CW Energy LLP

Uncertain tax treatment by large businesses – second consultation opened

HMRC published a summary of responses to the first consultation and opened a second consultation to invite further views on the potential regime ahead of a proposed implementation from April 2022; any responses should be provided by 1 June 2021.


In March last year, HMRC published a consultation document asking for views on the introduction of a notification requirement in respect of uncertain tax treatments for large businesses (i.e. those businesses which are in scope of the Senior Accounting Officer (“SAO”) regime).

A number of respondents expressed concerns about certain aspects of the proposal. One of the main concerns was that the definition of uncertain tax positions, being one that HMRC may challenge or is likely to challenge, was not sufficiently clear and in particular was too subjective.

See our news brief on 17 November 2020

The new consultation reiterates the intention of the new regime:

“This measure is not intended to promote any assumption that HMRC’s interpretation is correct, nor that HMRC is a final arbiter of tax law. The measure aims to ensure that HMRC is aware of all cases where a large business has adopted a treatment that is contrary to HMRC’s known position and to accelerate the point at which discussions occur on uncertain treatment.”

The new consultation seeks taxpayers’ views on a number of proposed changes to deal with some of the concerns raised as part of the first consultation.

Changes proposed by the second consultation

A number of changes to the regime have now been suggested. These include:

  1. A number of suggested objective triggers where a notification will be required, such as:
    • A business adopts a tax treatment that is different from HMRC’s known position (eg. published in the tax manuals);
    • A tax treatment is not in accordance with known and established industry practice;
    • A business alters a previously used treatment, where that change is not due to a change in law or a change in HMRC’s known position;
    • A structure or transaction that is in some way novel has been adopted where there is no known HMRC position;
    • Where a provision has been made in the accounts in accordance with IFRIC 23 (or other relevant accounting standards);
    • Professional advice has not been followed.
  2. Proposals that the threshold for reporting is raised to a £5m tax outcome (from £1m).
  3. Taxes within the scope of the notification requirement are to only include Corporation Tax, VAT and Income Tax (which includes PAYE). This change removes Customs and Excise and PRT (amongst others) from the scope of the regime.
  4. A notification will be required separately for each of the relevant taxes on an annual basis.
  5. The proposal is to align the notification with the due date of the tax return’s submission.
  6. A penalty for failure to notify is to be charged on the large business rather than an individual as had been originally proposed.

The government intends that the notification requirement will apply to transactions in returns due to be filed after April 2022.


The business will not be required to make a notification if the tax treatment has already been disclosed under a different legislative requirement or HMRC is already aware of the uncertainty.

It has been suggested that businesses with a low-risk rating under the Business Risk Review process should be excluded from the notification requirement; HMRC has outlined certain reasons why this may not be achievable although HMRC said they would explore how the business risk review process could be used to limit the scope of the measure.

Certain matters relating to transfer pricing cases may be excluded.

CWE Comments

It is clear that HMRC intends to push ahead with the new requirement from April 2022.

Although the introduction of a number of objective tests will assist businesses to understand their obligations under the regime there continues to be a fundamental difference between the test in IFRIC 23, which requires a taxpayer to take a view on the ultimate outcome of a position, and that in the proposed regime, which focuses on the likelihood of HMRC challenge.

In addition, the “in some way novel transaction” test could be interpreted very widely so that a reporting obligation could be triggered for anything that is not a business as a usual transaction.

As we have previously outlined, given that it seems likely that this regime will be introduced we believe that it is important that taxpayers factor in the possibility of a wider notification requirement when assessing the efficacy of any tax planning that they may currently be considering.  For corporation tax, with the new regime expected to apply to tax returns filed after April 2022 most currently envisaged transactions will be subject to the new regime.