It is well established that HMRC may settle back tax matters by way of contractual agreement. The normal rules of contract law govern whether a binding agreement has been reached. Taxpayers seeking to rely on contractual settlements need to have regard to those rules because HMRC will, quite properly, not regard itself as bound if exchanges fall short of a binding agreement. Equally there may be occasions where HMRC seek to avoid an agreement but will not be able to do so if the agreement is contractually binding. The High Court’s decision in Kyte provides a warning to taxpayers not to rely on informal assurances or exchanges of correspondence falling short of a binding contract.
