Can HMRC manuals be used for legitimate expectation? (Aozora GMAC vs HMRC)

In a case between Aozora GMAC Investment Ltd & HMRC, the Court of Appeal has rejected the notion that legitimate expectation can be based off guidance given in HMRC’s online manuals. Here we look into the details of the case, along with the potential ramifications of the decision.

Case overview

Aozora UK received interest on funds lent to its wholly owned subsidiary Aozora US, previously taxed at 30% in the United States. At the time, information provided in HMRC manuals agreed that Aozora could offset the foreign tax under unilateral credit relief. HMRC have subsequently amended the manual to remove the incorrect statement. Following the correction HMRC then looked to recover over £4,000,000 in corporation tax.

Aozora contended that they had a legitimate expectation that it would be taxed in accordance with HMRC’s manual. They added that it would be conspicuously unjust and an abuse of power for HMRC to resile from the alleged representation.

Whilst HMRC did not dispute the original wording, the manuals are published to assist HMRC’s staff and all manuals come with a general notice that…

 “These manuals contain guidance prepared for HMRC staff and are published in accordance with the Freedom of Information Act 2000 and HMRC Publication Scheme.

You shouldn’t assume that the guidance is comprehensive or that it will provide a definitive answer in every case. HMRC will use their own reasoning, based on their training and experience, when applying the guidance to the facts of particular cases.

The guidance in these manuals is based on the law as it stood when they were published. HMRC will publish amended or supplementary guidance if there’s a change in the law or in the department’s interpretation of it. HMRC may give earlier notice of such changes through a Revenue and Customs brief or press release.

Subject to these qualifications you can assume the guidance normally applies, but where HMRC considers that there is, or may have been, avoidance of tax the guidance will not necessarily apply.”

Court ruling

Whilst the court agreed that there had been a clear and unambiguous representation in the manual. The court was not convinced that Aozora had directly relied up on the guidance and as such, concluded that Aozora did not show a high degree of unfairness arising in the particular circumstances and as such legitimate expectation had not been created.


If an advisor or client is to act based upon HMRC’s manuals, then a clear and explicit reference to the guidance used should be made. It is also important to note that the details of the guidance have materially influenced any decision of a declaration.