UTT13100 - Notification criteria: tax provisions

The first criterion which requires notification is that the amount relates to a transaction in respect of which a provision has been recognised in the statutory accounts of the company or a partnership, to reflect that a different tax treatment may be applied to the transaction. The criterion applies irrespective of where the provision is recognised in the statutory accounts.

For the purposes of this criterion, an “uncertain amount” is notifiable if a provision has been recognised in the accounts to reflect that a different tax treatment may be applied to a transaction. Provisions made for other reasons are not notifiable.

For the provision to be a notifiable “uncertain amount”, there must be a link between that provision and at least one entry (including nil) on a relevant tax return.

Where a decision to include a provision in a set of accounts occurs after the relevant return has been filed, the deadline for notification is extended, as described in UTT15200.

Example

A company prepares both its accounts and company tax return for the year ending 31 December 2022 and concludes that a particular expense is deductible. The company submits its 2022 return to HMRC on that basis. When preparing its 2023 accounts the company recognises a provision for the tax deduction included in the 2022 return in respect of the expense. (It is assumed for the purpose of this example that the company does not amend its 2022 return.)

Unless the threshold test at paragraph 11 of the legislation is not met or one of the exemptions at paragraphs 18 or 19 applies, notification is required as a provision has been recognised in the accounts of the company to reflect that a different tax treatment may be applied to the expense. The provision reflects the directors’ conclusion that it is probable the expense would be found to be non-deductible, and this tax treatment is different from the 2022 return, where it was included as deductible.

In the above example, the amount was notifiable because a provision was made to reflect that the correct tax treatment of the amount was uncertain. As the decision to include a provision takes place after the filing of the 2022 Corporation Tax (CT) return, the deadline for notification becomes the CT return due date for the year in which the provision is recognised. The provision is recognised in the year ended 31 December 2023; hence the notification deadline is 31 December 2024.

It is possible that tax provisions made in the company accounts cover a range of related and unrelated amounts (UTT14500). For the purposes of deciding whether the threshold test is met it may therefore be necessary to consider each specific issue provided for and consider which are related or not related.