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HMRC internal manual

Admin Law Manual

Incorrect Advice to Customers: Detriment

In all cases where a customer has received incorrect advice, it is important to examine the facts in light of the points in ADML1300. The starting point for all considerations must be that the courts will seek to apply the law, in other words HMRC should collect the correct amount of tax unless there are compelling reasons to not do so. This might be difficult or embarrassing for HMRC, but there are only specific and limited circumstances in which HMRC can exercise some discretion.

One of the tests to be applied is to consider if the correct application of the law would result in detriment to the taxpayer. If so, especially if this seriously affects the customer’s livelihood or business, and it is more likely that the courts would regard a correct application of the law as so unfair that it would be an abuse of our power, though the other conditions in ADML1300 must also be met. We would therefore be bound by our incorrect advice for the past, whilst ensuring the law is applied correctly for the future.

The taxpayer must suffer real and significant detriment before HMRC can regard itself as bound by incorrect advice.