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Can we rely upon the guidance in HMRC Manuals etc?

HMRC has contradicted its own guidance relied upon by the taxpayer and won at the Court of Appeal

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It is frightening that we cannot advise clients, relying upon published HMRC guidance, without the danger of this being contradicted by HMRC to the detriment of the taxpayer. What is surprising is that the Cof A seems quite relaxed about HMRC's behaviour. See Aozoara GMAC Investment Ltd R (Aozora GMAC Investment Ltd) v HMRC [2019] ECWA Civ 1643

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By SteveHa
28th Oct 2019 10:04

HMRC "guidance" has no weight in law. Why rely on it all.

The legislation is all that you need.

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By The Dullard
28th Oct 2019 11:18

Surprisingly, that's largely what the Court of Appeal said. They suggested that Aozora's advisers, a small firm going by the name of Deloitte, were at no disadvantage to HMRC in forming an interpretation the law.

However, usual procedure has always been to compare one's own interpretation of the law with HMRC guidance, and if one's own interpretation came up with a better result to go with that. If HMRC's guidance produced a better result though that was followed. If the two produced the same conclusion, fantastic. If not there has to be some sort of caveat to the client.

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By Lone_Wolf
28th Oct 2019 12:23

Exactly.

It merely assists you in forming an opinion as to what HMRC's view on a subject may be. As the case linked indicates, that view may change if it suits them.

The Dullard's comments about usual procedure I'd agree with, with the slight caveat that, even if HMRC's interpretation provided the better result, I'd be caveating with the client that I don't agree with that interpretation, albeit would probably go with it if they wanted to do so (despite the highlighted case, HMRC won't commonly disagree with their own stated treatment after all).

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By sammerchant
29th Oct 2019 17:06

If you wrote the rules governing a game, would you be allowed to change them after an opposing player makes a move so that you win no matter what?

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By sammerchant
29th Oct 2019 17:01

If HMRC are effectively saying "This is just our pinion, and does not mean we will adhere to it", surely a disclaimer from them to that effect would be advised?

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By Tax Dragon
29th Oct 2019 19:00

"These manuals contain guidance prepared for HMRC staff and are published in accordance with the Freedom of Information Act 2000 and HMRC Publication Scheme."

It's not been published for you. It's been published (with redactions where allowed) because it has been asked for.

"The guidance is not comprehensive and does not provide a definitive answer in every case. It is based on the law as it stood when they were published. HMRC publishes amended or supplementary guidance if there’s a change in the law or in the department’s interpretation of it."

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By whitevanman
29th Oct 2019 19:22

They also publish an Admin Law manual (though not sure if we can rely on it now) that deals with the subject of incorrect advice. That is however directed at case specific advice given by an officer. It does point out also that, in relation to reliance on manuals, there is a possibility that a legitimate expectation has been created. If the OP has actually read (and understood) the Aozora case, (s)he will have noted that that is what the court considered.

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By unearned luck
30th Oct 2019 00:13

In a SA system like ours it behoves the tax authority to publish its view of the law.
Firstly, the tax code is vast and complex and taxpayers need a guide of some sort - the state should make the task of self-assessing as easy as possible.
Secondly, if the taxpayer doesn't know HMRC's view how can he flag-up in the white space the fact that he has deliberately* parted company from HMRC's interpretation of the law and obtain finality at the closure of the enquiry window?

*Perhaps an unfortunate word to use in light of the CoA's view in Tooth.

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By Tax Dragon
30th Oct 2019 04:25

I don't disagree, but to some extent you could turn that thought on its head: not only does the taxpayer have to navigate a vast and complex tax code, but also to read a huge narrative of that tax code provided by the tax authority in order to understand its view of the law and ascertain whether there is any variance from his own. Is that making it easier, or adding to the compliance burden?

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By johnhemming
30th Oct 2019 05:10

Looking at the judgment and commentary here
https://library.croneri.co.uk/cch_uk/btc/2019-btc-26

Noting from the judgment:
Aozora Japan obtained advice from specialist tax advisers who were not at any great disadvantage compared to HMRC when coming to their own view of the law and it was that view on which Aozora Japan relied. AG had not shown it had suffered a serious detriment as a result of any reliance on the representation.

