R v Commissioners of Inland Revenue, ex parte Taylor (No. 2)
| Jurisdiction | England & Wales |
| Judgment Date | 23 March 1990 |
| Date | 23 March 1990 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Lord Donaldson MR, Nourse and Bingham L JJ.
Mr Leolin Price QC and Mr Michael Ashe (instructed by Gregory Rowcliffe & Milners, agents for TPD Taylor, Altrincham) for the taxpayer.
Mr Stephen Oliver QC and Mr Alan Moses (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment of Bingham LJ:
Parry-Jones v Law Society & Ors ELR[1969] 1 Ch 1
R v IR Commrs, ex parte TC Coombs & Co TAX[1989] BTC 251
Income tax - Notice requiring delivery of document by solicitor to tax inspector for purpose of investigation into his affairs - Documents demanded included material concerning subject matter of assessments under appeal and material relating to clients - Whether power to issue notice in relation to documents relevant to pending appeal - Whether delivery of documents relating to clients would breach duty of confidentiality - Taxes Management Act 1970 section 20 subsec-or-para (2)Taxes Management Act 1970, sec. 20(2).
This was an appeal by the applicant from a decision of a Divisional Court of the Queen's Bench Division ([1989] BTC 309)refusing to quash a notice issued under the Taxes Management Act 1970 section 20 subsec-or-para (2)Taxes Management Act 1970, sec. 20(2) requiring him to deliver to them a wide range of documents relating to his personal affairs and to his practice as a solicitor.
Appeals to the special commissioners against assessments on him for the years 1981-82 to 1984-85 were pending in 1986. Tax appeals by some of his clients were also pending.
On 23 September 1986, after extensive correspondence between the taxpayer's accountants and an inspector in the Special Investigation Section of the Revenue, a notice under the Taxes Management Act 1970 section 20 subsec-or-para (2)Taxes Management Act 1970, sec. 20(2) was issued to the applicant requiring delivery of material including statements of bank accounts and records relating to his practice as solicitor and any other trade, profession or vocation carried on by him between 6 April 1980 and 5 April 1985.
The applicant submitted that, once an appeal to the commissioners was pending, the Taxes Management Act 1970 section 51Taxes Management Act 1970, sec. 51 precluded reliance by the Board on the powers contained in Taxes Management Act 1970 section 20sec. 20. Taxes Management Act 1970 part IIIPart III of the Act, in which Taxes Management Act 1970 section 20sec. 20 appeared, was concerned with investigation whileTaxes Management Act 1970 part VPt. V, in whichTaxes Management Act 1970 section 51sec. 51 appeared, was concerned with appeals and the two were mutually exclusive. After an appeal was entered, the Revenue might apply to the commissioners for discovery of documents under Taxes Management Act 1970 section 51sec. 51 which provided for an inter partes hearing, while the power to issue a notice under Taxes Management Act 1970 section 20 subsec-or-para (2)sec. 20(2) afforded the recipient no opportunity to oppose the notice before it was given.
The applicant further submitted that, even if there was a choice of methods open to the Revenue, the decision to proceed underTaxes Management Act 1970 section 20 subsec-or-para (2)sec. 20(2) was an irrational exercise of power because of the very broad scope of the notice; the fact that the documents sought required the taxpayer to act in breach of his professional duty of confidence to his clients; and the fact that no reasons had been given for preferring to proceed under Taxes Management Act 1970 section 20 subsec-or-para (2)sec. 20(2).
Held, dismissing the applicant's appeal:
1. The power under Taxes Management Act 1970 section 51sec. 51 did not operate to the exclusion of Taxes Management Act 1970 section 20sec. 20. The powers inTaxes Management Act 1970 section 20 subsec-or-para (2) section 51sec. 20(2) and 51 were powers exercised by different bodies and might be used for different purposes. In considering an application under Taxes Management Act 1970 section 51sec. 51, an existing appeal was all that the commissioners were concerned with, while a notice under Taxes Management Act 1970 section 20 subsec-or-para (2)sec. 20(2) might relate to other matters such as a further assessment. They were different powers and nothing in the Act expressly or impliedly provided that the availability of an application under Taxes Management Act 1970 section 51sec. 51 precluded the issue of a notice under Taxes Management Act 1970 section 20sec. 20. That inference was fortified byTaxes Management Act 1970 section 20B subsec-or-para (2)sec. 20B(2) which, in relation to notices underTaxes Management Act 1970 section 20 subsec-or-para (1) section 20 subsec-or-para (3)sec. 20(1) and (3), contained a saving for documents relating to the "conduct of any appeal" but there was no corresponding provision for Taxes Management Act 1970 section 20 subsec-or-para (2)subsec. (2).
