HMRC starts from the position that it is not bound by advice that is wrong in law, but it accepts it can be held to incorrect advice given to a specific taxpayer where the taxpayer gave full facts, the advice was clear and unqualified, the taxpayer relied on it, and going back on it would be so unfair as to be an abuse of power. This is the public law doctrine of legitimate expectation. It protects the past only, rarely helps where the taxpayer relied on general published guidance, and is enforced by judicial review rather than an ordinary tax appeal.

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Why is HMRC not automatically bound by what it says?

HMRC’s Admin Law Manual (ADML1200) explains that HMRC has a duty to collect the correct amount of tax as required by statute and only limited powers to do otherwise. Its collection and management discretion under section 5 of the Commissioners for Revenue and Customs Act 2005 allows it to forgo tax only where that produces a higher net return for the Exchequer, a principle the manual links to the Court of Appeal decision in Wilkinson v Commissioners of Inland Revenue in 2003. So the starting point is that wrong advice does not change the tax due.

Against that sits HMRC’s public law duty to act fairly. The same manual accepts that in exceptional circumstances a court would treat applying the strict law as so unfair as to be an abuse of power. That is where legitimate expectation comes in.

When does HMRC accept it is bound?

ADML1300 lists the criteria HMRC applies to incorrect advice. All must be met:

  1. The customer made it plain they wanted fully considered advice on a specific tax issue and said what it would be used for.
  2. The customer gave all information relevant to the query.
  3. The advice was clear, unambiguous and without relevant qualification.
  4. The customer acted on the advice, doing or not doing something as a direct result.
  5. The customer would suffer detriment if the correct law were now applied.
  6. Applying the correct law would be so unfair as to be an abuse of power.

Where advice was unsolicited, for example in a letter after a compliance check, HMRC applies the same tests without the first one (ADML1800). HMRC’s public guidance puts the same idea in plainer terms: you may be able to rely on incorrect advice if it was reasonable to expect to, and very unfair for HMRC to act differently. It will look at whether you gave all the relevant facts, whether the advice was clear and certain, and whether you would be worse off.

The courts express the test in four parts. In the Samarkand film partnership case, the Upper Tribunal adopted a summary from R (GSTS Pathology LLP) v HMRC: the claimant has an expectation of favourable treatment, the authority caused it by words or conduct, the expectation is legitimate, and it would be an unjust exercise of power to frustrate it. The summary records that taxpayers who receive a ruling from HMRC on their particular case may acquire a substantive legitimate expectation to be taxed in line with it.

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How much does detriment count?

Case law treats detrimental reliance as an important factor rather than an absolute requirement. HMRC’s manual (ADML1400) accepts this in theory, but says it will require evidence of detriment in the first instance, and that this means real harm or loss rather than disappointment. The more a taxpayer’s livelihood or business would be seriously affected, the more likely a court is to see unfairness.

Does published guidance create a legitimate expectation?

Much less readily. The HMRC manual’s tests are written for case specific advice and it directs staff to policy teams where someone says they were misled by published guidance (ADML1100 and ADML2200). In Samarkand, the partnerships argued that HMRC’s Business Income Manual and its settled practice gave them a legitimate expectation of relief and that HMRC’s conduct was conspicuously unfair; the Upper Tribunal dismissed the applications for judicial review.

Clearances are the strongest basis for reliance. HMRC’s exchange of information manual (IEIM520100) states that all statutory clearances and all non statutory clearances will always involve enough consideration of the facts, and an intention that HMRC’s view is binding, to create a legitimate expectation, and that the usual caveats in a clearance do not stop this. See HMRC non statutory clearances for how to get one. A reply that just points to published guidance, or one given without the full facts, is not a ruling.

What if the law changes after the advice?

HMRC’s guidance says advice reflects the law as understood when it is given. If new legislation comes into force before the transaction, earlier advice is not binding, and if legislation is retrospective HMRC will not be bound for the retrospective period (ADML1700). If a court changes the accepted reading of the law, HMRC may no longer be bound, though it may choose to apply the new reading only going forward.

What does HMRC do when it is bound?

A legitimate expectation protects only the past. Under ADML2000, HMRC tells the taxpayer in writing what the correct treatment is and when to start applying it, normally from the date the error was pointed out, and simply takes no further action on the earlier periods. Where HMRC decides it is not bound, the tax is recovered in the normal way and penalties and interest are considered under the usual rules. Even then, ADML2100 says some redress, such as paying reasonable costs the customer incurred, may be considered through HMRC’s complaints process, covered in escalating issues with HMRC.

Illustration only. A landlord writes to HMRC describing exactly how she proposes to treat a payment, says she will rely on the answer, and gives all the facts. HMRC replies in clear terms agreeing her treatment, and she completes the transaction on that basis. Three years later a different officer says the advice was wrong and assesses £12,000. Her strongest position is to show each of the ADML1300 criteria, including the cost she would not otherwise have taken on. If HMRC accepts it is bound, the past years stand and she changes her treatment from now on.

How do you enforce a legitimate expectation?

Usually not through a tax appeal. In HMRC v Abdul Noor (2013), the Upper Tribunal held that the First tier Tribunal had no jurisdiction to consider a legitimate expectation argument about recovering VAT input tax, and reversed the decision that had allowed the taxpayer’s appeal. The route is judicial review instead. In Samarkand, the Upper Tribunal dealt with the judicial review claims alongside the tax appeals. The government’s guide to judicial review, The Judge Over Your Shoulder, notes that a claim must be brought promptly and in any event within three months of the grounds arising, so act quickly once HMRC goes back on its advice.

In practice many disputes are resolved before that stage by asking HMRC to apply its own ADML criteria, or by raising a complaint. A separate defence may also be available on penalties: our page on reasonable excuse covers when relying on advice can excuse a failure. Your general rights are set out in our page on the HMRC Charter.

Common mistakes

  • Not keeping a record. Phone advice is hard to prove; get it in writing or note the date, adviser and words used.
  • Leaving out facts. Advice based on an incomplete picture will not bind HMRC.
  • Relying on general guidance. Published manuals rarely found an expectation; a clearance does.
  • Arguing it at the tribunal. The First tier Tribunal is generally the wrong forum.
  • Expecting future protection. Once the error is known, the correct treatment applies going forward.
  • Missing the judicial review deadline. Three months is the outer limit, not a target.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.