Mitchell: taxpayer confidentiality and a crisis of confidence?

17 May 2023. Published by Robert Waterson, Partner and Liam McKay, Senior Associate

In Mitchell v HMRC [2023] EWCA Civ 261, the Court of Appeal (CA) considered HMRC’s powers to disclose taxpayer information and the First-tier Tribunal’s (FTT) jurisdiction in respect of such disclosures. While the CA’s decision contains an unsurprising statement of the law, the fact that HMRC sought the protection of an FTT order before making disclosure demonstrates a curious lack of confidence when it comes to the exercise of certain of its statutory powers.

This blog is based on an article by Robert Waterson and Liam McKay that appeared in Tax Journal issue 1616 (28 April 2023).


Mr Mitchell and Mr Bell were directors of two companies that allegedly submitted inaccurate VAT returns. HMRC commenced an investigation into Mr Mitchell's tax affairs under Code of Practice 9 and, as part of that investigation, conducted interviews with him. In reliance on evidence obtained during HMRC's investigation, HMRC issued penalties to the taxpayers for deliberate inaccuracies. The taxpayers appealed against the penalties to the FTT, each denying liability and effectively apportioning blame for any inaccuracies on the other.

The FTT directed that the appeals be heard together, with HMRC serving a single Statement of Case (SoC). HMRC's SoC referred to documents (the Disputed Documents) obtained during its investigation, including notes of meetings with Mr Mitchell and outline disclosure volunteered to HMRC by him. 

Mr Bell’s representatives asked HMRC to disclose the Disputed Documents. HMRC sought Mr Mitchell's consent to the disclosure to ensure transparency between the parties. Mr Mitchell asserted that only material relevant to the appeals should be disclosed. HMRC subsequently served a List of Documents for both appeals, which included the Disputed Documents. Mr Mitchell objected to the disclosure of some documents on the basis they were irrelevant.  

At this point, the case took a bizarre turn. HMRC applied to the FTT for an order, purportedly under Rule 5(3)(d) of the FTT Rules, that it be permitted to disclose the Disputed Documents to Mr Bell. Despite determining that the disclosure fell within section 18(2), Commissioners for Revenue and Customs Act 2005 (CRCA), HMRC requested the FTT's permission “due to the procedural complexity of the two appeals". Mr Mitchell opposed the application.

HMRC argued that it had no power to disclose the Disputed Documents without Mr Mitchell’s consent. That argument was rejected by the FTT, which determined that HMRC did not need to obtain an order before it could rely on documents to which section 18(1), CRCA, applied, because defending appeals against assessments is a function of HMRC that engaged the exemptions in section 18(2)(a) and (c), CRCA. Instead, the FTT considered the issue was whether HMRC should be permitted to rely on the documents, which was to be determined by relevance. The FTT concluded that only relevant documents were to be disclosed.   

The taxpayers appealed to the Upper Tribunal (UT). With regard to Mr Bell, the UT determined, amongst other things, that the FTT was entitled to take the view that the question whether he should have sight of the documents was co-extensive with the question of whether HMRC was entitled to rely on them and that the FTT's assessment of relevance was not "plainly wrong". The appeals were dismissed.

Both taxpayers appealed to the CA. HMRC filed a Respondent's Notice supporting Mr Bell's appeal. The arguments before the CA shifted from that before the FTT and the UT. In particular, and purportedly with the benefit of hindsight, HMRC contended that it was permitted to disclose the documents by virtue of section 18(2)(a) and (c) and that its application to the FTT had been unnecessary. HMRC also disputed Mr Mitchell's assertion that the FTT retained power to supervise the exercise of HMRC's powers to make disclosure under section 18(2), the only route for challenging the exercise of those powers being by way of judicial review proceedings.

CA judgment

Perhaps not surprisingly, the CA accepted HMRC's arguments, finding the disclosure of documents in HMRC’s possession, which HMRC considers to be required out of fairness in the context of ongoing tax litigation, is part of HMRC’s collection and management function. Accordingly, the exceptions to HMRC's duty of confidentiality in section 18(2)(a) and (c), CRCA, would apply, at least in principle, if HMRC wished to disclose the Disputed Documents to Mr Bell. Further, those exemptions were not subject to any implied condition that the documents must be relevant to the issues pleaded by the parties; the statutory language did not suggest the existence of such a condition and the scheme and purpose of section 18 did not warrant one being read in. On the jurisdiction issue, the CA held that the FTT was not empowered to adjudicate on the exercise of powers by HMRC under section 18(2)(a) and (c), which were instead matters for judicial review. 


Mitchell was not a case in which the legal issues were complex. The CA's findings are thoroughly mundane in their foreseeability: the notion that a public body imbued with public powers is responsible for decisions as to when and how to exercise those powers is not a ground-breaking proposition, and one even HMRC was alive to when embarking on its application. Yet notwithstanding the perspicuousness of its powers in the circumstances of Mitchell, HMRC still sought the protection of an FTT order before making disclosure, occupying a significant amount of limited judicial resource in the process.

It is crucial that a sensible balance is struck between a regulator that is sensitive to and cognisant of its statutory obligations, and one that is confident in the interpretation and exercise of its functions such that it does not seek judicial handholding when it comes to making decisions as to when and how to use its powers. That is important as a matter of building public confidence, but also in ensuring that the cost of resolving disagreements with HMRC are reasonably commensurate with the complexity of the issues in dispute. 

The circumstances in Mitchell highlight an area where an HMRC, assured in the interpretation and exercise of its statutory powers, would have avoided the need for costly and drawn-out litigation. Getting these issues right would be a step on the road to faster and more effective decision making within HMRC more generally. That would surely serve the interests of all taxpayers.  

The judgment can be viewed here.

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