2. Professional privilege was preserved by Taxes Management Act 1970 section 20B subsec-or-para (8)sec. 20B(8) when a notice was issued under Taxes Management Act 1970 section 20 subsec-or-para (3)sec. 20(3) or Taxes Management Act 1970 section 20A subsec-or-para (1)20A(1) to a lawyer or tax accountant in his capacity as an adviser but that did not entitle such an adviser who received a notice underTaxes Management Act 1970 section 20 subsec-or-para (2)sec. 20(2) in his capacity as a taxpayer to refuse disclosure.
3. The Board's decision to issue a notice under Taxes Management Act 1970 section 20 subsec-or-para (2)sec. 20(2)could not be regarded as irrational. The width of its scope was not surprising in the circumstances, and, although there was strictly no opportunity to oppose the notice before it was given, in practice it was possible to contest any penalty proceedings brought in consequence of non-compliance with the notice. Moreover, it was not disputed that the material requested was relevant to the verification of the information provided by the applicant's accountants which the Revenue felt was not sufficient to enable them to ascertain the true position and the inspector concerned was not obliged to give reasons for the decision. (R v IR Commrs, ex parte TC Coombs & Co TAX[1989] BTC 251 distinguished.)
By a notice of appeal dated 14 July 1989 the applicant appealed against the decision of a Divisional Court of the Queen's Bench Division given on 9 June 1989. The grounds of appeal were:
1. The Divisional Court erred in law in holding that documents relevant to the subject-matter of an appeal could be sought by the respondents, the Commissioners of Inland Revenue, of the applicant underTaxes Management Act 1970 section 20 subsec-or-para (2)sec. 20(2) of the Taxes Management Act 1970.
2. If contrary to the first ground of appeal, the respondents had a choice between exercise of their powers under Taxes Management Act 1970 section 20sec. 20 of the Taxes Management Act1970 and application to the special commissioners under Taxes Management Act 1970 section 51sec. 51 of that Act the Divisional Court erred in holding that on the facts the exercise by the respondents of their power under Taxes Management Act 1970 section 20sec. 20 was reasonable.
3. The Divisional Court erred in holding that Taxes Management Act 1970 section 20 subsec-or-para (2)sec. 20(2) of theTaxes Management Act 1970 overrides the duty of confidentiality which the applicant as a solicitor owes to his clients.
4. The notice under Taxes Management Act 1970 section 20sec. 20 is unreasonable because no or alternatively no sufficient reasons have been given by the respondents for their issue of it.
Bingham LJ: On 9 June 1989 the Queen's Bench Divisional Court,Glidewell LJ and Tucker J, refused Mr T P D Taylor an order of certiorari to quash a notice dated 23 September 1986 served on him by the Inland Revenue under Taxes Management Act 1970 section 20 subsec-or-para (2)sec. 20(2) of the Taxes Management Act 1970.
Mr Taylor appeals against that decision. He is a solicitor and much of his practice is concerned with advising clients how to minimise their liabilities to tax. He is also, in his personal capacity, a taxpayer himself. In that capacity he was assessed to income tax in respect of each of the five years ending 5 April 1981 to 1985 inclusive. Mr Taylor was dissatisfied with those assessments and appealed against them. Those appeals are due to be heard by the special commissioners in due course.
Until about November 1983 Mr Taylor's tax affairs were handled by a local inspector in Manchester. They were then handed over to Mr J C Ward. Mr Ward is an inspector in the Special Investigations Section of Technical Division 2 of the Inland Revenue, the director of which is Mr J H Roberts. A large part of the Special Investigations Section's work is concerned with investigation of substantial cases of suspected tax avoidance.
After the involvement of Mr Ward, a long correspondence took place between him and Mr Taylor's accountants. Without going into that correspondence in great detail, it is, I think, fair to say that a large number of questions were put by Mr Ward to the accountants and, while some of the questions were answered, the general response of the accountants, and of Mr Taylor himself when he wrote personally, was anything but forthcoming. The accountants on more than one occasion made it plain that their client had instructed them to decline to give the information asked.
In a letter of 16 January 1985, by which time this correspondence had built up to a considerable volume, Mr Ward said to the accountants:
The general tenor of your letter seems to be that your client will not provide further information to me in support of the appeals made against the assessments on him. If such attitude continues then I will have to consider whether to seek statutory authority for the provision of the...
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