MWL International Ltd v HMRC: Estoppel and legitimate expectation in tax disputes

The Upper Tribunal's recent decision in MWL International Ltd & Anor v HMRC [2026] UKUT 62 (TCC) provides important clarification on the circumstances in which HMRC can be prevented from collecting tax through estoppel by convention or legitimate expectation, particularly where retrospective assessments are concerned.

The case arose from a 1993 agreement between the appellants and an Inland Revenue inspector regarding the treatment of company cars as "pooled cars" for National Insurance Contributions purposes. Under this agreement, the cars would qualify for exemption from NICs provided they met four conditions: availability for business use, use by multiple employees, overnight storage at the company's registered office, and each employee owning another car for private use.

HMRC subsequently decided the cars did not qualify as pooled cars under the statutory provisions and sought to collect NICs retrospectively for the tax years 2015-2020. The appellants challenged these decisions, arguing that HMRC were estopped from departing from the 1993 agreement and that they had a legitimate expectation the agreement would be honoured.

The First-tier Tribunal found that whilst the requirements for estoppel by convention were satisfied, HMRC could not be estopped from enforcing statutory provisions. The tribunal also concluded it lacked jurisdiction to determine the legitimate expectation issue. The appellants appealed both conclusions.

Estoppel by convention

The Upper Tribunal dismissed the appeal, confirming that estoppel by convention could not operate against HMRC in these circumstances. Drawing on authorities including Maritime Electric Company v General Dairies and Keen v Holland, the tribunal established key principles: where a statutory provision imposes a positive duty for public benefit, estoppel cannot prevent its performance; estoppel cannot achieve what contract could not; and the court must determine whether the statutory provisions would be "overridden" or "undermined" by the estoppel.

Crucially, the tribunal found the 1993 agreement fundamentally departed from the statutory requirement that private use of pooled cars be "merely incidental". The agreement's condition that employees own another car was described as "a very poor proxy" for the statutory test, as it imposed no requirement regarding actual usage. An employee could theoretically own another car but never use it, whilst using the pooled car exclusively for private purposes.

Since HMRC could not have bound themselves by contract to misapply section 167 ITEPA, they could not be estopped from applying its plain statutory terms.

Legitimate expectation

On jurisdiction, the tribunal endorsed a conventional purposive construction approach to determining the FTT's jurisdiction in statutory appeals. The substantive NICs provisions were mandatory and incorporated no discretion. The appeal rights were narrowly framed and did not signal a supervisory jurisdiction for the FTT.

Even if jurisdiction existed, the tribunal indicated the legitimate expectation claim would have failed. Whilst acknowledging some unfairness in HMRC's retrospective departure from the agreement, the public interest in proper tax collection significantly outweighed this concern. The appellants had benefited from the exemption for over a decade, and the agreement would have permitted exemption without satisfying a central statutory condition.

The decision reinforces that taxpayers cannot rely on agreements with HMRC that contradict clear statutory requirements, regardless of how long-standing such arrangements may be. The judgement provides valuable guidance on both the limits of estoppel against public authorities and the FTT's jurisdiction to determine public law challenges in tax appeals.

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