An open tax system or the “gates of the Kremlin”?
Is it realistic to assume that where HMRC publish information either in letter, booklet or on the internet, a taxpayer should be able to rely upon it to be both accurate and binding?
Can we trust statements made by HMRC to be binding as to the consequences they highlight?
Where a taxpayer relies upon such statements, should HMRC be required to be bound by their comments?
Peter Vaines, a leading tax barrister at Field Court Tax Chambers, recently commented that “(if) …. taxpayers can be misled or disadvantaged … by relying upon official statements which (HMRC) can disown … (this) is not just the thin edge of the wedge; it is the gates of the Kremlin.
And so to the case of Aozora GMAC Investment Ltd v HMRC (2019) EWCA Civ 1643. In the case, which concerned double taxation relief, the taxpayer stated that it had a legitimate expectation that HMRC would apply the law in accordance with their published guidance. The taxpayer added that it has a “legitimate expectation” that HMRC would apply the law accordingly.
However, as Michelle Malone Tax Director at ASE notes, “reliance on HMRC published guidelines is not quite so simple”. Specifically, Michelle advises that “taxpayers must be aware of the context in which such guidance is given; for example is it unambiguous and unqualified”.
In the judgement, the court stated that “it is necessary for the taxpayer to show a high degree of unfairness in order to override the public interest of HMRC collecting taxes in accordance with the correct interpretation of the law”.
“But to what extent and how might it be possible for the taxpayer to establish such unfairness” comments Michelle “if the fall-back position is that HMRC argue that tax should always be collected in accordance with the law?”
There has always been circumstances where HMRC will have errored and yet have been able to recover the tax notwithstanding the genuine and reasonable action of a taxpayer. “In circumstances where the taxpayer’s errors are penalised for carelessness, why is the law not mirrored in favour of the taxpayer for the carelessness of HMRC” concludes Michelle.
In case of any questions please contact at Chris.Cummings@ase-global.com
Tel: +44 (0)161 493 1930