The High Court held that the exercise by the Board of Revenue and Customs Commissioners of their powers to require the production of documents from a barrister, advocate or solicitor under TMA 1970, s. 20(3) and s. 20B(3) was not subject to the same conditions and safeguards as applied to a tax inspector exercising powers under s. 20(3) alone.

Facts

Under TMA 1970, s. 20(3), a tax inspector might require the production of documents relating to a taxpayer's affairs for the purpose of inquiring into his tax liability. Under s. 20B(3), notice could only be given to a barrister, advocate or solicitor by the Board. Whether a s. 20(3) notice was given by an inspector or by the Board, it had to be based upon reasonable opinion. But in cases (not involving a barrister, advocate or solicitor) where an inspector issued a notice under s. 20(3) there were various other conditions that had to be met: (a) the inspector must have served a precursor notice (s. 20B(1); (b) the inspector (who had to be authorised by the Board) must have obtained the consent of a general or special commissioner (s. 20(7)); (c) the inspector must have given a copy of the notice to the taxpayer (s. 20B(lA); and (d) the inspector must have given a written summary of his reasons to the taxpayer (s. 20(8E)(b)). The claimant was a solicitor who acted for a taxpayer in relation to his tax affairs. He was issued with a notice purportedly under TMA 1970, s. 20(3) and 20B(3) requiring him to deliver, or make available for inspection, certain specified documents. The notice was signed by ‘M’, the Assistant Director, Central Policy, ‘For and on behalf of The Commissioners for HM Revenue & Customs’. The notice was counter- signed by a general commissioner who had given his approval under s. 20B(6) to the exclusion from the notice of s. 20B(5). In a covering letter, M said that he was authorised by the commissioners to give the notice. He asserted that s. 20B(1) did not apply.

The claimant wrote to the commissioners taking the point that no written summary of reasons had been given as required (so it was said) by s. 20(8E). The commissioners asserted that since the notice had been given by the commissioners in accordance with s. 20B(3), and not by an inspector, s. 20(8E) did not apply. The claimant applied for judicial review and the question for the court was whether the conditions applicable to a tax inspector had also to be satisfied where a s. 20(3) notice was given by the Board to a barrister, advocate or solicitor.

Issue

Whether the commissioners’ exercise of their powers under TMA 1970, s. 20(3) and 20B(3) when requiring the production of documents or information from a barrister, advocate or (as in the present case) a solicitor was subject to the same conditions and safeguards as when an inspector was exercising his powers under s. 20(3) in relation to anyone other than a barrister, advocate or solicitor.

Decision

Munby J (dismissing the application) said that s. 20B(3) was not a deeming provision but merely substituted ‘the Board’ for ‘the inspector’ in some provisions but not in others. For present purposes it was the last few words of s. 20B(3) which were critical. The draftsman had there adopted a well-known technique of referential drafting. Rather than repeating the whole of s. 20(3) with the slight modifications called for when the notice was given by the Board rather than by an inspector, the draftsman had simply indicated that when the notice was given to a barrister, advocate or solicitor (i.e. when the notice was given by the Board rather than an inspector) s. 20(3) was to be read with references to the Board substituted for references to an inspector. In other words, when the notice was given by the Board s. 20(3) had to be read as if the words ‘an inspector’ or ‘the inspector’ were struck out and replaced by the words ‘the Board’. That was the plain and obvious meaning of the third limb of s. 20B(3).

What was determinative for present purposes was not only what s. 20B(3) said but, equally important, what it did not say. The substitution of references to the Board for references to the inspector was stated as applying to s. 20(3); it was not stated as applying to s. 20(7), s. 20(8E), s. 20B(1) or s. 20B(lA). Those sections remained unaffected as to their language by anything in s. 20B(3). Since each of those sections was, as a matter of its unaltered language, applicable only to notices given by ‘an inspector’, they had no application in any case where the relevant notice was given not by an inspector but, by virtue of s. 20B(3), by the Board. As a matter of simple language, none of s. 20(7), 20(8E), 20B(l) and 20B(lA) applied where, as in the present case, a notice under s. 20(3) was served not by an inspector but by the Board.

Broadly speaking, the court accepted the commissioners’ argument that, properly construed, s. 20B(3) did not require the Board to meet the same pre-conditions as an inspector. Section 20B(3) was properly described as and plainly operated as a restriction inasmuch as it prevented a notice, where it was to be given to a barrister, advocate or solicitor, from being given by an inspector. The legislation, in the case of notices given to lawyers, deliberately replaced the requirement of a ‘low-level administrative’ decision (with general or special commissioner level supervision) with a requirement of a ‘high-level administrative’ decision. The scheme of the Act allowed lawyers an effective opportunity to vindicate their rights under either judicial review proceedings or during enforcement (penalty) proceedings.

The commissioners had not been granted any unfettered discretion to invade privacy, confidentiality or privilege. Their admittedly intrusive powers were subject to statutory safeguards of various kinds, graduated and increasing proportionately, so that the more intrusive the power the greater the statutory safeguards. Different levels of administrative decision making, supervised by different levels of judicial authority and subject to different procedures, were required for the exercise of different powers. Accordingly, in the present case, the Revenue and Customs Commissioners were not obliged to provide a written summary of reasons when issuing a notice requiring discovery of documents in relation to the taxpayer's affairs (R v IR Commrs, ex parte Davis, Frankel & Mead [2000] BTC 203 and R v Special Commissioner, ex parte Morgan Grenfell & Co Ltd 2002] BTC 223 considered).

Just how far the commissioners could lawfully go in delegating their functions under s. 20B(3) was a matter, if it arose, for another day. But the outcome would not necessarily have been the same had the delegation of their powers in relation to s. 20B(3) in fact been to a wider class of lower level officials. There might come a point where a purported delegation extended so far and to such a wide class of officials as to exceed the proper bounds of the commissioners’ power.

Queen's Bench Division (Administrative Court).
Judgment delivered 30 January 2007.