New guidance issued by HMRC encourages taxpayers to identify areas of uncertainty in their tax returns and to provide additional information unless HMRC agrees otherwise. However, unless the uncertain tax treatment rules apply, this is not legally required and may not always be appropriate.
On 1 September 2025, HMRC released new “promotional material” in four parts which contain guidelines on submitting documents and self-assessment returns to HMRC. This kind of published guidance can be a useful interpretation tool for the taxpayer, clarifying HMRC’s views and the approach it is likely to take. It does not, however, override the legal obligations of the taxpayer as established in statute and case law.
The guidance explicitly states that HMRC’s policy has not changed and that for most customers (with simple tax affairs), the guidelines will not change anything. However, in some places HMRC’s published views diverge from taxpayers’ actual legal obligations, introducing inconsistency and subjectivity which potentially makes it more difficult for taxpayers to understand and comply with their obligations. This could result in an increase in risk for taxpayers.
When submitting a tax return, the taxpayer must include a declaration that it is correct and complete to the best of their knowledge. HMRC may also impose penalties if the taxpayer fails to take reasonable care and, as a result, submits a return (or certain related documents) containing an inaccuracy.
It is clear from the case law that what constitutes reasonable care will depend on the taxpayer and the resources available to them. A court or tribunal will consider whether, in all the circumstances, the taxpayer acted as a “prudent and reasonable” taxpayer would; there is no exhaustive list of relevant factors that will be taken into account. However, the guidance suggests that HMRC will focus on whether in its view the taxpayer has taken steps that are proportionate to:
In certain circumstances, there may be genuine uncertainty as to the law or a legitimate range of views on the “correct” tax treatment of a particular matter. In the new guidance, HMRC distinguishes between:
However, this is only HMRC’s approach; it is not a distinction set out in any of the case law HMRC cites in the guidance, and so there is no certainty that a tribunal would make the same distinctions. There is also space for some positions to fall short of the “on balance” or “most likely” standards HMRC sets out for finely balanced arguments and novel interpretations, but still be significantly more defensible than an “improbable” argument.
In practice, the taxpayer’s own assessment of the correct position will often align with the view that would be taken by the courts. However, it is important to recognise that resolving tax disputes can take many years, and it is not uncommon for decisions of lower tribunals or courts to be overturned on appeal. This inherent uncertainty reinforces the complexity of making judgments in uncertain areas of the law.
HMRC’s focus appears to be on discouraging taxpayers from adopting “arguable” positions, particularly in circumstances where professional advice indicates that the courts and tribunals are unlikely to support the taxpayer’s interpretation. This places additional scrutiny on the professional judgment of accountants and advisers in determining whether a particular position constitutes a defensible “filing position.” As such, comprehensive documentation and careful consideration of the reasoning behind any tax position adopted are essential to mitigate the risk of challenge by HMRC.
The guidance advises taxpayers to tell HMRC about any:
(i) significant factual or legal uncertainties which the taxpayer has been unable to resolve; or
(ii) legal positions which the taxpayer has adopted but which the courts have not considered.
It suggests that the taxpayer should take steps to specifically identify the uncertainty in question, including considering using headings such as “novel interpretation” or “uncertain position”, and implies that a taxpayer should provide additional information and explanations unless they have discussed the uncertainty with their Customer Compliance Manager prior to submitting their tax return and HMRC has given its written agreement that no further information is required.
In many cases, discussing uncertainties with HMRC in advance is good practice, and may help to mitigate the risk of a later enquiry or dispute. However, unless the uncertain tax treatment rules apply (see below), this is not legally required and may not always be appropriate. HMRC does acknowledge this, both in the guidance and elsewhere; taxpayers who are unsure should prepare carefully for any engagement with HMRC and seek legal advice early in the process, especially where documents may be subject to legal professional privilege.
The Uncertain Tax Treatment (UTT) rules establish specific disclosure obligations for large businesses and partnerships that (by themselves or with other UK group companies) have either an annual turnover exceeding £200 million or a balance sheet total exceeding £2 billion.
There is a UTT if one or both of the following two ‘triggers’ apply:
Where the regime applies and, broadly, there is more than £5m of tax at stake in the relevant period (taking all UTTs together), the company or partnership is required to notify HMRC and provide details about the nature of the uncertainty, unless an exemption applies. There is a general exemption where it would be reasonable to conclude that all, or substantially all, of the information relating to the UTT is already available to HMRC. This can be through a number of means, including informal discussions as well as statutory disclosures, but HMRC takes the view in its manual that the onus is on the taxpayer to draw HMRC’s attention to the relevant amounts. Where taxpayers discuss UTTs with HMRC, HMRC will generally confirm when (in its view) the general exemption applies; however, taxpayers should continue to monitor the situation as later developments may mean a new notification is necessary.
A company (but not an open-ended investment company, investment trust, or other non-corporate entity) that (by itself or with other UK group companies) has either an annual turnover exceeding £200 million or a balance sheet total exceeding £2 billion must also appoint a Senior Accounting Officer (SAO).
The SAO must take reasonable steps to ensure that the company’s tax liabilities can be calculated "accurately in all material respects," and issue a written certificate confirming to HMRC that the company’s tax accounting arrangements were appropriate throughout the relevant financial year (or, if not, explain why not). This is, strictly, a different standard from the “reasonable care” required when filing a tax return, although in practice many compliance activities will be relevant to both.
HMRC may write to taxpayers inviting them to review their tax affairs and to voluntarily disclose any inaccuracies or omissions in their tax filings. Such correspondence, commonly referred to as a “nudge letter”, is typically directed at individuals or entities whom HMRC suspects may be connected to a potential tax loss.
These nudge letters are often accompanied by a “certificate of tax position”, which HMRC requests the taxpayer to complete and return. However, neither the letter nor the accompanying certificate imposes any legal obligation on the recipient to take action, and it is not compulsory to complete or return the certificate.
The promotional material issued by HMRC contains a considerable amount of useful practical guidance; however, it is important to note that adhering to HMRC’s guidance does not, in itself, guarantee compliance with the law. The ultimate legal obligation remains with the taxpayer to ensure that their tax affairs are conducted in accordance with the relevant legislative requirements.
Nor does HMRC’s published guidance prevent it from adopting a different interpretation of the law or the facts, although following HMRC’s guidance may reduce the risk of a dispute or HMRC enquiry. Indeed, the fact that HMRC has described the new guidance as “promotional material” rather than formal “guidance” suggests that the content is intended to inform and encourage best practice, rather than to set any new binding standards on which a taxpayer might seek to rely.
In particular, the language used in the material may imply an obligation to disclose certain matters to HMRC, even where such disclosure is not strictly required by law. Proactive and cooperative engagement with HMRC is often a sensible step to resolving uncertainties and determining the correct tax outcome, but should be considered carefully, taking legal advice where appropriate.
If you have any doubt or uncertainty regarding the correct tax treatment of a particular matter, or would like advice on engaging with HMRC, please contact one of our tax specialists.
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