Historic understandings with HMRC can feel settled and reliable, particularly where arrangements have operated without challenge for many years. When HMRC later revisits that position and issues assessments, the instinctive response is often to argue that the department cannot simply change its mind.
A recent Upper Tribunal decision in MWL International Ltd and another company v Revenue and Customs Commissioners [2026] UKUT 62 (TCC) highlights the limits of that approach. The case concerned Class 1A national insurance contributions on company cars and whether HMRC were prevented from issuing retrospective decisions because of a 1993 agreement.
The Tribunal’s message is clear. Arguments based on estoppel or legitimate expectation face a high threshold, and directors should not assume that long-standing treatment will automatically be protected.
At a Glance
The Upper Tribunal has confirmed that historic agreements with HMRC do not automatically prevent retrospective national insurance assessments. Arguments based on estoppel or legitimate expectation face a high legal threshold.
What was the dispute about?
The companies had leased cars to employees and treated them on the basis that they qualified as pooled cars for national insurance purposes. They relied on what they described as a 1993 agreement with an inspector of taxes.
Years later, HMRC issued decisions imposing Class 1A national insurance contributions on the basis that the cars did not qualify for pooled car treatment.
The companies appealed. They argued:
- HMRC were estopped from departing from the earlier agreement; or
- They had a legitimate expectation that HMRC would continue to treat the cars as pooled cars.
Both arguments ultimately failed.
Can you rely on estoppel against HMRC?
Estoppel by convention generally requires a shared assumption between parties, reliance on that assumption, and detriment if one party departs from it.
The Upper Tribunal held that the First-tier Tribunal had made no error of law in rejecting the estoppel argument. In short, the requirements were not met in a way that prevented HMRC from issuing the disputed decisions.
For directors, the important point is that estoppel arguments against HMRC are difficult. The courts are cautious about preventing a public authority from exercising statutory powers, particularly in tax matters. A historic agreement or informal understanding will not necessarily prevent HMRC from reassessing its position if it considers the statutory requirements have not been met.
What about legitimate expectation?
The companies also argued that they had a legitimate expectation that HMRC would continue to treat the cars as pooled cars.
The Upper Tribunal considered whether the First-tier Tribunal even had jurisdiction to determine that argument. It concluded that the First-tier Tribunal had been correct in finding that it lacked jurisdiction to determine a free-standing public law legitimate expectation claim.
The Upper Tribunal went further. It stated that even if the elements of a legitimate expectation claim were assumed to be made out, it was not conspicuously unfair for HMRC to depart from the 1993 agreement when issuing the NIC decisions.
This illustrates two key risks for directors:
- Jurisdictional hurdles may prevent certain arguments being fully ventilated in the tax tribunal.
- Even where a legitimate expectation can be articulated, the threshold for establishing unfairness is high.
Does this mean HMRC can always change its position?
No. HMRC must act within the law and within the limits of its statutory powers. However, this decision reinforces that:
- Informal agreements or historic understandings are not a guarantee of future treatment.
- The statutory framework ultimately governs the position.
- Public law arguments will not lightly override tax legislation.
Where HMRC reopens an issue after many years, the analysis will focus on the statutory basis for the assessment, time limits, and the specific facts of the arrangement, rather than simply whether there was a previous understanding.
What should directors do if HMRC revisits a historic arrangement?
If HMRC challenges a long-standing arrangement:
- Do not assume that past correspondence or agreements automatically bind HMRC.
- Review the statutory framework carefully.
- Assess whether the assessment is within time.
- Consider how any earlier agreement was framed and whether it was conditional or fact-specific.
It is also important to align any response with the broader strategy of the enquiry. Arguments about estoppel or legitimate expectation may form part of the picture, but they rarely succeed in isolation.
Where national insurance, PAYE or other employment tax liabilities are involved, financial exposure can escalate quickly. Early structured engagement can often narrow issues before they harden into formal litigation.
The Upper Tribunal’s decision in MWL International Ltd is a reminder that tax disputes are ultimately governed by statute. While fairness arguments have their place, directors should approach them with caution and ensure that any defence is grounded in the legislative framework as well as the factual history.
For further information or assistance with tax related claims, contact our team of tax dispute experts today. We are here to help.
