UK and International Tax news

Further Consultation on Notification of UTT Regime

Wednesday 1st April 2026

As announced at Budget 2025, HMRC have now published another consultation setting out proposed changes to extend and widen the notification of uncertain tax treatment regime.  The objective of the proposed changes is to reduce the legal interpretation portion of the tax gap by requiring more legal interpretation uncertainties to be brought to HMRC’s attention. The consultation will seek comments on the proposals and their implementation.

In the 2020 Spring Budget, the government announced that large businesses would need to notify HMRC of uncertain tax treatments, being those contrary to HMRCs known position or where there is uncertainty about how a transaction should be treated for tax purposes.

In March 2020, a consultation was launched to seek views on how the regime should operate.  In November 2020, the government announced that HMRC would consult further on the policy details of the proposal, and implementation would be deferred for twelve months and would apply to tax returns due on or after 1st April 2022.

A second consultation was launched in March 2021 that reflected the responses received to the previous consultation. Key changes to the proposal included changing the definition of “uncertain tax treatment” to a series of more objective triggers, increasing the threshold above which uncertain tax treatments must be notified, from £1m to £5m, reducing the taxes in scope of the regime to CT, VAT, PAYE and ITSA, and clarifying exclusions from the requirement to notify.

The Notification of Uncertain Tax Treatment by Large Businesses (UTT) regime was enacted in Sch 17 FA 2022 and applies to the above taxes for returns filed after 1 April 2022.  The UTT regime requires large businesses to notify HMRC of legal interpretation uncertainties where the tax advantage exceeds £5m and satisfy either or both criteria:

  • the business is taking a position that is contrary to HMRC’s known position, as published in guidance or in direct dealings with HMRC, or
  • the business has made a provision in their accounts to reflect that their interpretation may not be successful if challenged.

The government now intends to widen the existing regime to require additional legal interpretation uncertainties to be notified to HMRC. HMRC’s latest consultation sets out the areas of the UTT regime that it intends to change, and seeks views on:

  • the proposal to bring individual taxpayers and trusts within scope of UTT
  • the proposal to include SDLT, NICs, the CIS, CGT and IHT within scope of UTT
  • the wording of the proposed additional triggers, that, if met, will require notification of legal interpretation uncertainties, where the taxpayer and HMRC interpret the law differently and that results in a different tax outcome.

The total tax gap is estimated to be £46.8bn in the 2023/24 tax year. The legal interpretation portion of the tax gap was £5.4bn (12%) of the total tax gap.

HMRC state that, as of 1 January 2026, there have been over 30 notifications, involving a potential tax at risk estimated to be £1bn. However, the narrow scope of the two existing notification conditions means that some legal‑interpretation issues may not meet the current thresholds for notification and therefore may not be brought to HMRC’s attention.

The proposal is to extend the existing UTT regime to require more legal interpretation uncertainties to be notified to HMRC, thereby improving transparency and ensuring consistent and fair treatment to other taxpayers and taxes.

The consultation runs from 12 March to 4 June 2026.

The government intends that any legislation will be introduced in the next available Finance Bill and will apply to returns filed after 1 April the following year.

 

If you would like further information on the consultation, please contact Keith Rushen on 0207 486 2378.

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