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HMRC internal manual

Admin Law Manual

What this means in practice: Example 4 - corporation tax, advice not clear and unequivocal

A golf club, an unincorporated association, holds share capital in a number of subsidiary incorporated companies. When the club submits its first corporation tax return, it claims group relief in respect of the losses of the subsidiaries. The club is unsure if it is entitled to claim group relief, so writes to HMRC giving as much information as possible about the claim and asking if their treatment is correct. HMRC reply, asking for further details, which the club then provides. HMRC write back saying this issue is complex and so will require further consideration, not giving the club any indication of when a substantive reply might be expected. No enquiry is opened into the return. The matter is then overlooked and the club receives no full reply to its query.

The club goes ahead with a number of development and investment decisions assuming it is entitled to claim group relief.

When the next corporation tax return is filed, they claim group relief again. The return is selected for enquiry and the inspector, reviewing the facts, decides that group relief is not available to the club and issues a closure notice on that basis. The club refuses to amend the return, claiming that the question had been brought to HMRC’s attention and that HMRC had not indicated there was anything wrong with the club’s application of group relief.

In this case, the club makes it plain that it is looking for clear advice and it provides all the relevant facts relating to its situation. If HMRC apply the law correctly, it is likely that the club would suffer real financial detriment. However, HMRC did not provide clear and unequivocal advice on the question when it was raised. Therefore, it would not be an abuse of power to apply the law correctly and the inspector amends the return. The club is advised of the correct tax treatment for the future.