The UK HM Revenue & Customs launched a consultation on March 23 on the proposed requirement for large businesses to notify HMRC when they have adopted an uncertain tax treatment.
The uncertain tax treatment requirement is intended to help HMRC identify issues where a taxpayer and HMRC might disagree on how the law should be interpreted to help resolve those issues earlier on. The government intends the requirement to apply to transactions in returns due to be filed after April 2022.
The consultation seeks input on several issues. This is the second consultation on the proposed requirement, and it takes into account comments previously received.
Regarding the definition of uncertain tax treatment, the government asks about the proposed “triggers.” HMRC has proposed a series of triggers that, if satisfied, would impose a notification requirement on the business. Triggers include the adoption of a treatment that is different from HMRC’s known position, a treatment that is not in accordance with established industry practice, and a difference in treatment from one year to the next that is not based on a change in law.
HMRC asks if these triggers and others are sufficiently objective, if they could be more objective or certain, and if they will capture things that they are not intended to.
Regarding the threshold for reporting, the government proposes a threshold based on treatments resulting in a difference in calculated tax liability of GBP 5 million (approximately USD 7.1 million) for both direct and indirect taxes. HMRC seeks input on whether taxpayers agree with this threshold and the proposed rules for calculating it.
The consultation also seeks input on exclusions from the requirement to notify, the proposed penalty for non-compliance, the method of notification, and the level of detail.
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