HMRC’s Discretion: The Application of the Ultra Vires Rule and the Legitimate Expectation Doctrine

This paper considers the development of HMRC’s discretionary powers and the limits applied by the courts on the use of those powers with particular reference to the legitimate expectation rule.  The paper aims to promote discussion about the extent of HMRC’s discretion in interpreting and applying the tax rules set out by Parliament and whether taxpayers’ abilities to challenge the use of that discretion are sufficient. The paper identifies problems with the application of HMRC’s discretionary powers and the ability of taxpayers to rely on the various forms of statements and guidance which HMRC are increasingly under pressure to provide, as well as considering the procedures for claiming reliance on statements. It also suggests some ways to improve the position and invites comments and debate of the issues.