Section 8: Power to transfer functions

57.     The Act establishes HMRC as a non-Ministerial department. It would therefore not ordinarily be covered by the provisions of the Ministers of the Crown Act 1975, which allows the transfer of functions between Ministerial departments by Order in Council, thereby removing the need for primary legislation to achieve this.

58.     This section amends the Ministers of the Crown Act 1975 to allow HMRC to be treated as a Ministerial department solely for the purposes of transferring functions under that Act. Functions may therefore be transferred into or out of HMRC by Order in Council subject to negative resolution procedures.

59.     Subsection (1) inserts the required text into the Ministers of the Crown Act. The effect of that text is:

• Subsections (1) and (2) of the section to be inserted into the Ministers of the Crown Act provide that the functions that may be transferred are those conferred upon either the Commissioners for HMRC, or officers of Revenue and Customs. This distinction reflects the fact that legislation confers some functions (such as responsibility for administering a particular tax regime) upon the Commissioners, while other linked functions (such as the powers required to administer that regime) are conferred upon officers of Revenue and Customs. Subsections (1) and (2) ensure that both sets of functions may be transferred under this provision.

60.     There are, however, a number of restrictions imposed upon the ability to transfer functions under this section.

61.     Subsection (3) operates to prevent the transfer from HMRC of any of the functions specified in section 5(1) of the Act, including the collection and management of revenues (i.e. taxes, duties and contributions) and the payment and management of tax credits.

62.     Subsection (4) provides that an Order transferring functions to HMRC may limit the powers available to exercise those functions, and it may provide that the function can only be exercised with the consent of a Minister.

63.     Arrangements also exist within the Scotland Act 1998 to allow the transfer of functions between Ministers of the Crown and Scottish Ministers. Section 8(2) and (3) therefore extend those arrangements to include the transfer of functions between HMRC and Scottish Ministers. Subsection (2) allows HMRC to be treated in the same manner as other ministerial departments for the transfer of functions to or from Scotland, while subsection (3) restricts this ability to prevent the transfer of HMRC functions specified in section 5(1) of the Act under this provision. Subsection (3) also permits limitations on the exercise of powers when a function is transferred into HMRC, and allows for the order to provide that a function may only be exercised with the consent of a specified member of the Scottish Executive.

64.     Subsections (4) and (5) of section 8 introduce arrangements to permit the transfer of functions from HMRC to Welsh Ministers (but not from Welsh Ministers to HMRC), in a reflection of arrangements that already exist for other ministerial departments in the Government of Wales Act 1998. Subsection (4) permits the transfer of functions from HMRC to the Welsh Assembly, however subsection (5) prevents the transfer of those HMRC functions specified at section 5(1).

Section 9: Ancillary powers

65.     This section provides the Commissioners with ancillary powers to do anything necessary in connection with the exercise of their functions or incidental business. Examples are:

• the gathering of information relating to the exercise of their functions;

• establishing advisory bodies;

• entering into agreements;

• acquiring and disposing of property; and

• promoting, or assisting in the promotion of, publicity about the tax system.

Section 10: The Valuation Office

66.     This section enables HMRC to carry on the work currently undertaken by the Valuation Office Agency of the Inland Revenue.

67.     Subsection (1) lists the duties of the officers within the Valuation Office Agency. They are to provide any valuations of property needed in relation to the functions of HMRC. They may provide property valuations at the request of any other public authority. They may also provide property valuations where these are needed in connection with a public function (for example, a multiple compulsory purchase by a public utility), or with the management of property distributed in the exercise of a public function (for example advising government and third party partners on policy programmes such as the Sustainable Communities agenda).

68.     Subsection (2) allows the Commissioners to charge fees for valuation services provided to other public authorities.

69.     Subsection (3) makes clear that the functions of such officers cover giving related advice, as well as providing actual valuations.

Section 11: Treasury directions

70.     This section sets out the relationship between the Treasury and the Commissioners' exercise of their functions.

71.     It carries forward the existing oversight by the Treasury of the predecessor Commissioners' exercise of their statutory functions. "Any directions of a general nature" replaces a variety of expressions in previous legislation, and applies to all the functions of the Commissioners for HMRC conferred on them by section 5. In the exercise of those functions, it gives the right for the Treasury, for example, to direct the Commissioners' strategies and call them to account for the overall effect of actions taken by them, but not to direct day-to-day or operational decisions. Thus it does not provide for the Treasury to be able to decide or be otherwise involved in, for example and in particular, an individual taxpayer's affairs.

