STEP has recently published a briefing note[1], advising professionals to carefully consider HMRC’s reliance statement[2], as the taxpayer could suffer adverse consequences if the guidance is later found to be inaccurate.
The Institute for Fiscal Studies’ Tax Law Review Committee (TLRC) urged HMRC last year to update its reliance statement which has not been substantially updated since 4 March 2009 and STEP’s UK Technical Committee has written to HMRC strongly supporting the TLRC’s request. In the meantime, STEP has produced a briefing note to highlight this risk to members. It reinforces that they should be aware of this issue and will need to carefully consider the guidance that they are relying upon and whether there could be adverse consequences if it was later found to be inaccurate.
The advice provided by HMRC is based on the understanding of the law at the time it is given and it explains that it cannot be wholly relied upon due to the fact that HMRC may update its views and approaches and that retrospective policy and law changes can also be introduced. Many professionals will refer to HMRC’s guidance regularly as a guide to HMRC practice and the interpretation of the legislation, which it is likely to adopt, but it should be noted that HMRC’s guidance does not carry the force of law. STEP believes there are aspects of HMRC’s reliance statement that are unclear and potentially misleading and we endorse the recommendations that the TLRC calls for including:
- The guidance refers to the “taxpayer” and individual transactions but it would be helpful if it is stated that it applies to general advice as well as more specific, individual advice for both taxpayers and professional advisors.
- It should state that there are avenues other than appeal available to those affected by reliance on the advice such as through the Adjudicators’ Office, the Parliamentary Ombudsman and judicial review.
- It should state that users may continue to disagree with HMRC as to whether its previous advice was a proper reflection of the application of law to particular facts.
- It should undertake that HMRC will provide some flexibility where it has previously issued erroneous advice, although the erroneous advice can be binding where detrimental reliance is not proved.
- It should introduce a policy whereby changes in advice are only to be applied prospectively and not retrospectively.
STEP recommends that professionals refer to the guidance as evidence of HMRC’s practice and construction of legislation that it is likely to adopt but remain alert to the fact that, except in rare circumstances and through uncertain and expensive judicial review proceedings, they cannot rely on HMRC’s guidance in law.
Emily Deane TEP, Technical Counsel & Head of Government Affairs
[1] https://www.step.org/system/files/media/files/2021-10/step-guidance-on-hmrc-reliance-statement-14.10.21.pdf.
[2] https://www.gov.uk/guidance/when-you-can-rely-on-information-or-advice-provided-by-hm-revenue-and-customs.
