Ulster Bank Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 14 June 2000 |
| Date | 14 June 2000 |
| Court | Crown Court |
Queen's Bench Division (Crown Office List).
Dyson J.
David Goldberg QC and Clive Lewis (instructed by Travers Smith Braithwaite) for Ulster Bank.
Timothy Brennan (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment:
Associated Provincial Picture Houses Ltd v Wednesbury CorpELR[1948] 1 KB 223
Larner v Warrington (HMIT) TAX[1985] 58 TC 557
Pepper (HMIT) v Hart TAXELR[1992] BTC 591; [1993] AC 593
R v Clarke ELR[1969] 1 QB 91
R v General Commrs for St Marylebone, ex parte Hay TAX[1983] BTC 73
R v General Commrs for Morleston and Litchurch, ex parte GR Turner Ltd TAX(1951) 32 TC 335
R v IR Commrs, ex parte Ulster Bank Ltd TAX[1997] BTC 314
Ryall v Cubitt Heath ELR[1992] 1 KB 275
Walker (HMIT) v Centaur Clothes Group Ltd TAX[2000] BTC 121
Judicial review - Power to call for documents - Notice to bank to produce documents relating to taxpayers' affairs - Consent by special commissioner applied for without naming taxpayers - Application for consent to be "by order of the Board " - Whether Board could delegate authority to director of the Special Compliance Office - Meaning of "by order of the Board" - Taxes Management Act 1970 section 20 subsec-or-para (8A)Taxes Management Act 1970, s. 20(8A).
These were applications by a bank ("UBL") and by the Revenue for judicial review of the special commissioner's decision to give consent to the issue of a notice to the bank under Taxes Management Act 1970 section 20 subsec-or-para (3)s. 20(3) of the Income and Corporation Taxes Act 1970.
In November 1997 the Revenue gave notice under Taxes Management Act 1970 section 20 subsec-or-para (3)s. 20(3) of the 1970 Act to UBL in relation to six named branches. The notice was challenged in judicial review proceedings on the grounds that it was oppressive. Those proceedings were compromised in relation to the six branches. It was also agreed that, if the Revenue wished to give a new notice to UBL in relation to its other branches, notice should be served not later than 31 March 1999.
In March 1999 an inspector of taxes made an application to a special commissioner for consent to give a "new notice". The application for the consent to issue the new notice was made pursuant to Taxes Management Act 1970 section 20 subsec-or-para (8A)s. 20(8A),which if certain conditions were satisfied, allowed consent to be given by the special commissioner without disclosure of the identity of the taxpayer to whom the notice related. The application was made pursuant to an oral authorisation given to the inspector by the director of the Special Compliance Office of the Board.
In a reserved decision given on 14 May, the special commissioner held that Taxes Management Act 1970 section 20 subsec-or-para (8A)s. 20(8A) of the 1970 Act required the Board to give the necessary authorisation itself, and not by an officer exercising delegated authority. Accordingly, since the Board itself had not given authorisation to the notice, the question of giving consent did not arise. However, he went on to consider the grounds for the application, and decided that the requirements of s. 20(8A) other than authorisation of the Board were satisfied.
On 18 May the Board purported to make an order authorising the inspector to make the proposed application, stating that it was identical to the application made in March, save for the authorisation order. On 18 May the special commissioner gave his consent to the giving of the new notice.
The issues before the court were: whether the special commissioner was right to hold that the original application was not authorised "by order of the Board"; even if the director's authorisation was "by order of the Board", was there in fact an "order" within the meaning ofTaxes Management Act 1970 section 20 subsec-or-para (8A)s. 20(8A); if the Revenue succeeded on both those issues, what was the appropriate remedy; and whether, if the Revenue failed on those issues, the May application was a new application in breach of the compromise agreement.
Held, dismissing the application:
1. The Inland Revenue Regulation Act 1890, which provided that any function conferred on the Revenue might be exercised by any officer of the Revenue acting under their authority, applied to authorisation to apply for the consent of a general or special commissioner underTaxes Management Act 1970 section 20 subsec-or-para (8A)s. 20(8A) and the director of the Special Compliance Office could authorise consent by a commissioner.