Section 12: Commissioners' arrangements

72.     This section provides for the Commissioners to determine the arrangements for the conduct of their proceedings, including any of their committees under subsection (1)(b), subject to the condition at subsection (3) that agreement to such arrangements must be taken by more than half of the Commissioners holding office at the time the arrangements are adopted.

73.     Subsection (2) describes how particular arrangements may be made for the exercise of Commissioners' functions. Paragraph (a) allows for the Commissioners, if desired, to make arrangements for a quorum at meetings. Paragraph (b) allows for Commissioners to make arrangements for a function of Commissioners to be exercised by two or more Commissioners or a specified number of Commissioners greater than two. Part 1 of Schedule 2 places restrictions on the exercise of functions.

Section 13: Exercise of Commissioners' functions by officers

74.     This section provides for officers of Revenue and Customs to exercise any function of the Commissioners, other than a function as reserved to Commissioners by subsection (3). It closely follows existing arrangements for the officers of the predecessor departments. In the exercise of a function of the Commissioners, subsection (2)(b) places a duty on officers of Revenue and Customs to comply with the directions of the Commissioners made under section 2(3) and with arrangements made under section 12 (which may limit or exclude the exercise of the Commissioners' functions by officers). Part 1 of Schedule 2 places restrictions on the exercise of functions.

75.     Subsection (3)(a) to (c) reserve to the Commissioners entirely the exercise of certain functions. Paragraph (a) prevents the exercise by officers of the Commissioners' function of making, by statutory instrument, a regulation, rule or order, and paragraphs (b) and (c) similarly prevent the exercise by officers of the function of approving an application for a warrant to search premises under section 20C of the Taxes Management Act 1970 (c.9), or to enter premises under Part 7 of Schedule 13 to the Finance Act 2003 (c.14). Subsection (3)(d) reserves to Commissioners the giving of instructions generally in relation to the disclosure of information under the Public Interest Disclosure arrangements in section 20, but a limited exception is made, allowing officers to make a specific disclosures about one or more specified persons or transactions, or specified goods.

Section 14: Delegation

76.     Subsection (1) provides for the Commissioners, or a number of Commissioners, to delegate a function of the Commissioners to a single Commissioner, a committee established by the Commissioners, or to any other person, other than matters reserved for the Commissioners by subsection (2) or for a single Commissioner by a delegation under subsection (3). These delegations would be made in accordance with the arrangements determined under section 12, and Part 1 of Schedule 2 places restrictions on the exercise of functions.

77.     Subsection (1)(b) provides for the delegation of a function of the Commissioners to one of their committees, which may include committees whose members are neither Commissioners nor officers of Revenue and Customs. This allows the Commissioners, for example, to adopt sound corporate governance practice such as setting up an Audit Committee, to be chaired by a person who is neither a Commissioner nor an officer, and whose membership may include persons of a similar status. Such non-executives may join with the Commissioners to form a board, with the intention of bringing from outside HMRC different experience and an independent perspective to the work of the board.

78.     Subsection (2) reserves to Commissioners the exercise of certain functions, which, because they cannot be delegated under subsection (1) to a single Commissioner, means that two or more Commissioners must exercise these functions. These reserved functions are the same as those that apply to the exercise of Commissioners' functions by officers of Revenue and Customs at section 13(3)(a) to (c). In addition, subsection (3) provides that the function of instructing public interest disclosures under section 20(1)(a) can only be delegated to a single Commissioner. This, coupled with the limitation on the exercise of the Commissioners' functions by officers, in section 13(3)(d), means that while officers can give instructions for public interest disclosures in specific cases, subject always to the directions of the Commissioners under section 2(3), and any Commissioners' arrangements under section 12, only a Commissioner can give a general instruction, authorising disclosure in a class of cases.

