Some phrases which one comes across in the course of professional training stick in one’s memory for decades (or, at least, they do in the case of this professional) – certainly long after the facts of the particular case have passed into mere oblivion.
One (framed on the writer’s office wall for years) was the observation of the Lord President of the Scottish Court of Session (in Ayrshire Pullman Motor Services 14 TC 754) that “No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores.”
Almost equally memorable were the words of the judge in Williams v Grundy’s Trustees 18 TC 271: “nothing is better settled than the principle that there is no estoppel as against the Crown.”
It was that second phrase which came to mind when reading the recent First-tier Tribunal (‘FTT’) decision in MWL International Ltd and Maywal Ltd v HMRC [2024] UKFTT 00402 (TC).
HMRC had confirmed at a meeting in 1993 that cars would be treated as ‘pool cars’ (so giving rise to no taxable benefit-in-kind) provided certain conditions were met in respect of them. Those conditions were in fact met and continued to be met, so no benefit-in-kind was declared. A quarter of a century later, HMRC had another look and concluded (correctly) that compliance with the stated conditions did not (as a matter of law) have the effect that the cars were pool cars. In other words, HMRC had made a mistake in 1993 and the companies had for 25 years been acting on it in good faith.
HMRC nonetheless sought to collect tax and National Insurance Contributions for a number of past years (though not, of course, as far back as 1993). The companies objected, claiming that HMRC were ‘estopped’ from doing that.
The FTT examined the various forms of estoppel, concluding that all the elements of ‘estoppel by convention’ were present (essentially, that there was a common assumption as to the facts and/or the law expressly shared between the parties on which one party had acted to its detriment in subsequent dealings between the parties). Nonetheless the FTT held that HMRC weren’t bound: case law had demonstrated that “HMRC cannot be estopped from applying a statutory provision”. What this means in layman’s terms is that if something is taxable as a matter of law, you remain liable to pay tax on it, regardless of how often, how firmly and in what circumstances HMRC have told you that you aren’t liable to pay tax on it.
Of course, this is very much a one-way street. HMRC can and do raise arguments of estoppel against taxpayers – for example in the Supreme Court in 2021 on which we commented here. Outrageous.
So is there anything you can do?
Well, since it was an employee of HMRC who made the mistake in 1993 and since an employer is normally vicariously liable for the tortious acts of an employee (something else that one remembers from one’s early training!), wouldn’t it be nice to think that HMRC would be liable qua employer to compensate the companies for the detriment suffered? Just sayin’.
For more information on estoppel, please get in touch with your usual BKL contact or send us a message.