When can you rely on what HMRC say

Recently, a landmark Supreme Court decision wemt against a taxpayerwho had relied on adfvice included in a HMRC booklet. So where are you if you follow HMRC's rules but they later change their mind?


Gaines losses Mr Gaines Cooper(GC) spent the best part of 30 years living abroad and followed advice published by HMRC in its IR20 booklet (now Booklet 6). Yet HMRC still contended he was resident in UK for tax purposes. The case raises an important question for us all. When can you rely on information contained in the various documents HMRC publish?


By the book The case actually involved three taxpayers who had relied on HMRC guidance contained in IR20. All claimed they had satisfied the conditions to qualify as not resident in UK for tax purposes and thus were not liable to UK tax on their income arising outside the UK. The big problem is that there is currently no statutory definition of tax residence. So greedily eyeing the huge amounts of tax at stake, HMRC argued against their own guidance and claimed all three taxpayers were UK resident. 


TRAP Some reports have implied that following this judgement. advice in HMRC's publications is worthless. That is not true but you need to take some precautions before following it.


Be reasonable The Supreme Court took the view that HMRC's guidance and publications are a vital part of its relationship with taxpayers and HMRC were bound by what it had said in its publications. GC and the others lost because they had misinterpteted the published guidance. However, HMRC had not been sufficiently clear and should provide clear, unambiguous advice in all its publications. One judge commented that ordinary taxpayers should feel no need to go beyond HMRC's published advice. HMRC will doubtless take their time in updating their publications to meet this goal but where is the taxpayer left in the interim?


Public or internal guidance Booklets, notices and HMRC statements of practice intended for the general public can be relied upon and tribunals and courts will back you up if HMRC decide to change their mind. However, this does not hold good for HMRC's staff instruction manuals on their web site. Mostly, these will tie up with their publications but where a difference exists, rely only on what is written for the taxpayer.


TRAP You cannot cherry pick the bits of advice you like and ignore those you don't. This may end up with you not acieving the tax result you wanted. Follow the published guidance in full.

Contemporaneous records HMRC's advice is constantly changing. Online publications may alter before you next refer to them - slightly awkward if you are arguing against HMRC's updated view.


TaxTip Keep a PDF or hard copy of HMRC web pages you used in making a particular decision. If you phone HMRC for advice, ask which public notice or instruction the taxman bases his view on.


Conclusion You can rely on HMRC advice contained in public notices (but not online manuals). Follow this to the letter to be sure you get the tax result you want. HMRC's publications and views change often, so keep a hard copy of any web pages you rely on.