79.     Subsection (4)(a) provides that, if a function of the Commissioners is delegated, such delegation does not prevent the Commissioners, or a number of Commissioners (under the arrangements made under section 12), from exercising that function themselves. Similarly, under paragraph (b), the delegation of a function of the Commissioners (other than matters reserved for Commissioners under subsection (2) or subject to express provision to the contrary in a direction issued by the Commissioners under section 2(3)) does not prevent the exercise of that function by an officer of Revenue and Customs. This clarifies that, although Commissioners' functions can be delegated, that does not prevent the Commissioners from exercising those functions themselves.

80.     Subsection (5) places certain conditions on the delegation of Commissioners' functions, made under subsection (1)(c), to any other person who is neither a Commissioner nor an officer. Paragraph (a) places a duty on the Commissioners to monitor the exercise of the function by that person. Paragraph (b) places a duty on the delegate to comply with directions of the Commissioners, or a number of Commissioners (if the function was delegated by Commissioners to a quorum of Commissioners or a number of Commissioners under the arrangements at section 12).

Section 15: Agency: Scotland and Northern Ireland

81.     The Scotland Act 1998 and the Northern Ireland Act 1998 both contain provisions that permit Ministers of the Crown and Scottish Ministers or Northern Ireland Departments to act as 'agents' for one another - that is, it allows them to make arrangements to exercise specific functions on behalf of the other party. This 'agency' arrangement does not affect the accountability of the person whose functions are being exercised under the agency agreement.

82.     For example, in the case of an environmental tax which involves tax reliefs based upon compliance with best environmental practice, the tax would remain a reserved matter under the collection and management of HMRC, but HMRC could engage the devolved administration's environmental expertise by engaging them as agents in respect of the technical and specialised aspects of the scheme.

83.     Section 15 introduces provisions permitting HMRC to be treated as a Minister of the Crown for the purposes of entering into an agency agreement with Scottish Ministers or Northern Ireland Departments.

84.     Subsection (1) permits agency agreements between HMRC and Scottish Ministers, allowing both Commissioners' and officers' functions to be subject to such an agreement. Subsection (2) introduces similar provisions for Northern Ireland.

Section 16: Restrictions, &c.

85.     This section introduces Part 1 of Schedule 2, which applies restrictions and makes other provisions on the exercise of certain functions. For example, it prevents the accidental widening of Commissioners' powers.

Section 17: Use of information

86.     This section allows the new department, subject to suitable safeguards, to use any of its information, including information inherited from the predecessor departments, to support any function of the department, not just the particular function from which the information was originally derived. This will supersede existing provisions to pool information within a department, together with the existing provision in section 127 Finance Act 1972. Section 127 authorises either set of predecessor Commissioners or their officers to disclose information to the other set of Commissioners or officers for the purpose of assisting the receiving set in the performance of their duties. It will be repealed, as no longer required, on the coming into existence of the new department.

87.     Subsection (1) states the general principle that information acquired by "the Revenue and Customs" (as defined in subsection (3)) in connection with one of their functions may be used by them in connection with any other function. A similar provision is contained in section 435 Proceeds of Crime Act 2002 in relation to the use of information, including taxpayer information, by the Asset Recovery Agency.

88.     Subsection (2) makes the general principle subject to certain exceptions. These are any restriction or prohibition which expressly limits the use of information, as imposed by:

• this Act itself, such as section 22, or Part 2 of Schedule 2, which limits the use of certain information in relation to disclosures to other government departments, to prevent the integration of the former departments extending the scope of the information that may be disclosed;

• any other enactment, such as the Human Rights Act 1998; and

• any international or other agreement of the United Kingdom or Her Majesty's Government. An example of an international agreement would be a Double Tax Treaty concluded under section 815 C Income and Corporation Taxes Act 1988, containing an express limitation on use of information obtained from a foreign tax authority. A further example of an "other" agreement would be the UK and Isle of Man Revenue Sharing Agreement of 15 October 1979, as amended, containing a limitation on use of information obtained from the Isle of Man Customs and Excise Service. As the Isle of Man is not a state in international law, it does not have the capacity to conclude "international" agreements.

89.     Subsection (3) defines "the Revenue and Customs" for the purposes of subsection (1) as the Commissioners for HMRC, their officers, those, such as contractors, who act on their behalf, and members of committees established by the Commissioners under section 12(1)(b). It also includes the former Commissioners of Customs and Excise and Inland Revenue and their officers, thereby bringing the holdings of information inherited from those organisations within the new Commissioners' information pool.

