Tax

CIOT welcomes business compliance obligation improvements 

The proposal is that businesses must notify uncertain tax treatments to HMRC separately from their tax return

The Chartered Institute of Taxation (CIOT) has welcomed a new compliance obligation for large businesses to notify HMRC of uncertain tax treatments.

From April 2022, large businesses will have to notify HMRC if they have adopted a tax treatment where the business believes that HMRC, or a tribunal or court, may not agree with their interpretation of the legislation, case law, or guidance. 

The proposal is that businesses must notify uncertain tax treatments to HMRC separately from their tax return, and according to HMRC, this will help to reduce the amount of tax which is not collected as a result of businesses adopting tax treatments that HMRC does not agree with.

However, while the CIOT said the measure has been “much improved” through the consultation process, it “would have preferred a non-legislative response”. 

It added that there “are other things that could be done, many of which will be needed in any event if this compliance measure is to be capitalised on, without also adding to the burdens of compliant businesses”.

John Cullinane, CIOT director of Public Policy, said the group welcomed the changes that have been made as a result of the consultation process, adding that the draft legislation published yesterday shows that the government has “continued to listen to stakeholders through the second consultation and sought to address key concerns raised”.

He said: “We welcome the reduction in the number of ‘triggers’ in the definition of what is an uncertain tax treatment from seven to three, although we have some remaining concerns about the subjectivity of the definition, particularly in relation to the part of the definition based on an inevitably hypothetical view of what a court or tribunal might find to be incorrect.”

“However, we remain concerned about the parity of treatment between businesses that have a Customer Compliance Manager (CCM)3 and those that do not.”

He added: “The Government’s policy paper published yesterday4 said that for taxpayers without a CCM, HMRC will utilise their existing Customer Engagement Team to provide a structured opportunity to discuss tax uncertainties, so that they can also benefit from this exemption. It will be important that there is sufficient HMRC resource to make this an effective avenue for these large businesses.

“Overall, the consultation process for this measure has been a good one, with significant engagement with HMRC and a willingness to discuss the concerns we raised. However, notwithstanding the improvements that have been made to the measure, we remain unconvinced that it will achieve the stated policy aims effectively or proportionately.”

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