HMRC isn’t just responsible for collecting taxes; they also play a part in helping individuals and businesses understand their tax obligations and liabilities, as well as their entitlement to tax credits and certain benefits. As part of that role, HMRC publish advice and information to educate taxpayers and help them comply with tax rules.
HMRC’s information and advice comes in various forms such as: letters, phone calls, webpages on GOV.UK, webchat services and social media messages. The information might be general (commonly referred to with the overarching term of guidance) or may take the form of bespoke advice HMRC provide, for instance in response to individual letters or queries.
Like any organisation, HMRC are not infallible, and mistakes can be made. So, what happens if their guidance turns out to be wrong?
HMRC have recently updated their reliance on guidance statement, which confirms that HMRC agree to be bound by their own incorrect statements if:
- it is reasonable for taxpayers to expect to be able to rely on the advice given by HMRC; and
- it would be very unfair for HMRC to act in a different way from the advice and information they provided.
When reviewing whether they should be bound by any wrong advice provided, HMRC will consider cases on an individual basis. They will review factors such as:
- whether HMRC’s advice was clear and not subject to limitations;
- whether the taxpayer’s actions were affected by HMRC’s advice;
- whether any departure from HMRC’s previous (incorrect) advice would leave the taxpayer financially worse off; and
- whether ignoring the previous incorrect advice would be an abuse of power by HMRC.
In cases where the taxpayer has specifically sought advice, HMRC will consider whether they were made aware of all relevant facts, whether the taxpayer made it clear they were seeking detailed advice, and for what purpose.
If HMRC guidance is found to be incorrect, taxpayers must follow the corrected advice once it is made available. Equally, where legal cases affect the interpretation of tax law, any resulting updated guidance should be followed.
Instances of taxpayers getting their taxes wrong as a result of following incorrect HMRC advice will hopefully be rare. However, anyone relying on HMRC guidance in any form should keep records of the information and advice they have used in case HMRC later challenge their tax position. Retaining HMRC letters, noting the content of telephone advice, and keeping copies of relevant GOV.UK webpages will be key to evidencing precisely what advice the individual has relied on.
This article reflects the position at the date of publication (14 September 2023). If you are reading this at a later date you are advised to check that that position has not changed in the time since.
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