90.     Subsection (4) defines "function" in subsection (1) to mean a function of any of the persons who are defined as constituting "the Revenue and Customs". In this way, information derived from any spent, or obsolescent functions of the former Commissioners or officers may also be included in the new Commissioners' information pool.

91.     Subsection (5) provides that the reference to "enactment" in subsection (2)(b) does not include legislation of the devolved institutions, which is not relevant here.

92.     Subsection (6) introduces Part 2 of Schedule 2 to the Act, which deals with certain exceptions.

Section 18: Confidentiality

93.     The section lays down a code of confidentiality for the new Commissioners and their officers in relation to information held by "the Revenue and Customs", and the circumstances in which disclosures can be made. The section is based on the provisions of the Inland Revenue statutory declaration (Schedule 1 Taxes Management Act 1970), extended as a statutory duty to all Commissioners and officers of the new department.

94.     Subsection (1) lays down the general principle that "Revenue and Customs officials" may not disclose information held by "the Revenue and Customs". The terms are defined in subsection (4).

95.     Subsection (2) then provides for a limited number of specific circumstances where disclosure may be allowed.

96.     Paragraph (a) allows a disclosure to be made for the purposes of a function of the Revenue and Customs, which does not contravene any restriction imposed by the Commissioners. This would cover, for example, a disclosure made in connection with the levy of distress for unpaid taxes, or disclosure to a bank by paying in a tax refund.

97.     Paragraph (b) allows a disclosure in the public interest, or to the prosecuting authority (in accordance with procedures laid down in section 20 and 21).

98.     Paragraph (c) allows a disclosure to be made for the purposes of civil proceedings (whether or not within the United Kingdom) relating to a matter in respect of which the Revenue and Customs have functions. This would cover, for example, a disclosure in the course of Special Commissioners, VAT and Duties Tribunal or other civil proceedings, or a disclosure to a foreign revenue authority to assist the recovery of UK tax debts abroad, under EU mutual recovery arrangements.

99.     Paragraph (d) allows a disclosure to be made for the purposes of criminal investigation or criminal proceedings (whether or not within the United Kingdom) relating to a matter in respect of which the Revenue and Customs have functions. This would cover, for example, disclosure to the court under the disclosure provisions (sections 3 to 9) of the Criminal Procedure and Investigation Act 1996. It would also cover disclosure to a person other than the prosecutor for the purposes of criminal investigation, such as the Sheriff in connection with the grant of a search warrant at common law in Scotland, or to a foreign police or judicial authority for authority to continue a hot pursuit surveillance into a foreign jurisdiction, pursuant to the foreign equivalent of section 83 Crime (International Co-operation) Act 2003. In addition this would cover further HMRC investigations abroad, under the direction of RCPO, following commencement of proceedings with a foreign component or straddling EU Member State boundaries (e.g. in respect of the offence under section 71 Criminal Justice Act 1993).

100.     Paragraph (e) allows a disclosure in pursuance of any order of a court. This would cover, for example, a disclosure in accordance with a witness summons.

101.     Paragraph (f) covers a disclosure to HM Inspectors of Constabulary and their Scottish and Northern Ireland counterparts, termed "the Scottish Inspectors" and "the Northern Ireland inspectors", who are to take on an inspectorial function for the new department, under section 27.

102.     Paragraph (g) covers a disclosure to the Independent Police Complaints Commission, who are to take on an oversight of complaint handling about allegations of criminal conduct or gross misconduct for the new department, under section 28.

103.     Paragraph (h) covers a disclosure made with the consent of each person to whom the information relates. This would cover for example an individual case where a taxpayer raised their circumstances with their Member of Parliament, asked them to take the case up with Treasury Ministers, and authorised the Commissioners to disclose what they knew of the case to the Minister for that purpose.

104.     Subsection (3) makes subsection (1) subject to any other enactment permitting disclosure, e.g. section 8 Finance Act 1988, which authorises the Commissioners of Customs and Excise (and in future the Commissioners for HMRC, by virtue of the working of section 50(1)) to disclose information about imported goods.

