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Can HMRC guidance be relied upon?

The Office of Tax Simplification (OTS) has published a timely report entitled ‘Guidance for taxpayers: a vision for the future’. The report’s vision is for guidance geared to the needs of users, graded according to whether the user seeks basic, more advanced or specialist technical levels of help, with systems to direct users to the appropriate level. It recommends that HMRC should assign a high priority to guidance as a way of promoting voluntary compliance, with high level oversight and responsibility vested in a Head of Guidance at Director level. The task of writing and updating guidance should be a collaboration on equal terms between HMRC policy officials, web-writing and online content specialists within government, and external bodies from industry and the professions who can provide insight from the clients’ perspective.

For me, the most interesting part of the Report is the final chapter, which is headed ‘Greater clarity about the reliance taxpayers can place on guidance’. Two recent happenings have convinced me of the urgent need for such clarity. The first is a First-tier Tribunal case, Mark Richard Beardwood v C&E Commrs [2018] UKFTT 0099, in which the taxpayer appealed against a penalty imposed on him because he relied on incorrect HMRC guidance about when to file self-assessment returns. The Tribunal noted that:

‘The website guidance is at best unclear in places and caused puzzlement to the Tribunal with its conflicting, vague and inconsistent advice. . . HMRC’s submissions on this matter . . . are unclear, and the Tribunal is in some doubt about their accuracy. . . This is a case which the Tribunal considers should never have come before it. . . The Tribunal considers that HMRC have wasted everyone’s time in bringing a case which has very little merit on their side and where the taxpayer seems to have acted in an exemplary manner.’

The other is an extract from the Adjudicator’s annual report for 2018 (Case Study 6 in the chapter about HMRC) in which the Adjudicator comments on a decision by HMRC officers not to follow their own guidance. She says:

‘HMRC’s guidance shows that set warning letters should be issued to advise customers of debts and warn them of the consequences if debts are not paid. We saw no evidence that one of these letters had been sent to Mrs F. In reply to our questions about why HMRC had not followed their own guidance, they said guidance is just that – they do not have to follow it and it is not a mistake or error not to. They said that in this case they made a judgement call not to follow their guidance.’

The Adjudicator remarked that ‘it can lead to a lack of consistency in the decision-making process if guidance is not followed’. She also observed that there were no notes as to why this approach was chosen.

In both these examples of disregard of their own guidance by HMRC, the taxpayer’s right to rely on it has ultimately prevailed, even though the matter went as far as the tribunal in one case and the Adjudicator in the other. The OTS report (para 4.9) quotes Bingham LJ:

‘No doubt a statement formally published by [HMRC] to the world might safely be regarded as binding, subject to its terms, in any case falling within them’.

The OTS also notes the practice of the Australian Tax Office (ATO) who regard themselves bound by the category of guidance they refer to as ‘precedential guidance’ even if it is incorrect, and where taxpayers rely in good faith on other kinds of incorrect guidance, the ATO at least refrain from imposing penalties and interest. In the UK, the courts will apply the doctrine of ‘legitimate expectation’ which means that a taxpayer can rely on guidance, even if incorrect, if they can show they have reasonably relied on it to their detriment and have made full disclosure to HMRC of all relevant facts. Nevertheless, they may well have to go as far as the court or tribunal in order to have their rights recognised. There is a clear need for HMRC to review its policy on adherence to official guidance, and the ATO position may provide a good starting point.

Robin Williamson MBE is an author and commentator on tax, welfare and public policy. He was technical director of the CIOT’s Low Incomes Tax Reform Group from 2003 to 2018.

See also: Guide to Taxpayers’ Rights and HMRC Powers (6th edition) by Robert Maas.

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