General Data Protection Regulation (GDPR) provision used to reduce tax liability (Spotlight 65)
Find out about claims featuring General Data Protection Regulation (GDPR) provisions used to incorrectly reduce Corporation Tax liability or claim repayments of tax already paid, or both.
HMRC is aware of tax agents that target businesses to claim Corporation Tax refunds through incorrect provisions, linked to potential GDPR fines or civil claims.
These claims are designed to reduce business profits through the recognition of a provision and a corresponding expense. This leads to businesses paying less Corporation Tax than they should, or claiming Corporation Tax repayments they are not entitled to. Provisions and related expenses should only be recognised in accordance with relevant Generally Accepted Accounting Practice (GAAP).
HMRC’s view is that these and similar claims are not in accordance with the law. HMRC will challenge anyone:
- making such claims
- who encourages or facilitates businesses to make false claims that reduce tax liability or seek a repayment
How the GDPR provision is claimed to work
Businesses are approached by a tax agent offering advice on how to reduce their Corporation Tax liability by:
- claiming a deduction for a GDPR provision in the company’s tax return
- amending a previous tax return
The tax agent may offer some or all of the following advice:
- inform you of the risk level for non-compliance of the GDPR rules
- suggest a monetary amount to be set aside as a provision for a potential breach of the GDPR rules
- ask you to include this provision in your accounts for the latest tax return, to reduce the tax that you should correctly pay for the period
- ask you to amend your previous year’s tax return to include the provision, with the aim of reducing your profits and generating a tax refund
Some agents may:
- charge you a fee, sometimes exceeding 30% of any tax saving or repayment you receive
- disappear before HMRC make any enquiries about the information submitted
Some agents may try to link the incorrect claims involving GDPR to the process for claiming Research & Development (R&D) tax credits, in order to falsely inflate the size of the R&D credit.
If this happens, the GDPR element will be incorrect.
Businesses should be alert to this approach as it could lead to an error on which tax, interest, and penalties may be due, even if the R&D element is correct.
HMRC’s compliance response for businesses
HMRC can review the tax return after you make the submission and could seek to claim all the tax back, along with interest and possible penalties.
What this means for those promoting these claims
HMRC are aware of agents encouraging ineligible claims linked to GDPR.
HMRC has a range of civil and criminal powers that we use to disrupt or investigate those that cause harm to the tax system.
We proactively tackle tax agents who encourage or facilitate customers making false claims for expenses, rebates, or tax credits. This includes:
- issuing penalties
- suspending their ability to make claims on behalf of clients
- refusing to deal with an agent
When needed, we will work with the police and other government departments to support our investigations, which could lead to prosecutions.
What to do if you’ve made this type of claim, or something similar
If you’re worried about having made an incorrect claim, then HMRC can help.
HMRC offers a range of support to get you back on track or avoid being caught out in the first place. Contact HMRC if you have any concerns.
If you’ve made this or a similar claim in your Corporation Tax Self Assessment return, HMRC advises you to:
- contact us to discuss withdrawing your claim
- correct your tax return to remove the provision
By settling your tax affairs, you’ll:
- minimise interest and penalty charges (where they apply) on tax you should have paid
- avoid any costs of investigation and litigation
Anyone concerned about the claims they have made should consider:
- getting independent professional tax advice
- speaking to one of the tax charities, such as TaxAid — find out more about the TaxAid helpline on the TaxAid website.
Report a scheme
You can report tax fraud and tax avoidance arrangements, schemes and the person offering you them to HMRC by using our online form to report tax fraud.
You can submit this form anonymously and do not have to give your name, address or your email.
You can phone HMRC to report tax fraud if you cannot use the online form.