Government proposals to widen the uncertain tax treatment regime have raised concerns among tax professionals, who warn the changes could increase compliance burdens and create further uncertainty for taxpayers.
The current rules require large businesses to notify HMRC where they adopt an uncertain interpretation of tax law and significant tax amounts are involved. The aim is to give HMRC earlier visibility of potential disputes and reduce the tax gap linked to legal interpretation.
However, the government is now considering a much broader regime. The proposed expansion could bring more taxpayers within scope, including individuals and trusts, while also extending the rules to additional taxes.
The Chartered Institute of Taxation (CIOT) has warned that the plans risk going too far, particularly if they create uncertainty about when a notification is required.
One key area of concern is a proposed new trigger for notification. This would apply where there is more than one “credible” interpretation of the law and HMRC’s view is not known. The CIOT argues that this test is too subjective and could be difficult for taxpayers and advisers to apply consistently in practice.
Rather than providing clarity, the Institute says the proposals could lead to cautious over-reporting, increased administrative work and more disputes over whether a tax treatment was uncertain in the first place.
Lauren Fletcher, CIOT Tax Technical Senior Manager, said the proposals would represent a significant expansion of the existing regime by covering more taxpayers, more taxes and a wider range of uncertainties. She warned that, in their current form, the rules are not workable and need further development before legislation is introduced.
The CIOT supports the government’s aim of reducing the legal interpretation tax gap and improving certainty. However, it argues that any notification regime must be clear, targeted and practical.
For taxpayers, the proposals underline HMRC’s growing focus on transparency and early disclosure. But unless the rules are carefully designed, they could leave individuals, trusts and businesses facing more uncertainty—not less—when dealing with complex areas of tax law.
