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Relying on Inland Revenue

Inland Revenue has released a draft statement for public consultation setting out the Commissioner’s view of the current law in relation to the status of different types of advice (other than binding rulings) that the Commissioner gives and the implications of reliance on it.

Situations where the Commissioner will take the view that advice he has previously given is incorrect include when:

  • a court decision clarifies the law and shows that the earlier advice is incorrect;
  • the Commissioner discovers an error in the earlier advice; or
  • the Commissioner reconsiders earlier advice and changes his view.

As the Commissioner is bound to the same law as taxpayers, an incorrect tax postion cannot be permitted only because of relying on the Commissioner.

Draft item INS0104, “Status of the Commissioner’s advice” clarifies some issues in relation to the advice that the Commissioner gives. In particular, it considers:

  • the legal status of the Commissioner’s advice and when the Commissioner will be bound by his statements
  • taxpayers’ liability for substantive tax, penalties and use of money interest where the Commissioner’s advice is incorrect
  • application dates for public statements
  • the Commissioner’s position in relation to court and tribunal decisions that he is appealing, and
  • the status of Standard Practice Statements the Commissioner issues.

Note that the statement does not apply to binding rulings and that some of it overslaps with  “Amendment and re-opening of assessments: Policy statement by Commissioner of Inland Revenue” Public Information Bulletin No 123 (January 1984) (PIB 123).  Much of the material in PIB 123 is now addressed by the Standard Practice Statement on s 113 of the Tax Administration Act 1994 “SPS 07/03 Requests to amend assessments” Tax Information Bulletin Vol 19, No 5 (June 2007).   Any remaining parts of PIB 123 that were still relevant are superseded by this current statement.  There may also be an overlap in places with “Remission of penalties and interest – SPS 05/10 Tax Information Bulletin Vol 17, No 9 (November 2005).  Although legislation now provides that no interest will be charged where a taxpayer relies on a “Commissioner’s official opinion” SPS 05/10 still applies to a variety of circumstances where it is possible to obtain remission.

The deadline for comment is 22 June 2012.  See INS0104, “Status of the Commissioner’s advice” at

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