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Notification of uncertain tax treatment by large business consultation – Law Society response

We responded to an HM Revenue and Customs (HMRC) consultation about the proposal to require large businesses to notify HMRC where they have adopted an uncertain tax treatment.

The proposals

This consultation is about a proposed measure that would require large businesses to notify HMRC where they have adopted an uncertain tax treatment.

The consultation states that an uncertain tax treatment is one where the business believes that HMRC may not agree with their interpretation of the legislation, case law, or guidance.

Our view

Our response argues that the proposed measure should be reconsidered and explains our three main concerns with the measure, as it is currently proposed.

The proposed measure effectively:

  • involves a process of guessing what HMRC might be thinking
  • confers discretion on HMRC to determine the meaning of the law
  • attaches a penalty to the failure to guess correctly, jeopardising taxpayer safeguards

All of this means that the measure, which goes beyond international law and accounting comparators, is incompatible with the rule of law, imposes an excessive and unreasonable compliance burden on taxpayers, and risks unintended negative consequences.

What this means for solicitors

The negative consequences of the proposed measure could include counterproductive disincentives for taxpayers to seek advice and for solicitors to offer it, which would run counter to the rule of law.

The proposed measure raises serious questions as to what the role and liability of the solicitor in giving advice on it would be, if it is implemented into law.

Larger law firms may also need to consider whether they would qualify as large businesses for the purpose of the proposed measure such that they would fall within the scope of the proposed notification requirements.

Next steps

The consultation closed on 27 August.

The original intention was that the government would aim to introduce legislation to implement the measure to apply to returns filed after April 2021.

That timescale may have been affected by disruption caused by the pandemic.

Read the consultation on the GOV.UK website