UTT15200 - Notification process: notification deadlines

The deadlines for notifying HMRC of an uncertain tax treatment are as follows:

  • Where the relevant return is an annual return, the notification must be given on or before the date on which the return is required to be made.
  • Where the relevant return is not an annual return, the notification must be given on or before the date on which the last relevant return for the financial year in question is required to be made.

The concept of a financial year is explained in UTT15100.

Case 1: The amount is a notifiable uncertain amount at the time the return is delivered to HMRC

  • For company tax returns, notification should be made by the later of the last date the return is required to be delivered to HMRC or, if the return period is the same as a period for which the registrar of companies requires delivery of accounts, the last day for the delivery of accounts to the registrar for the period of the return,
  • For partnership tax returns, notification should be made on or before the last date that the return is required to be delivered to HMRC.
  • For PAYE returns, on or before the date on which the last PAYE return for the financial year is required to be made.
  • For VAT returns, on or before the date on which the last VAT return for the financial year is required to be made.

Case 2: The amount is a notifiable uncertain amount included in the return as a result of an amendment

Notification must be given within 30 days of the day HMRC is notified of the amendment.

Case 3: The amount becomes a notifiable uncertain amount in a filed return after the return is delivered due to an accounting provision

Notification must be given by the same dates as Case 1, but treating the return as being delivered to HMRC:

  • For Company or Partnership returns, as if the return were for the financial year in which the provision is recognised.
  • For VAT and PAYE returns, as if the return were for the financial year after the one in which the provision is recognised.

Please see the examples below which illustrate the notification rules in relation to annual returns, non-annual returns, and accounting period end date changes.

Examples

Example 1 - Annual return

Baerlon Ltd is preparing its company tax return for the 12-month period ending 31 December 2021. The company intends to claim capital allowances for capital expenditure incurred in this period. HMRC is known to view these items as non-qualifying expenditure under the Capital Allowances Act 2001. The known position notification criterion applies because the tax treatment taken by Baerlon Ltd is contrary to HMRC’s known position, and the company must therefore notify HMRC that an uncertain tax amount is being included in its company tax return for this period.

The filing date for the company tax return is 31 December 2022 as the company belongs to a large group. The company must therefore notify HMRC of the uncertain tax treatment on or before 31 December 2022, or by the accounts filing deadline, if later (refer above cases).

Example 2 - Non - annual return

Kamfite Ltd financial year runs from 1st Dec to 30th Nov. In October 2022, Kamfite Ltd sold shares that it held for investment purposes.

Kamfite Ltd claimed £5m VAT input tax on the legal costs in relation to the sale of these shares in return ending 30 November 2022. This is a non-business activity for VAT purposes and therefore any VAT incurred on legal costs is not recoverable. Kamfite Ltd believes that these expenses could be deductible as they relate to the wider business strategy. However, this is contrary to HMRCs known position and Kamfite Ltd must notify HMRC of its VAT uncertainty by or on 31 December 2022.

Kamfite Ltd also claimed the legal costs in their CT return ending 30 November 2022. Capital expenditure on legal costs is not an allowable expense, as it would likely fail the ‘wholly and exclusivity’ test. As Kamfite’s treatment is contrary to HMRC’s known position, Kamfite Ltd must notify HMRC of the CT uncertainty by or on 30 November 2023.

However, paragraph 18(1) of Sch.17 FA22 provides an exemption from Kamfite having to notify again about the same uncertainty because as stated in para 8(2) [a company or partnership is not required to notify HMRC about an amount included in a relevant return if it is reasonable to conclude that HMRC already have available to them all or substantially all of the information relating to that amount]. If Kamfite Ltd submits its VAT UTT notification and notifies of the uncertainty relating to the legal costs associated with selling of shares including notifying of the CT implications on or before 31 December 2022, no further notification regarding the CT return will be required.

Example 3 - Non - annual return

A company provides healthcare services for which there is uncertainty about whether the services qualify for the VAT exemption (in relation to considering the application of the principal purpose test).

The company’s financial year follows the calendar year, with the business submitting their VAT returns quarterly. The final VAT return due that falls within the calendar year is the period ending 31 December 2022, with the return due for submission by 31 January 2023.

Therefore, where an Uncertain Tax Treatment (UTT) notification is due, the business must notify HMRC of the uncertain tax treatment on or before 31 January.

Example 4 - Change of company year-end (financial year is more than 12 months)

Following a takeover in late 2020, a limited company looked to change its financial year to match that of its parent company.

The subsidiary company’s financial year ran from 1 August – 31 July. The parent company’s financial year runs from 1 January – 31 December.

Following the takeover, the limited company extended its financial year to run from 1 August 2020 – 31 December 2021. This financial year was therefore extended from 12 months to 17 months. As a Corporation Tax (CT) return can only cover a maximum period of 12 months, during the extended financial year, two CT returns are due.

During the period of 1 August 2020 – 31 December 2021 the notification criteria was met in relation to an uncertain tax treatment resulting in a potential underpayment of Corporation Tax.

The accounting periods for Corporation Tax for this financial year were 1 August 2020 – 31 July 2021 and 1 August 2021 – 31 December 2021. The filing deadlines for these returns are both 31 December 2022. The deadline for notification is 31 December 2022, regardless of whether the notification criteria were met in relation to transactions occurring between 1 August 2020 – 31 July 2021 or 1 August 2021 – 31 December 2021.

Example 5 - Change of company year-end (financial year is less than 12 months)

In early 2021, the parent company in the above scenario purchased a second company. This new company had a financial year running from 1 April – 31 March.

Following the company purchase, for the 2021 financial year, the company shortened its accounting period so it could match the accounting period of its new parent company for subsequent years.

The new accounting period for the company became 1 April 2021 – 31 December 2021.

As part of a full processes review undertaken post takeover, the company realised there was an uncertain tax treatment in relation to Income Tax for its employees. The deadline for notification is ‘on or before the date on which the last relevant return for the financial year in question is required to be made’. In this instance, the deadline becomes the last relevant PAYE return due for submission on or before 31 December 2021.