News: Divorcees inform on ex-partners to the taxman

Divorce|Family|News|October 29th 2012

HM Revenue and Customs (HMRC) now pays out £373,280 a year to confidential informants, 20 per cent more than in the last year, according to newly published figures. And financial experts report that many of the people ringing the department’s confidential Tax Evasion Hotline are ex-wives seeking revenge on their former partners.
Adam Craggs is a former employee of HMRC. He told the Daily Mail:

“If the divorce is acrimonious, it is not uncommon for a spouse to turn HMRC informant. HMRC is under intense pressure to increase the tax yield for the Exchequer.”

No less than 74,000 calls were made to the Tax Evasion Hotline last year.

Cash payments are offered for information on undeclared income and other financial arrangements that could be used to evade tax, such as offshore bank accounts

There is a duty to keep confidential all information and documents disclosed  in financial remedy proceedings during a divorce. If documents are sought to be disclosed to the Revenue, then permission of the court must be obtained. As we have noted in previous posts, unless clearly in the public interest, it is unlikely that permission will be granted.

In Clibbery v Allan [2002] 1 FLR 565 the Court of Appeal explained when disclosed documents released in family proceedings can be released. There is an implied undertaking in the compulsory disclosure of documents in proceedings. Dame Butler-Sloss (President at the time) stated that ‘The importance of the implied undertaking has been accepted in decision of the House of Lords and Court of Appeal’.

She refers to the case of Riddick v Thames Board Mills Ltd [1977] 1 QB 881 and what Lord Denning stated during that case:

‘In order to encourage openness and fairness, the public interest requires that documents disclosed on discovery are not to be made use of except for the purposes of actions in which they are disclosed. They are not to be ground for comment in the newspapers, nor for bringing libel action, or for any other alien purpose’.  Lord Denning further refers to J Bray in Bray on Discovery (1885, 1st edition) and states that, ‘since that time such an undertaking has always been implied … A party who seeks discovery of documents gets it on condition that he will make use of them only for the purposes of that action, and no other purposes’

This is clearly a long established principle.

Dame Butler-Sloss goes on to say:

‘It would make a nonsense of the implied undertaking if information about the means of a party, in some cases sensitive information, could be made public as soon as the substantive hearing commenced. Information disclosed under the compulsion of ancillary relief proceedings is, in my judgment, protected by the implied undertaking, before, during and after the proceedings are completed … The implied undertaking extends to voluntary disclosure in ancillary relief proceedings, to the information contained in the documents and to affidavits and statements of truth and witness statements. All such information is required for the full and frank exchange of financial information and all the relevant circumstances which may be necessary to enable the Court to know, in order to come to a fair conclusion in accordance with the exercise of its statutory jurisdiction’

The parties implied undertaking is to the Court so my breaching the implied undertaking they are in contempt of Court. Anyone tempted should therefore first take legal advice before taking any steps that could end up with seriously adverse consequences

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  1. Churchill says:

    While it may not be possible to use documents brought to an ancillary proceeding, what’s to stop a disgruntled former spouse calling the HMRC and giving a heads up on a situation?
    Take a financial remedy including the valuation of a company. Say the (for example) husband has ‘managed down’ the profitablity of a company he either owns or has a significant shareholding in, to produce a smaller award for his ex wife. This is done by massaging the expense lines in his company accounts, increasing them in such a way as to reduce the profitability of the company. If he succeeds, he end up paying less to his ex by way of settlement. Win for him then? However, for the sake of consistency, these accounts are also posted with HMRC/Companies House. This means that he also pays less Corporation Tax than might otherwise be the case. Win win?
    In this situation, what’s to stop a former spouse contacting the HMRC and blowing the whistle? No documents as such change hands, just the tip toff that there are tens, or even hundreds of thousands of pounds of unpaid tax. Would this be contempt of Court?

  2. Myra Poole says:

    What about using Form E information,compiled for use for Child Financial Remedy and not in a divorce case. Could Form E documents be offered to the CSA as proof of assets or inconsistent lifestyle? What would be wrong here in using Form E information to try to enforce a non resident parents financial responsibility?
    Wouldn’t a child’s rights to “openness and fairness” take prescedense ?

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