A company or partnership with UK turnover above £200 million or a UK balance sheet above £2 billion in its previous financial year must tell HMRC when a corporation tax, VAT or PAYE return, or a partnership return, includes an uncertain amount worth more than £5 million in tax. An amount is uncertain if a provision for it is made in the accounts or if it relies on a reading of the law that differs from HMRC’s known position. Notification is usually due by the return’s filing date, and missing it costs £5,000, rising to £25,000 and then £50,000 for repeated failures.
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Where do the rules come from and when did they start?
The regime is in Schedule 17 to the Finance Act 2022 and applies to relevant returns that are required to be made on or after 1 April 2022 (paragraph 33). HMRC’s interpretation is set out in the Uncertain Tax Treatments by Large Businesses Manual (the UTT pages) and in its guidance Check if you need to notify HMRC about an uncertain tax treatment.
HMRC’s stated aim, at UTT11000, is to reduce the part of the tax gap that comes from differences in legal interpretation by getting large businesses to flag those differences early. The regime encourages businesses to discuss uncertainties with HMRC before filing, because doing so can remove the need to notify formally.
Which businesses are within scope?
A company (wherever incorporated) or a partnership is a qualifying business for a financial year if, in the previous financial year, it had relevant UK turnover of more than £200 million, a relevant UK balance sheet total of more than £2 billion, or both (paragraphs 2 and 4). For a company in a group, the UK turnover and UK balance sheet totals of the group members within the charge to corporation tax are aggregated, using a 51% group test. For an overseas company, only the turnover and balance sheet attributable to its UK taxable activities count.
HMRC’s guidance lists businesses that do not need to notify, including open ended investment companies, collective investment schemes, unit trusts, alternative investment funds, public authorities (but not most of their subsidiaries) and qualifying asset holding companies holding more than half of another business as a market value investment.
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Which taxes and returns are covered?
The relevant taxes are corporation tax, income tax in a PAYE return or payable by partners through a partnership return, and VAT. HMRC confirms at UTT12050 that corporation tax includes amounts charged as if they were corporation tax, such as the charge under section 455 CTA 2010 on loans to participators, and that uncertainties within the corporate interest restriction, tonnage tax and research and development expenditure credits are in scope.
Outside the regime are the bank levy, the banking surcharge, controlled foreign company charges, Digital Services Tax, the Apprenticeship Levy and income tax collected on other returns such as the CT61. For PAYE uncertainties, HMRC’s guidance says the amount reported should include National Insurance contributions.
What makes an amount an uncertain amount?
Paragraph 10 sets out two triggers. Either or both can apply, and both must be considered.
- Accounting provision. A provision has been recognised in the accounts to reflect the probability that a different tax treatment will be applied to a transaction to which the amount relates. HMRC says at UTT13100 that the provision must be linked to at least one entry on a relevant return, and provisions made for other reasons do not count. This includes provisions made after the return was filed.
- HMRC’s known position. The amount relies, wholly or partly, on an interpretation or application of the law that is not in line with the way HMRC is known to interpret or apply it.
HMRC’s known position comes from published material such as its manuals, guidance on GOV.UK, statements of practice, Revenue and Customs Briefs and explanatory notes to legislation. Under paragraph 10(4)(b) it can also come from the business’s own dealings with HMRC, for example discussions with its Customer Compliance Manager, a written view from HMRC, a response to a non statutory clearance, or a determinate result from the Check Employment Status for Tax tool. Submissions HMRC makes in litigation and views given to other taxpayers do not count. The position is judged when the return is filed, so a later change in HMRC guidance does not create a notification duty (UTT13200).
When is the £5 million threshold met?
Notification is only needed if the tax advantage from the uncertain amount, together with any related uncertain amounts, is more than £5 million in the relevant period (paragraph 11). The advantage is measured against the expected amount: what HMRC’s known position would produce, or the treatment reflected in the provision. Where both triggers apply, the larger advantage is used.
