Elsbury v The Information Commissioner

Factual and Procedural Background

This appeal concerns a Freedom of Information Act 2000 (FOIA) request submitted by the Appellant on 14 December 2023 to HM Revenue & Customs (HMRC) seeking detailed information about the use of Large Language Models (LLMs) and generative AI within HMRC's R&D Tax Credits Compliance Team. HMRC initially confirmed holding the information but refused disclosure under section 31(1)(d) FOIA, citing prejudice to the assessment or collection of tax. Following an internal review and a complaint to the Information Commissioner, HMRC shifted its position to rely on the 'neither confirm nor deny' (NCND) exemption under section 31(3) FOIA.

The Information Commissioner issued a Decision Notice on 11 November 2024 upholding HMRC's NCND stance, concluding that confirming or denying whether the information was held would prejudice tax collection. The Appellant appealed this Decision Notice to the First-tier Tribunal on 4 December 2024, arguing that the Commissioner erred in law and wrongly exercised discretion, particularly in weighing the public interest.

Legal Issues Presented

1. Whether the Information Commissioner's Decision Notice was legally correct in upholding HMRC's reliance on the NCND exemption under section 31(3) FOIA based on prejudice to tax collection under section 31(1)(d).
2. Whether the Commissioner properly exercised his discretion in balancing the public interest in transparency against the public interest in protecting tax collection.
3. Whether HMRC's reversal from acknowledging it held the information to adopting an NCND position was lawful and procedurally correct.

Arguments of the Parties

Appellant's Arguments

• HMRC and the Commissioner failed to demonstrate a causal link between disclosure and any real, substantive prejudice to tax collection, relying instead on speculation and unsubstantiated theoretical risks.
• The refusal to disclose undermines public oversight of AI usage in tax compliance, reducing opportunities to identify flaws or abuses and thus potentially increasing fraud rather than preventing it.
• Transparency is critical to maintaining public confidence, especially given concerns about sensitive intellectual property in R&D claims and the use of AI in government functions.
• Disclosure would enhance compliance by fostering trust and clarity regarding HMRC's AI strategies, deterring non-compliance.
• Transparency would counter misinformation and speculation about unfairness, privacy violations, and inaccuracies associated with AI tools.
• The Information Commissioner's own guidance emphasizes accountability and transparency in AI deployment, which conflicts with HMRC's NCND stance.
• HMRC's procedural handling of the request was flawed, including excessive delays and an inconsistent reversal from acknowledging information held to NCND refusal, undermining FOIA's principles.
• The balance of public interest favors disclosure to support the government's policy of incentivizing R&D and to address the chilling effect on legitimate claimants caused by distrust and confusing AI-generated correspondence.

Commissioner's Arguments

• The Commissioner supported HMRC's position that confirming or denying the information's existence would prejudice tax collection by aiding those intent on fraud.
• He acknowledged the public interest in transparency and accountability but concluded that the public interest in protecting the public purse from fraud outweighed this.
• He noted that sufficient information about R&D tax relief compliance is already in the public domain, facilitating public debate.
• Disclosure could reveal HMRC's methods and focus areas, potentially enabling evasion and undermining both current and future compliance activities.
• The Commissioner relied on HMRC's submissions, including confidential details, to support the NCND position and the likelihood of prejudice.
• There is no explicit presumption in FOIA favoring disclosure where public interests are evenly balanced; here, the balance favored maintaining the exemption.

Table of Precedents Cited

Court's Reasoning and Analysis

The Tribunal panel first established the factual background, noting HMRC's initial acknowledgment that it held the requested information and subsequent reversal to an NCND position during the Commissioner's investigation. The panel found HMRC's reversal untenable and inconsistent with FOIA principles.

On the legal analysis, the Tribunal applied the three-limb prejudice test from established case law, concluding that HMRC and the Commissioner failed to provide concrete evidence of a causal link between disclosure and real, substantive prejudice to tax collection. The risk of prejudice was unsubstantiated and speculative.

Regarding the public interest balance, the Tribunal recognized the significant public interest in protecting the public purse and preventing fraud but found that the Appellant's arguments for transparency, accountability, and public confidence carried considerable weight. The Tribunal was persuaded that the lack of transparency and the NCND stance undermined trust in HMRC's handling of R&D tax relief claims, potentially discouraging legitimate claimants and thereby frustrating government policy objectives.

The Tribunal also noted the absence of publicly available information undermining HMRC's NCND position and found that HMRC had not satisfied the transparency requirement to facilitate public debate on AI use in R&D tax compliance.

In sum, the Tribunal concluded that the Commissioner erred both in law by not requiring sufficient evidence of prejudice and in discretion by giving disproportionate weight to unsubstantiated risks over the societal benefits of disclosure.

Holding and Implications

The Tribunal ALLOWED the appeal, finding that the Information Commissioner's Decision Notice was not in accordance with the law and that the Commissioner exercised his discretion wrongly in upholding HMRC's NCND refusal.

As a result, a substituted Decision Notice was issued requiring HMRC to, within 35 working days of promulgation, confirm whether it holds the requested information and either disclose it or serve a refusal notice with appropriate grounds under section 17 FOIA.

The decision directly affects the parties by compelling HMRC to respond substantively to the Appellant's FOIA request. No new legal precedent was established beyond the application of existing FOIA principles and case law. The ruling underscores the importance of evidence-based prejudice claims and the necessity of balancing transparency against protection of the public purse, particularly in the context of AI use in public administration.