Hutchinson – English Court of Appeal finds that the UK Revenue could change its published policy respecting taxpayers whose only reliance had been to claim unlooked-for losses

HMRC initially published guidance respecting a recent Court of Appeal decision which suggested to the taxpayer that transactions which he had already reported in his returns had generated additional (unlooked for) losses. Accordingly, he claimed the additional losses, which HMRC then denied. HMRC later followed up with revised published guidance indicating that they had changed their mind but that they would not reverse the claims of those who could demonstrate reasonable detrimental reliance on the initial HMRC guidance.

The taxpayer had initial success arguing in the High Court that HMRC could not resile from their previously expressed view in their initial guidance in the circumstances of his case. In allowing HMRC’s appeal, Arden LJ stated:

[T]he respondent has to show conspicuous unfairness. … I consider that this is not shown… . The respondent was returned to the same position as he was in when he committed himself to the transactions which gave rise to the capital losses. Moreover he had been clearly warned by HMRC in the letter of 2 June 2003 that they did not accept his additional Mansworth v Jelley losses.

The well-developed U.K. jurisprudence in this area has not really been tested in Canada as to its portability. This is not about requiring CRA to stick to a view that is clearly wrong, but about being fair about making changes from one reasonable interpretation in its published positions to another - which generally has been its practice.

Neal Armstrong. Summary of Revenue and Customs Commissioners v. Hutchinson [2017] EWCA Civ 1075 under s. 152(1).