Uncertain tax treatment rules: final guidance

Following Royal Assent to the Finance Act 2022 on 24 February 2022, including the provisions to implement the uncertain tax treatment reporting rules, HMRC has now published the final version of its guidance on the rules.

The guidance is in fundamentally the same form as the second draft of the guidance released for consultation in January, though further clarifications have been included, particularly relating to the identification of HMRC’s “known position”.

For example, the guidance now states that HMRC’s “known position” is considered at the time the return is filed. If there is no “known position” at the time the return was filed, but uncertainty arose after it was filed, perhaps due to HMRC guidance being changed, there is no requirement to notify. This would be the case even if the due date to notify the uncertainty had not passed at this point.

Equally, however, HMRC’s published position remains its known position for the purposes of the rules despite an adverse decision in litigation. Accordingly, where HMRC is unsuccessful in litigation but has not changed its guidance, businesses are still expected to notify HMRC where they take a position that is contrary to HMRCs known position as published in guidance.

The guidance also now contains further information on out-of-date or ambiguous guidance. For example, if HMRC’s known position was provided to a taxpayer (say) ten years ago, the business cannot necessarily assume that is still HMRC’s known position as HMRC expects the business to have a level of familiarity with published material and to consider whether any changes have occurred affecting HMRC’s known position.

Ironically, one area where the published guidance appears somewhat contradictory is in relation to contradictory guidance! Where there is contradictory guidance from HMRC, UT13200 states that “the known position is to be taken as the most recently published statement of the known position”. However, at UTT14300 the guidance suggests that “in a case where there is more than one known position because HMRC has not made its position on the matter clear, there would be no known position and therefore no notification requirement under the known position criterion”.

HMRC’s known position includes where that arises from any specific dealings with a particular taxpayer and the guidance makes clear that any views expressed directly to a particular taxpayer or regarding a particular situation, will not apply to other taxpayers or to other situations. In particular, that approach also applies to any views expressed to an agent is respect of a client so that any “known position” will not apply to other clients of that agent.

In terms of the types of publication that may indicate HMRC’s known position, the final guidance has added HMRC’s Guidelines for Compliance (new practical guidance and greater transparency on the approaches HMRC regards as higher or lower risk to be published by HMRC following its review of tax administration for large businesses).

Finally, the published guidance contains more information on where the general exemption from reporting will apply where it is reasonable for the taxpayer to conclude that HMRC already has available to it all, or substantially all, of the information that would have been included in the notification if it had been required to be given. In particular, the guidance now confirms that where a business (or their agent) approaches HMRC, via the CCM or the MSB Customer Support Team, to provide information and discuss an uncertain tax issue, HMRC will confirm when the general exemption has been met. However, the guidance makes it clear that it is essential that, if there are any changes to the transaction itself, or to the tax treatment of it after discussion has taken place, that these are notified to HMRC. Changes to the underlying transaction or tax treatment of it would invalidate the exemption.