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Nick Evans

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Nick Evans is a senior tax adviser in Baker McKenzie London office.

The inaugural ‘Tax Day’ on 23 March saw a range of announcements on the future of UK tax compliance. One of most significant measures is the re-launch of the proposal to require Large Businesses to notify HMRC of uncertain tax treatments that they have adopted.

This second consultation addresses the criticisms expressed when the proposal was first put forward during 2020. The original trigger of HMRC “may not agree with/is likely to challenge” the treatment adopted by a taxpayer has been replaced with eight separate triggers designed to apply the reporting requirement on a more objective basis.

The revised proposal looks a step in the right direction, but there remain a number of practical concerns to be ironed out. We would recommend that Large Business taxpayers continue to engage with the proposal to ensure it is implemented on proportionate and practicable terms.

The intention is for the requirement to apply to returns that are due to be filed from 1 April 2022 onwards. Therefore, for annual taxes such as corporation tax, this is a live issue that affects the current financial period for the vast majority of taxpayers.

The inaugural ‘Tax Day’ on 23 March saw a range of announcements on the future of UK tax compliance. One of most significant measures is the re-launch of the proposal to require Large Businesses to notify HMRC of uncertain tax treatments that they have adopted.

This second consultation addresses the criticisms expressed when the proposal was first put forward during 2020. The original trigger of HMRC “may not agree with/is likely to challenge” the treatment adopted by a taxpayer has been replaced with eight separate triggers designed to apply the reporting requirement on a more objective basis.

The revised proposal looks a step in the right direction, but there remain a number of practical concerns to be ironed out. We would recommend that Large Business taxpayers continue to engage with the proposal to ensure it is implemented on proportionate and practicable terms.

The intention is for the requirement to apply to returns that are due to be filed from 1 April 2022 onwards. Therefore, for annual taxes such as corporation tax, this is a live issue that affects the current financial period for the vast majority of taxpayers.

HMRC has published its response to the recent consultation on the operation of the UK hybrid-mismatch rules along with draft legislation to amend the rules in various respects. Although the consultation document identified discrete areas where HMRC were seeking views, HMRC also welcomed broader feedback on the current operation of legislation to the extent it was not operating proportionately or as intended. 

HMRC’s proposals only offer partial solutions to many of the issues identified by stakeholders. In particular, US multinational groups may continue to suffer material disallowances under the double deduction rules in some common (and benign) commercial structures. It is clear from our recent discussions with HMRC that they have endeavored strike a balance between fixing some of the issues with the current legislation while ensuring the rules cannot be manipulated. The remaining pitfalls within the legislation which continue to lead to economic double taxation are therefore deliberate policy choices that HMRC intends to stick by irrespective of the harmful consequences for some taxpayers.