105.     Subsection (4)(a) to (c) defines "Revenue and Customs officials" and "the Revenue and Customs" for the purposes of the section. The definition looks forward to the time when there will be persons who were Commissioners and officers of the new department, but have ceased to be so, e.g. by retirement or resignation. "Revenue and Customs officials", the persons to be subject to the statutory duty imposed by subsection (1), are therefore defined to be any current or former:

• Commissioner for HMRC;

• officer of Revenue and Customs;

• person acting on behalf of the Commissioners or an officer, for example a contractor; and

• member of a committee established by the Commissioners under section 12(1)(b).

106.     Subsection 4(d) defines the meaning of the terms "Scottish inspectors" and "Northern Ireland inspectors" with reference to section 27.

107.     Subsection 4(e) defines that the term enactment referred to in the section does not relate to an Act of the Scottish Parliament or an Act of the Northern Ireland Assembly or any statutory instrument made under these Acts.

108.     "The Revenue and Customs", whose holdings of information define the subject matter of the statutory duty under subsection (1), has the same meaning as in section 17 above, and therefore includes the holdings of information inherited from the predecessor departments within the scope of the statutory duty of confidentiality of the new department.

Section 19: Wrongful disclosure

109.     Section 18 lays down a code of confidentiality for the new Commissioners and their officers. Section 19 establishes a criminal offence, in relation to disclosures about identifiable persons, to buttress the duty of confidentiality, which widens the ambit of the existing offence, and lays down how such an offence will be prosecuted. The section is based on the existing offence provision of section 182 Finance Act 1989, which applied to both predecessor departments, but now extended to cover all functions of the new department.

110.     Subsection (1) makes it an offence for any person to contravene the non-disclosure provisions of section 18(1), or of section 20(9), in relation to "revenue and customs information relating to a person" whose identity is revealed by the disclosure. The term "person" includes both natural and legal persons, and, for example, the tax affairs of a limited company are also protected by the provisions of the subsection.

111.     Subsection (2) then defines "revenue and customs information relating to a person" to mean information acquired or held in connection with the exercise of a function of the Revenue and Customs, as defined in section 18(4)(c), in respect of the person, but excluding information about HMRC internal administrative arrangements, and the activities of its contractors .

112.     Subsection (3) provides certain defences for a person charged with the subsection (1) offence. In particular, he will not be guilty of the offence if he proves that he reasonably believed that the disclosure was lawful, that is that the disclosure fell within the terms of section 18(2) and (3). Similarly, he would not be guilty if he proved that he reasonably believed that the information had already been made available to the public, and that this had been done lawfully; it would be no defence as regards a subsequent unlawful disclosure to say that the information had been disclosed previously, if that previous disclosure was itself unlawful.

113.     Subsection (4) lays down the penalties for those found guilty of the offence under subsection (1). The offence is triable either way, that is:

• either summarily, when the maximum penalty will be 12 months imprisonment, or a fine not exceeding the statutory maximum (currently £5000), or both; or

• on indictment, when the maximum penalty will be two years imprisonment, or an unlimited fine or both.

114.     Subsection (5) provides that a prosecution for the offence may be instituted in England and Wales only by the Director of Revenue and Customs Prosecutions, or with the consent of the Director of Public Prosecutions.

115.     Subsection (6) provides that prosecutions for the offence may be instituted in Northern Ireland (where the Director of Revenue and Customs Prosecutions has no functions) only by the Commissioners, or with the consent of the Director of Public Prosecutions for Northern Ireland.

116.     No comparable provision is needed in Scotland, because the Procurator Fiscal and the Crown Office automatically have exclusive cognisance of summary and indictable offences in Scotland, under the law relating to Scotland, without the need for specific enabling provision.

117.     Subsection (7) provides that the maximum penalty on summary conviction in Scotland and Northern Ireland is to be six months, rather than twelve, to accord with their arrangements for maximum summary penalties.

118.     It should also be noted that section 55(1) makes a temporary change to the maximum penalty of imprisonment on summary conviction in England and Wales, provided for under subsection (4)(b), reducing it to six months from twelve months, pending the coming into force of a general amending provision about the maximum penalties on summary conviction (section 282 Criminal Justice Act 2003).

119.     Subsection (8) provides that the prosecution of the subsection (1) offence is without prejudice to other remedies for unlawful disclosure contrary to the section 18(1) and section 20(9) duties of confidentiality e.g. the seeking of an injunction to restrain an unlawful disclosure.