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Notification of uncertain tax treatment by large businesses

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The CIOT has published its response to the HMRC consultation Notification of uncertain tax treatment by large businesses. Based on the proposal outlined by HMRC, the CIOT would not support the introduction of a requirement for large businesses to notify HMRC of uncertain tax treatment. According to the CIOT, the policy objectives of the proposal have not been clearly explained and it is unclear from the consultation document ‘what precisely it is that this measure is intended to achieve or, more particularly, a coherent and practical proposal for achieving it’.

The CIOT notes that the requirement to notify would leave large businesses in a position of considerable uncertainty about their compliance obligations. The proposal also does not represent a fair balance between the powers of HMRC and the rights of taxpayers, particularly with regard to the penalty which could arise in circumstances when the taxpayer has taken care with its tax affairs and, consequently, has not done anything wrong.

The CIOT considers that the proposal would create an unnecessary compliance burden for large businesses, with a consequent adverse impact on administration for HMRC which is disproportionate to the amount of tax which is expected to be raised by the exchequer.

The CIOT urges HMRC to revisit plans to introduce the requirement, particularly given the current challenges facing many businesses, and to consider a number of recommendations which include:

  • providing a clear and objective definition of ‘uncertain tax treatment’;
  • clarifying the proposed exclusion for ‘what HMRC already knows’;
  • limiting the proposal to corporation tax, at least initially;
  • considering additional exemptions to the requirement to notify, to ‘better focus’ the compliance obligation;
  • revisiting the proposed de minimis threshold and proposed timing of the notification; and
  • introducing a strong reasonable excuse defence.
Issue: 1499
Categories: News