Measure

Notification of Uncertain Tax Treatments

The measure

The government has changed previous proposals that will require large businesses to notify HMRC when they adopt a tax position for VAT, Corporation Tax, or Income Tax (including PAYE) purposes that is uncertain. Uncertain amounts which are notifiable are now defined by reference to two criteria: that a provision has been made in the accounts for the uncertainty, or that the tax treatment is contrary to HMRC’s known interpretation (as stated in the public domain or in dealings with HMRC). Previously a third criteria, where there is a substantial possibility that a tribunal or court would find the taxpayer’s position to be incorrect in material respects, was included but has now been removed. The government is committed to further consideration of this third criteria.

 

Who will be affected?

The measure will affect large businesses with either: 

  • turnover of more than £200 million per annum
  • balance sheet total over £2 billion

Businesses will be required to notify HMRC only if the tax advantage exceeds a £5million threshold.

 

When will the measure come into effect?

The measure will apply for Corporation Tax, Value Added Tax and Income Tax returns (via Self-Assessment and including amounts collected via PAYE) that are due to be filed on or after 1 April 2022.

Our view

The now abandoned third criteria created significant uncertainty as to how this measure would apply to businesses, so removing it will be well-received by those affected by the rules. Businesses are still required to exercise judgement as to whether an accounting provision is required based on the facts and circumstances of each uncertain tax treatments and the application of the relevant accounting standards. The fact that the government has stated it is committed to further consideration of the third criteria may mean we will see more developments in this area in future.