EIS: income tax relief: company and investor procedures: advance assurance requests: where HMRC will not be bound by an assurance given
There are some circumstances in which HMRC’s primary duty to apply tax legislation according to statute and case law may mean that HMRC can no longer be bound by an assurance it has given. For example this may occur where:
- the nature or terms of a transaction or agreement change in a way that has a material impact on the transaction or agreement as a whole,
- the information on which the advance assurance was based has been superseded since the advance assurance was given,
- incorrect, incomplete or misleading information is provided when the assurance application is made,
- an examination of the detail of transactions subsequently entered into by the company (and taking account of any associated transactions involving other parties which could reasonably be regarded as part of a planned set of arrangements) would lead to the conclusion that the substance of the company’s activities was other than as described in the application,
- a Court or Upper Tribunal judgment before the investment is made, or before the company makes its statutory declaration on form EIS1, changes the prevailing interpretation of the law on which the assurance was based. An assurance will be based on the prevailing understanding of the law at the time it is given. Where the courts change the prevailing interpretation of the law and subject to the principle of legitimate expectation, HMRC is required to apply the tax legislation as required by the new interpretation of the law,
- the statutory law relevant to the qualifying conditions in respect of the issue of shares for which the assurance was given, changes. If this change is retrospective HMRC will not be bound by any assurance previously given. If the new statute is enacted prior to the issue of shares and is prospective, any previously given clearance relating to the transaction will not be considered to be binding. HMRC has a duty to apply the tax legislation as required by statute at the time the transaction takes place. It remains the company’s responsibility to take account of changes in the law.