And referring to the commentary:
What is perhaps most interesting is the Courtʼs comment, in its conclusion, that the specialist tax advisers were ‘not at any great disadvantage’ compared to HMRC when coming to their own view of the law, and it was that view on which the taxpayer relied. One feels this conclusion might impact the manner in which specialist advisers take HMRC guidance, and report it – or use it to report – to their clients.

It is clearly a really significant judgment for a tax advisor. My reading of this is that if someone takes tax advice and relies on it for a decision and the advisor looks at HMRC guidance then the taxpayer cannot make use of the guidance, but if the taxpayer does not take tax advice and instead relies on HMRC guidance then they are more likely to be able to rely on the guidance.

The Court of Appeal clearly accepted that guidance could give rise to a legitimate expectation. (although I accept it would not have the force of a Statutory Policy in another area of public law).

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By Tax Dragon
30th Oct 2019 07:39

johnhemming wrote:

My reading of this is that if someone takes tax advice and relies on it for a decision and the advisor looks at HMRC guidance then the taxpayer cannot make use of the guidance, but if the taxpayer does not take tax advice and instead relies on HMRC guidance then they are more likely to be able to rely on the guidance.

I think that's not quite right. It would have been interesting to see the decision had Deloitte, in giving its advice, referred to the guidance in the manner you suggest in your previous paragraph.

I have seen advice (on the back of Mansworth v Jelley) that said (I paraphrase(!)) "HMRC guidance is that you can have this huge gert big loss. We don't agree, and HMRC might change its view, but as it stands, that's the guidance."

I agree the case is significant. I'm not so sure the outcome is surprising. For sure, the issues are not new.

As an aside (picking up on one of another respondent's points), I've never understood why the white space disclosure regime does not seem to be consistent between companies and others.

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By sammerchant
31st Oct 2019 09:10

Many years ago, I believe HMRC would test a proposition in court and offer to pay the costs of the taxpayer in addition to paying its own. This was to create definable law and a precedent. It stopped doing that, and now effectively uses taxpayers' funds to threaten others: 'Our QC is £800+ per hour and you will have to meet his/her costs if you lose'. Only those with deep pockets now dare to take HMRC on.

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By Tax Dragon
31st Oct 2019 10:00

IMHO that's a political point.

It's one with which I have considerable empathy – there seems to me to be a "climate of hostility" to the ordinary citizen being able to obtain justice in some circumstances – but it's still political, so off limits for me. (Anyway, the next election will be about naffing Brexit, not justice.)

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By sammerchant
01st Nov 2019 16:02

I agree. But I hate injustice and unfairness in any form. That applies to clients and to HMRC.

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By The Dullard
01st Nov 2019 16:59

If nobody can rely on HMRC guidance, then everybody is in an equal position, which is then perfectly just and fair.

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By johnhemming
01st Nov 2019 18:51

With the separation of the estates of the constitution the rules on costs have tended to be determined substantially by the judiciary.

Historically it has always been difficult for people of ordinary means to litigate in the high court because of the costs risk (paying the other sides costs or most of them if you lose). More recently, however, the rules on costs budgets have brought in greater control.

Hence I would think (ignoring the issue of legal aid) that the civil procedure rules are less biased today towards people with deep pockets than they used to be historically.

I have been involved in a certain amount of litigation recently as a litigant in person and have won two cases where the other sides were funded by insurance and using solicitors and barristers (I did have a barrister, but I did the solicitor type of work myself with the assistance of a very knowledgeable friend).

I do, however, have quite a bit of litigation experience not only as a party, but also as a lay adviser or Mackenzie Friend and my work has obtained victories for people in the Criminal Court of Appeal and the Civil Court of appeal. (Not so much more recently as I have only really had one case I was assisting in the past couple of years which is currently with ECtHR (it is about medical consent).

Hence I think it is reasonable to say that the new rules on costs make it easier for people of ordinary means to litigate (particularly QOCS for example although that can be unfair itself).

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