IR35: Compliance - Question 5  

If I act on an opinion given to me by HMRC, and it later proves to be wrong, can I get compensation?

Clearances and Approvals 1 sets out our rules regarding the advice and information we can give. If someone wants to seek compensation in respect of incorrect advice we have given, then they must write to their local tax office, and:

• say why they were asking for advice;
• provide all relevant facts in an accurate format;
• show that they have actually received advice from us; which has led them to act in a manner determined solely by that advice; and
• suffered an actual financial loss (or a greater tax and NIC liability) as a consequence

If all of these conditions are met, then we will consider a claim for compensation.

If we have been asked to give an opinion about a contract and have been provided with all the relevant facts then we will be bound by the opinion we give. This is true even if we say, in error, that a contract is outside IR35. In such cases, a worker will not experience any financial loss by acting on the basis of our opinion, so there will be no grounds for claiming compensation.

If we have been asked to give an opinion about a contract and have not been provided with all the relevant facts then any opinion we give under CAP1 will not be binding on us. So, even if a worker experiences a financial loss by acting on the basis of the opinion we give, there will be no grounds for claiming compensation as the full facts have not been disclosed.

If we have been provided with all the relevant facts but say, in error, that a contract is within IR35 and a worker experiences financial loss by acting on the basis of that opinion, then there may be grounds for claiming compensation if all the requirements of CAP1 have otherwise been met.

In all cases it is important to remember that a worker is not bound to accept or act upon any opinion we give under this process.

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