UTT13050 - Notification criteria: overview

To comply with the Uncertain Tax Treatment (UTT) rules qualifying companies and qualifying partnerships must notify HMRC if a relevant return delivered to HMRC includes an amount which the legislation calls an uncertain amount.

A notification is required for each relevant return that contains an uncertain amount. This means for example that a company that makes corporation tax, VAT and PAYE returns for a relevant period may be required to make up to three notifications for a relevant period. Where a relevant return contains more than one uncertain amount in a relevant period, one notification is required providing details of the different uncertain amounts contained in the return.

An amount may be identified as an uncertain amount where one or both of the two notification criteria (also referred to as triggers) are met. Both criteria must be considered.

The notification criteria are:

1. Provision made in the accounts (paragraph 10(2))

The amount relates to a transaction in respect of which a provision has been recognised in the accounts of the qualifying company or partnership, to reflect that a different tax treatment may be applied to the transaction. This includes provisions made or adjusted after the relevant tax return has been filed. Paragraph 30 of the legislation defines “transaction” broadly to include arrangements, agreements, and understandings (whether they are, or are intended to be, legally enforceable).

2. HMRC’s known interpretation of the law (paragraph 10(3))

In arriving at the amount, reliance was placed on an interpretation or application of the law that is different to HMRC’s known interpretation or application.

Subject to the threshold condition (UTT14000) and the exemptions (UTT16000), notification is required where :

  • The entity is within scope of the legislation (UTT12000 to UTT12300), and
  • A relevant return, or amendment to a return, delivered to HMRC includes an amount (including nil) brought into account for the purposes of a relevant tax that is an uncertain amount.

The deadlines for notification are set out in UTT15200, the legislation sets out different deadlines for different types of tax return.

Where neither trigger is met, nil returns or nil notifications are not required..

Interaction between the Notification criteria

The notification criteria definitions do overlap; they are not mutually exclusive. However, it is necessary to consider both notification criteria as where an uncertain amount meets both notification criteria the threshold test is applied to the notification criterion that produces the largest tax advantage (UTT14300) and this is the amount notified (see UTT15100).

Threshold Test

For the purposes of the threshold test at paragraph 11, there is a different definition of “the expected amount” (UTT14300) for each of the criteria. Therefore, it is necessary to identify whether both criteria may apply to the amount in question. Businesses are required to identify and notify the largest tax advantage calculated by reference to the applicable criteria.

Exemptions

The legislation contains several exemptions from notification of uncertain amounts in paragraphs 18 and 19. Guidance for these exemptions starts at UTT16000.

Notification responsibility

The person notifying may vary depending on the type of entity and head of tax/or the type of tax. For notification purposes:

  • for VAT groups it is the representative member of the VAT group that should submit the notification of an uncertain tax treatment and not any separate VAT group member to which the uncertainty is attributable.
  • for other taxes and non-VAT group VAT registrations, each entity is responsible for their own notification. For partnerships, this is the nominated partner.
  • Within a CIR group, each entity is responsible for their own notification, even where the entity is not the reporting company for CIR purposes.