HMRC Policy on Notification of “Uncertain Tax Treatment” comes into force from 1 April 2022
Following the consultation by HMRC on this matter we now see the publication of their planned legislation for the Finance Bill 2021-22 which will affect returns due on or after the 1 April 2022. This is not just a VAT matter as it covers Corporation Tax and Income Tax (for partnerships, and including amounts collected via PAYE) but it is restricted to “larger businesses”.
In this context a large business has a turnover above £200 million per annum or a balance sheet total over £2 billion or both.
The draft legislation will also introduce a threshold of £5 million below which uncertain tax treatments do not need to be notified to HMRC.
As we have commented already, we have started to see this proposed rule influence some larger property related transactions between our VAT sensitive clients and large national financial institutions. The threshold of tax being set at £5m may well assist but it is likely that tax teams within such large organisations will take on board a tighter “risk” management profile which may result in VAT sensitive clients having to themselves be more robust in arguing their entitlement to VAT reliefs rather than accepting the vendor’s position on a transaction.
Within the guidance note criteria are outlined which businesses will need to consider in order to determine whether:
- a tax position is uncertain;
- notification is required; and
- the due date of notification.
There is a £5,000 penalty for failure to notify and an escalating penalty regime for repeated failures to notify across multiple notification periods.
Another step up in the journey of increased self-declaration by tax payers in managing their tax affairs with HMRC. For more background read here
If your organisation starts to experience complexities on the VAT front in dealing with vendors who are large businesses, under this criteria, particularly in the area of property transactions then do get in touch with your usual Centurion VAT contact or via firstname.lastname@example.org
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