For corporation tax and partnership returns the relevant period is the financial year the return relates to. For VAT and PAYE it ends on the last day of the last return period falling wholly within the financial year. If the period is not 12 months, the £5 million figure is adjusted proportionately. The threshold applies separately to each uncertain amount and each tax.
When must HMRC be notified?
| Situation | Deadline |
|---|---|
| Uncertain amount in a company tax return | The later of the return filing date and, where the return period matches the accounts period, the Companies House accounts deadline |
| Uncertain amount in a partnership return | The return filing date |
| VAT or PAYE uncertainty | The due date of the last VAT or PAYE return for the financial year |
| Uncertain amount added by amending a return | Within 30 days of HMRC being notified of the amendment |
| Provision made after the return was filed | As if the return were for the financial year the provision is recognised in (company and partnership returns) or the following financial year (VAT and PAYE) |
One notification is needed per relevant return, covering every uncertain amount in it, so a company could make separate notifications for its corporation tax, VAT and PAYE returns for the same period (UTT13050). For a VAT group the representative member notifies; for a partnership it is the nominated partner. Formal notification is made using HMRC’s online form.
Can the business avoid formal notification?
Yes, in two main ways. Under paragraph 18, there is no need to notify if it is reasonable to conclude that HMRC already has all, or substantially all, of the information the notification would have contained. HMRC calls this the general exemption and encourages businesses to obtain it by discussing the uncertainty with their Customer Compliance Manager or the mid sized business support team, making clear that the purpose is to obtain the exemption. Information already given under other regimes, such as the disclosure of tax avoidance schemes, can also count.
Under paragraph 19, an uncertain corporation tax amount arising from a transaction between members of the same group does not need to be notified if the net tax advantage across the group is below the threshold (UTT16300).
What are the penalties?
Paragraph 20 sets a fixed penalty for each notification requirement that is missed. For an uncertain amount at the time the return is delivered, it is £5,000 for a first failure, £25,000 for a second failure and £50,000 for a further failure, counted separately for each relevant tax over the preceding three financial years. Failing to notify an amount that only became uncertain because of a later accounting provision costs £5,000.
HMRC states at UTT17200 that no reduction is available. A reasonable excuse prevents the penalty, but not where the failure resulted from careless or deliberate behaviour. Penalties can be appealed.
An illustration and common mistakes
Illustration only. A company within scope has a 31 December 2026 year end. It deducts a large settlement payment that HMRC’s published manual treats as capital, and the deduction reduces its corporation tax by £6 million. No provision is made because the directors are confident. The known position trigger is still met and the advantage exceeds £5 million, so unless the company first obtains the general exemption it must notify by 31 December 2027, the corporation tax filing date for a company in a large group, or the Companies House accounts deadline if later. If it later amends the return to add a further uncertain amount, a separate 30 day deadline applies.
Common mistakes include:
- Looking only at accounting provisions and missing positions that depart from HMRC’s manuals without any provision.
- Forgetting VAT and PAYE, including employment status positions taken on contractors.
- Treating a subsidiary’s small figures as decisive when group aggregation brings it into scope.
- Waiting until the filing deadline when early discussion could have secured the exemption.
The same thresholds apply to the senior accounting officer rules and the duty to publish a tax strategy. HMRC says at UTT15400 that a notification would not ordinarily mean the SAO certificate has to be qualified.
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Related Accountapedia entries
- The Economic Crime Levy
- Uncertain tax treatments under FRS 102
- Your company’s first corporation tax return
- Group payment arrangements for corporation tax
- Dividends received by companies: the exemption
- HMRC non statutory clearances
- VAT on cosmetic and aesthetic treatments
Sources
- legislation.gov.uk: Act 2022 c. 3, schedule 17
- GOV.UK: Manual page UTT11000
- GOV.UK: Manual page UTT12100
- GOV.UK: Manual page UTT12050
- GOV.UK: Check if you need to notify hmrc about an uncertain tax treatment
- GOV.UK: Manual page UTT13050
- GOV.UK: Manual page UTT13100
- GOV.UK: Manual page UTT13200
- GOV.UK: Manual page UTT15200
- GOV.UK: Manual page UTT16300
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.