Can you rely on advice from the Taxman?
If you need an answer to a tax question, there’s plenty of information on the Taxman’s website. But the advice given is often out-of-date and is constantly changing, so where do you stand if it turns out to be wrong?
Expert at everything
If you’re in business, you don’t need us to remind you that these days you need to be an expert in VAT, PAYE and Corporation Tax, to name just the main culprits. Even specialists struggle to understand the rules, so what chance have you got if you need a tax question answered? You might think that consulting the Taxman for advice would be the obvious solution. After all, as it’s coming from the horse’s mouth, it must be right, and if it isn’t, then surely you wouldn’t be held responsible - would you?
High profile cases
There have been several recent cases where the Taxman has given advice and then changed his mind, leaving businesses out of pocket by thousands of pounds. In at least one of these the guidance published on HMRC’s website was so misleading that the judge publicly hauled the Taxman over the coals, but in the end had to concede he had the correct answer second time around and decided the case in his favour. The conclusion is that the Taxman can tell you something one day, change his mind the next, and then penalise you for his mistake.
His word is not law
In the majority of cases the advice given in the Taxman’s publications, including those on his website, are not law, it’s only his view, although there are one or two exceptions to this (see The next step). Yet he actively encourages you to go to his website as a first port of call for advice. And what makes this situation worse is that he’s currently in the process of updating, correcting and deleting many of the pages as part of a long overdue spring clean. In many cases the advice given has been superseded by new legislation, case law or was simply wrong in the first place. This means that unless you’re careful, you can be left in the lurch with nothing to explain why you did what you did, even though it resulted from advice on the HMRC website.
Tip. If you follow advice from the Taxman’s website, print a copy of the webpages you’ve consulted, and make sure that they’re dated. Copy and paste the webpage into an e-mail and send it to yourself. All e-mails contain an electronic fingerprint that means the date and time are stored, so there can be no argument from the Taxman. And, of course, don’t delete it!
In practice
Despite the recent court cases, proof that you followed advice from HMRC’s website will usually be sufficient to stop the Taxman taking any action against you where subsequently it’s found that you made an error. And even in the worst case where you can’t escape extra tax because you’ve followed his advice that was incorrect or you have misunderstood it, you’ll escape a penalty. This is because, under the new rules which came into force last year, where you can show that you’ve taken “reasonable care” in deciding on a course of action, e.g. following HMRC’s online guidance, the law says that the Taxman can’t charge a penalty.
For details of HMRC guidance that has the force of law, visit http://tax.indicator.co.uk(TX 10.19.07).
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