In April 2008 HMRC announced that they would provide businesses with their view of the tax implications of significant commercial issues regardless of when the legislation was first enacted. On 1 May 2008 this clearance concession was extended to IHT Business Property Relief in situations where the issues are commercially significant. HMRC have now announced that the IHT Business Property Relief clearance will continue. It will also be extended to transfers of value that involve a change of ownership of a business in situations in which, leaving aside the application of business property relief, an immediate inheritance tax charge would arise.

To take advantage of this extremely valuable service, it is necessary for taxpayers to demonstrate the commercial significance of the transaction that causes the uncertainty and to identify which aspect of the law or practice they consider to be uncertain.

It has been revealed by the Chartered Institute of Taxation that in discussions on this topic HMRC emphasised that they had a duty to collect the correct amount of tax and the taxpayer might still be required to pay the tax even though he or she had acted on the clearance from HMRC. There seems little point in seeking a clearance unless it can be relied on, and this is obviously a very hot topic at the present time.

However, the Revenue website does contain an assurance that if the taxpayer has reasonably relied on the advice from HMRC, having made full disclosure of all the relevant facts, and the application of the law would result in financial detriment, then HMRC will consider itself bound by their advice.

This does give rise to a strange conundrum that if HMRC say that they cannot be bound by their statements and have a legal duty to collect the tax, then their assurance that they would be bound in these circumstances would not be binding either.

It is high time that this issue was clarified.