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Out-Law Guide 6 min. read

Notification of uncertain UK tax treatment by large businesses

Large businesses are required to notify HM Revenue and Customs (HMRC) where they have adopted an uncertain tax treatment.

The rules, which came into force on 1 April 2022, are intended to make sure that HMRC is aware at an earlier stage if a large business has adopted a treatment that is contrary to HMRC's known position. HMRC estimates that £5.8 billion of the estimated £35bn UK 'tax gap' for 2019-20 is attributable to legal interpretation, most of which involves disputes with large businesses.

Uncertain treatments are defined by reference to two criteria: that a provision has been made in the accounts for the uncertainty, or that the position taken by the business is contrary to HMRC’s known interpretation, as stated in the public domain or in dealings with HMRC.

Draft legislation published in July 2021 had included a third trigger of where there is a substantial possibility that a tribunal or court would find the taxpayer’s position to be incorrect in material respects. This was not included in the final legislation in the 2022 Finance Act, although HMRC said that the government is committed to further consideration of this third trigger and could add it to the legislation later.

Large businesses

The requirement only applies to large businesses, including partnerships and LLPs.

A large business is one with either, or both, a turnover above £200 million and a balance sheet total over £2bn. This includes all businesses handled by HMRC's large business directorate as well as the larger groups in its mid-sized business directorate.

Collective investment schemes are excluded from the regime.

Definition of an uncertain tax treatment

The notification requirement applies when a return is delivered by a large business which includes an ‘uncertain amount’ in respect of a liability for corporation tax, income tax (including PAYE) or VAT.

An uncertain amount is where:

  • provision has been recognised in the accounts to reflect the probability that a different tax treatment will be applied to a transaction to which the amount relates; and/or
  • the tax treatment applied in arriving at the amount relies (wholly or in part) on an interpretation or application of the law that is not in accordance with the way in which it is known that HMRC would interpret or apply the law.

HMRC’s position on a matter is taken to be ‘known’ if it is apparent from guidance, statements or other HMRC material that is of general application and in the public domain, or dealings with HMRC by or in respect of the business, whether or not they concern the amount in question or the transaction to which the amount relates.

The new rules are intended to make sure that HMRC is aware at an earlier stage if a large business has adopted a treatment that is contrary to HMRC's known position

HMRC has published guidance on the UTT rules in a dedicated UTT manual. This guidance includes a list of the types of material that HMRC considers to form part of its “known positions”. These include the HMRC manuals, statements of practice, bulletins, briefs, technical notes accompanying legislation, the CEST tool and its new category of information: “Guidelines for compliance” (GfCs). These were announced in announced in November 2021 as part of the review of tax administration for large businesses and are intended to provide HMRC’s view on complex, widely misunderstood or novel risks that can occur across tax regimes. The first GfC was published in October 2022 and relates to PAYE settlement agreements.

The guidance confirms that there is no requirement to notify HMRC under the known position criterion if HMRC’s position is not known or is unclear. Where HMRC’s position is contradictory, the known position is to be taken as the most recently published statement of the position. For example, based on an example given in the guidance, where HMRC is unsuccessful in litigation but has not updated its guidance to reflect the court’s decision, businesses are still expected to notify HMRC if they take a tax position which reflects the outcome of the litigation on the grounds that it remains contrary to HMRCs known position.

This is an important point because HMRC is often slow to update its guidance following an adverse judgment, and the obligation to notify remains in place even in circumstances where HMRC have lost before the Supreme Court and has therefore exhausted all right of judicial challenge. So even where HMRC is obviously wrong in law, taxpayers can still be penalised if they fail to meet the requirements of the regime.

The business is required to make a decision about whether a tax treatment is uncertain at the time it submits the return, amends the return, or where the amount is uncertain because of an accounting provision, by reference to when that provision is made. If a tax treatment becomes uncertain after that date – perhaps due to changes in case law – there is no requirement to revisit that year or accounting period.

The notification requirement applies separately in relation to each tax covered.


A business is not required to notify HMRC about an amount included in a relevant return if it is reasonable for the company or partnership to conclude that HMRC already have available to them all, or substantially all, of the information relating to that amount that they would have to provide in the notification. This is designed to reduce the compliance burden for businesses which are already open in their dealings with HMRC. However, it is not as wide as might be expected.

Businesses must still check that they have given HMRC all the information that would be covered by notification. The guidance recommends that taxpayers should make it clear that the discussion with HMRC is to avoid the requirement to notify, and the conclusion should be documented. HMRC will provide written confirmation that the exemption has been met where a business has approached it specifically to address the UTT risk. Any changes to a transaction, or to its tax treatment, following discussions with HMRC must be notified. Failure to do so will invalidate the exemption.

HMRC's awareness may also come from a clearance application made by the taxpayer. The guidance confirms that no notification is required if the transaction was granted clearance and is implemented as set out in the clearance application. However, if clearance was not given by HMRC but the transaction/tax treatment was still implemented, or if the transaction was implemented contrary to the terms set out in the application, notification will still be required.

Taxpayers are also exempt from notification where the information has been provided by making information available to HMRC through "another regulatory requirement". This specifically includes anything disclosed under the Disclosure of Tax Avoidance Schemes (DOTAS) rules, the DOTAS VAT rules, the international movement of capital rules or the mandatory disclosure of cross-border arrangements rules.


A tax treatment is only uncertain if it, and any related uncertain amounts, result in a "tax advantage" of £5 million or more in a relevant period - usually the 12-month accounting period. A tax advantage is calculated as the difference between the taxpayer's calculation of their tax liability and the "expected amount", which is the amount of tax that would have been accounted for if HMRC's known position or the position that led to the recognition of a provision had been applied.

Two uncertain amounts are related if both amounts are included in the same return, or a return for the same tax in the same financial year or accounting period, both amounts relate to the same tax and the tax treatment applied in arriving at one amount is substantially the same as the tax treatment applied in arriving at the other amount.

Companies in groups are not required to notify uncertain amounts in relation to corporation tax if they relate to intra group transactions and the net effect is that the value of tax advantages obtained by the group as a whole does not exceed the £5m threshold.

Notification and penalties

Notification of an uncertainty should be made by way of a digital form which is accessible from within the business’s government gateway account. The notifier should provide the company name and tax reference/VAT registration number; and details of the uncertainty, including:

  • tax regime;
  • notification trigger(s) under which disclosure is being made;
  • description of the transaction/ tax issue type;
  • explanation of the uncertainty;
  • reference to any relevant statute, case law and HMRC guidance to which the uncertainty relates; and
  • indication of the amount of tax advantage relating to the uncertainty.

There is a separate annual notification for each of the covered taxes. For corporation tax, this is due when the return is due to be filed. For VAT and other non-annual returns, the notification is due when the last return for the financial year in question is due to be filed.

There is a £5,000 penalty for the first failure to report. A second failure in a 3 year period in relation to the same tax gives rise to a £25,000 penalty and any subsequent failure in the 3 year period in relation to the same tax a £50,000 penalty. Penalties are appealable, and there is a 'reasonable excuse' defence.

For companies, the penalty can only be imposed on the company and not on individual employees.

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