ADML1300 - Incorrect Advice to Customers: When incorrect advice can be binding
HMRC recognises that it is bound by incorrect advice in circumstances where all of the following criteria are met:
- The customer made it plain they were seeking fully considered advice on a tax specific issue 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 relevant qualification.
- The customer acted in reliance on the advice (i.e. they did or refrained from doing something as a direct consequence of the advice).
- The customer would suffer detriment if the correct statutory position is now applied.
- To apply the correct statutory position would be so unfair as to constitute an abuse of power.
Caselaw recognises that detriment resulting from reliance is not a prerequisite to bringing a succesful substantive legitimate expectation claim. It is however a relevant and important factor when assessing unfairness and whether the expectation should be considered binding. Please see ADML1400 for further information about detriment.
There will not always be direct or conclusive evidence that all the above criteria are met. If necessary, a reasoned judgement should be made on the balance of probabilities.
If you consider that all the critaria 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 please contact TAPS CMCAR team using the guidance form for further advice.