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HMRC internal manual

Admin Law Manual

Incorrect Advice to Customers: When incorrect advice can be binding

HMRC is only bound by incorrect advice in circumstances where all of the following tests are met:

  • The customer made it plain he or she was seeking fully considered advice and indicated what it would be used for
  • The customer provided all information relevant to the query
  • The advice given by HMRC was clear, unambiguous and without qualification
  • The customer acted in reliance on the advice (i.e. he or she did or refrained from doing something as a direct consequence of the advice)
  • The customer would suffer detriment if the correct statutory position were applied; (e.g. he would be financially worse off than if the correct advice had been given in the first place)
  • To apply the correct statutory position would be so unfair as to constitute an abuse of power (see ADML1400).

A customer can only suffer detriment if he or she is subject to real harm or loss. It is not sufficient to merely suffer disappointment or upset.

These are stretching tests for which there will not always be direct or conclusive evidence. If necessary a reasoned judgement should be made on the balance of probabilities.

If you feel that these tests are met, a higher net return to the Exchequer might be achieved by sticking with the tax treatment of the incorrect advice for the past. Each case must be considered on its own merits. You must keep a record of your decisions reached in such cases and the factors taken into consideration. If you are in any doubt, you should contact Tax Admin Policy in Central Policy for further guidance.