2. There had been an "order". The oral authorisation given to the director was sufficient. It was not necessary that an order should be in any particular form or in writing, nor did it necessarily connote a direction to do something as opposed to an "authorisation" to do something which conferred a discretion whether to do it or not.
3. The appropriate remedy was a declaration that the original decision of the special commissioner was valid. There was no purpose to be served by remitting the case to the special commissioner for reconsideration.
Per Curiam: If the commissioner had been right to refuse consent to the application made on 14 March, he could not have consented to the application made on 19 May which would have been in breach of the agreement.
Dyson J: Introduction
1. These two applications concern Taxes Management Act 1970 section 20s. 20 of the Taxes Management Act 1970. Under s. 20, inspectors of taxes have power to call for documents from, amongst others, third parties to an investigation. In order to exercise that power, an inspector must first give a notice to the person from whom he wants the documents. Taxes Management Act 1970 section 20 subsec-or-para (8) section 20 subsec-or-para (8A)Section 20(8) and (8A) provide that he can only give such notice without naming the taxpayer with whose liability he is concerned if a special commissioner gives his consent. One of the issues that arises for determination is whether, upon the true construction of s. 20(8A) of the 1970 Act, an application to a special commissioner for consent may be made by an inspector only if it has been authorised by an order of the Board of the Inland Revenue itself, or whether it is sufficient that the application be authorised by an officer to whom the Board has delegated the requisite power. But before I come to the issues in more detail, I need to set the scene.
2. Ulster Bank Ltd ("UBL") is a wholly owned subsidiary of National Westminster Bank plc. Its principal activity is that of deposit-taking. As part of its internal accounting mechanism, a "sundry parties' account" was operated at each of its branches. This is an account through which may be passed isolated transactions with parties who may or may not be customers of the bank, or who may or may not have accounts at the branch. All branches of the bank will have a sundry parties' account to record transactions which are not or cannot be dealt with through specific named accounts. UBL is not under investigation itself, and the Revenue are seeking information about other taxpayers whose transactions were passed through sundry parties' accounts. It is accepted by the Revenue that such accounts can have entirely proper banking purposes. They can, however, be used as a means of facilitating fraud. This is because it is difficult to trace money transactions that pass through such accounts. The Revenue do not suggest that UBL has been complicit in a tax fraud. But they are of the opinion that sundry parties' accounts have been used by individuals for the purpose of serious fraud. The investigation which is the subject of these proceedings has the aim of unravelling these frauds.
3. The history of the attempts by the Revenue to extract documents from UBL under Taxes Management Act 1970 section 20s. 20 of the 1970 Act is complex. It is unnecessary to examine it in detail. The relevant investigations started in 1995. In November 1997, the Revenue gave UBL a notice in relation to six named branches. That notice was challenged in judicial review proceedings on the grounds that it was oppressive. These proceedings were compromised and settlement agreements were reached. The first of these agreements dealt with the existing notice in relation to the six branches. The second, the so-called "New Notice Agreement" dated 18 September 1998, dealt with the procedure to be followed if the Revenue wished to give UBL a new notice in relation to the other branches and offices of UBL. Clause 2(iv) of this agreement provided:
In further recognition of the circumstances referred to in subparagraph (ii) above, the Inland Revenue agrees that it may not serve more than one new notice and shall not apply to the special commissioners for consent to serve such a notice later than 31 March 1999.
4. In March 1999, Mr Staples, an inspector of taxes, made an application to a special commissioner for consent to give what was, in the terms of the New Notice Agreement, a "new notice". This application was made pursuant to the authorisation given by Mr Brannigan, who was the "director of Special Compliance Office" of the Board. It is the Revenue's case that this authorisation was contained in, or evidenced by, a document dated 11 March 1999 signed by Mr Brannigan, which was in these terms:
Please note that I have authorised the above application in accordance with the delegated authority from the Board of Inland Revenue dated 25 October 1993.
5. By an order dated 25 October 1993, the Board authorised, amongst others, "the controller of Special Compliance Office" to exercise the functions under Taxes Management Act 1970 section 20 subsec-or-para (8A)s. 20(8A) of the 1970 Act. The "controller" is now called the "director". By an order dated 29 April 1997, the Board revoked the order of 25 October 1993, and by the...
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