Are HMRC Manuals Always Right?

The fact remains, however, that the manuals put together by HMRC are simply their interpretation of underlying legislation and, whilst clearly in many instances the interpretation is black and white such that the information in the manuals is a mirror image of such legislation, in other situations it is not.

This situation was highlighted in a recent Upper Tribunal decision regarding tax relief for in-specie pension contributions, the latest saga in a long running case between HMRC and Sippchoice.

In-specie pension contributions are when non-cash assets are transferred into a SIPP without being converted into cash.

The dispute originally arose between HMRC and Sippchoice when HMRC refused a claim for tax relief from one of Sippchoice’s clients in respect of a contribution in-specie.

At the First Tier Tribunal, in 2018, Sippchoice were successful in their appeal against HMRC’s decision with the judge at the time ruling that the meaning of contribution paid was wide enough to cover a transfer of assets.

However, in the Upper Tribunal, HMRC successfully argued that contribution paid referred only to the payment of money and hence in-specie tax contributions did not qualify for tax relief.

One of the key arguments presented by Sippchoice was that they had relied in good faith on the guidance in HMRC’s Pensions Tax Manual which appeared to strongly support the notion that an in-specie pension contribution was acceptable.

The Upper Tribunal actually agreed with this notion and, therefore, that HMRC’s own guidance was not consistent with law. Judge Sinfield stated:

“Statements in HMRC’s manuals are merely HMRC’s interpretation of the law in their internal guidance and they do not have the force of law”

At the time of writing we are unsure as to whether the decision by the Upper Tribunal will be subject to appeal but Sippchoice have suggested that this is their intention, however, notwithstanding the key thing to take away from this case is that when considering points of tax law, it is exactly that which should be considered, the actual legislation.

At Forths, our experienced team of tax investigation experts take this as the starting point on every news case we take on. Examining the legislation as it applies to the case and providing clear and concise advice based on the specific details. 

In the event that we believe that there is an erroneous application of the law we will robustly challenge this in order to arrive at what we consider is the appropriate result for our client.