Consultation on notification of uncertain tax treatment by large businesses

Consultation on notification of uncertain tax treatment

The consultation seeks views on a range of implementation issues including the method and detail of the notification requirement.


Also on

It was announced at the March 2020 Budget that the Government intends to require large businesses to notify HMRC where they have adopted an uncertain tax treatment. HMRC have issued a consultation document, open until 27 May 2020, on the framework for the requirement and are inviting comments (by email to from large businesses and their agents on: who is liable to notify, the size of business that will be required to notify, the tax threshold requiring notification, the method of notification, the level of detail that needs to be notified, and the proposed implementation date.

Background to the policy

HMRC have estimated that the legal interpretation tax gap is £6.2 billion (18 percent of the overall tax gap) and they consider the majority to be attributable to the large business customer group. The measure aims to ensure that HMRC are aware of all cases where a large business has adopted a treatment with which HMRC may disagree and accelerate the point at which discussions occur on uncertain tax treatment. The US (2010) and Australia (2011) have had equivalent notification requirements for corporate tax treatments for almost a decade.

Scope of the measure

The requirement will only apply to large businesses and the size threshold will be aligned with that used for the Senior Accounting Officer (SAO) and the Publication of Tax Strategies regimes i.e. turnover above £200 million or a balance sheet total over £2 billion.

The consultation indicates that partnerships and LLPs which satisfy the above criteria will be included within the scope - one area where the scope of the rules does not fully align with the SAO regime as large partnerships do not currently require an SAO. Alignment with the SAO regime seems a sensible approach and is preferable to the alternative of including all businesses subject an exemption for Small and Medium-sized Enterprises.

Scope of taxes covered

Unlike the equivalent regimes in the US and Australia, the proposed notification requirement will not be limited to corporation tax and will cover the same taxes which are within the scope of the SAO regime (Corporation Tax, Income Tax (including PAYE), VAT, Excise and Customs Duties, Insurance Premium Tax, Stamp Duty Land Tax, Stamp Duty Reserve Tax, Bank Levy and Petroleum Revenue Tax).

Comments have been invited on the coverage of the measure including the size thresholds and taxes in scope.

Legal interpretation

The meaning given to ‘legal interpretation’ is going to be a key element of the notification requirement and the consultation document defines this very broadly. It includes the interpretation of legislation and case-law, or guidelines relating to their application. Examples include “categorisation such as an asset for allowances or VAT liability of a supply, the accounting treatment of a transaction, or the methodology used to calculate the amount of tax due as in transfer pricing, or VAT partial exemption.”

Identifying uncertain tax positions

It is intended that the rules will draw on IFRIC 23, the International Accounting Standard that addresses Uncertainty over Income Tax Treatments, to determine what is notifiable. As the title suggests this does not cover the range of taxes proposed to be covered by the notification requirement.

It is proposed that the decision is made about whether a tax treatment is uncertain at the time the business is required to submit a notification. If a tax treatment becomes uncertain after that date (e.g. due to changes in case law) there would not be an expectation to revisit that year, but if the tax treatment appears in subsequent tax reporting periods then a notification would be required then.


Proposed exceptions cover situations where disclosure is required under other provisions (DoTAS, DAC6) or the uncertain tax treatment is already the subject of formal discussion with HMRC, such as an ongoing tax return enquiry which specifically covers the tax treatment in question. It is also proposed that the obligation to disclose can be removed where HMRC agree in writing that they have sufficient information in advance of the deadline for disclosure. Where a taxpayer has a Customer Compliance Manager (CCM) they are likely to be the person with whom such agreements are made and HMRC will provide a contact point for other taxpayers who do not have a CCM.

There will be no formal exception for instances where an uncertain tax treatment has been the subject of a clearance request to HMRC and there has been no formal agreement.

Threshold for reporting

It is also proposed that uncertain tax treatments which amount to a maximum of less than £1 million will not be notifiable. There will be some finer points of detail here around when tax treatments need to be looked at cumulatively rather than individually which will draw on the approach taken under IFRIC 23.

Determining what is reportable

The consultation indicates HMRC will provide guidance on general issues considered to be uncertain and specifically mentions: (i) adoption of a tax treatment which is under dispute in the courts; (ii) adoption of a treatment which is contrary to HMRC’s stated view in a VAT Brief or Statement of Practice; and (iii) adoption of a treatment where HMRC clearance was requested and was not given. Guidance may also highlight common areas of dispute and the examples provided in the consultation cover use of non-standard VAT rates and the capital-revenue divide.

The method of notification

The proposal is for a single, annual process which encompasses all of the relevant taxes. A nil return will not be required if there are no uncertain tax treatments to notify.

The level of detail that needs to be notified

The consultation does not go into much detail on this beyond indicating that a ‘concise description’ of the uncertain tax treatment should be provided and an indication of the amount of tax relating to the uncertainty.

This is an area that is likely to take some time to bed in. That was certainly the experience following the introduction of a similar measure in the US 10 years ago where in the first few years after the measure was introduced certain taxpayers were invited to expand their disclosures by the IRS.


The government proposes to use a penalty regime similar to that existing under the SAO regime.

The proposed implementation date

The notification requirement will apply to uncertain tax treatments in returns filed after April 2021.

For further information please contact:

© 2021 KPMG LLP a UK limited liability partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organisation please visit

Connect with us


Want to do business with KPMG?


loading image Request for proposal

Save, Curate and Share

Save what resonates, curate a library of information, and share content with your network of contacts.

Sign up today