC considered, Hartnett noted, that ‘if taxpayers believe that their information may be disclosed, it will make it very much more difficult for us to collect tax’.

The question whether disclosure should be made at HMRC’s discretion – where there was no prohibition on disclosure – engaged a ‘wide range of considerations’, he said.

These would include the damaging effect on voluntary compliance; the damaging effect on government ministers, ‘who by long tradition remain at arm's length from taxpayer specific information, in order to protect them from allegations of impropriety or political interference’; and ‘the fact that it would be inappropriate and unfair to create any real risk of exposing officials to criminal sanction in the course of their duties’.