Following the publication of draft legislation for the new Advance Tax Certainty Service (ATCS) in Finance Bill 2025-26 (see our earlier article for more details), HMRC have released draft guidance providing much needed practical detail on how the service will operate.
This article provides a summary of the key points covered in the guidance, however companies interested in applying for clearance should discuss the process in more detail with their usual KPMG contact.
HMRC will offer clearance on Corporation Tax, VAT, Stamp Duty Land Tax, Income Tax, PAYE Regulations and the Construction Industry Scheme, provided they are material to the investment project.
Section 2.5 of the guidance provides a non-exhaustive list of matters HMRC will not offer clearances on, including (but not limited to): the accounting treatment of a transaction; matters involving an overseas tax authority; draft legislation not yet passed by Parliament; areas where there are existing mechanisms to provide certainty (e.g. Advance Pricing Agreements); the application of main purpose or motive tests; and the valuation of assets. HMRC may refuse to give clearance on issues where certainty cannot be provided within the relevant timeframe, or where they decide there is no guarantee that the critical assumptions provided by the applicant can be materially adhered to.
A ‘qualifying person' may apply for a clearance. This can be the person who is incurring the expenditure or a person who controls it (for example if the investment entity does not yet exist). Where no single person has overall control (such as a joint venture or consortium), one qualifying person may apply on behalf of the qualifying persons.
Both UK and non-UK resident entities investing in the UK may apply.
Section 2.4 of the guidance sets out a non-exhaustive list of certain persons that are excluded from applying for clearance. These are generally persons who have committed fraud under statute or common law, have received penalties for certain ‘deliberate’ behaviours or have incurred a defeat in respect of notifiable tax arrangements under the Disclosure of Tax Avoidance Schemes (DOTAS) legislation.
The financial threshold is £1 billion of new qualifying expenditure in the UK incurred over the lifetime of a standalone project, or a group of approved, very similar projects that share the same tax uncertainty. If only the first phase of the expenditure has been approved, the projected cost of subsequent phases can still be considered when assessing the £1 billion threshold.
‘Qualifying project expenditure’ includes UK expenditure on the acquisition of tangible assets (like plant and machinery) and intangible assets (like software). It excludes some expenditure such as financing costs and amounts used for equity investment (for example transactions which are solely mergers and acquisitions or share buybacks).
The expenditure must be on a new initiative and not an ongoing, ordinary part of business activity.
To achieve the target 90-day turnaround from formal submission to providing clearance, HMRC expect applicants to have the resources and availability to work at pace and in partnership with the ATCS team. Regular dialogue, open sharing of information and responsiveness to requests will be key to the success of the service. The exact timetable will depend on the complexity of the case, but the process will broadly involve the following steps:
During the initial year of the ATCS, an expression of interest (EOI) and triage process may be implemented to help manage any early issues with HMRC capacity. The EOI process would require potential applicants to provide key project details (such as investment scale, deadlines and areas of tax uncertainty). HMRC will assess EOIs based on complexity and urgency.
Not all interested parties may be invited to submit an application; HMRC will aim to select a balance of projects across different tax regimes and sectors, giving priority to cases with the highest level of tax uncertainty and urgency.
After the first year of the service, the process will begin with the next step.
Before submitting a full application, potential applicants are encouraged to request an early engagement meeting to discuss what the clearance process can offer within the desired timeframes. HMRC aim for this meeting to take place within 10 working days of contact being made.
Formal clearance applications should be submitted no later than 60 working days before the relevant date of filing of the first return which will include the transaction.
The guidance contains a checklist of information that should be provided in the application, including an assessment of eligibility, an official business plan detailing the authorised project spend, and the applicant’s analysis of the tax treatment of the transaction. Further information and objective factual evidence should be provided to support the contents of the application.
HMRC intend to produce further guidance on the format and content of applications ahead of launch.
HMRC will acknowledge receipt of the application within three working days and within five working days the team will assess the submission to determine whether the application should be accepted into the clearance process.
Unsuccessful applicants will be informed of the reasons why HMRC are unable to provide a clearance. Although there is no right of appeal, unsuccessful applicants have 10 working days to contact the ATCS to ask for a review by the ATCS team in certain circumstances.
A scoping and planning meeting will usually take place within 21 working days from application submission where the scope of the clearance and areas to be prioritised will be agreed to allow HMRC to give certainty within a realistic timeframe.
HMRC aim to complete their subsequent reviews as quickly as possible and will provide the applicant with regular updates against agreed timelines.
A clearances approval board, comprising independent representatives from functions including policy, operations, legal and subject matter experts, will be responsible for reviewing the ATCS team’s recommendations on all clearance applications, to ensure decisions are consistent and confirm HMRC’s policy positions.
HMRC will ordinarily aim to issue a clearance within 31 working days from the scoping meeting or 49 working days from receipt of a complete application.
The written clearance will set out the scope and duration of clearance (generally a clearance lasts for up to five years or until the project ends), the key facts on which the clearance relies and key assumptions for continued reliance on the clearance.
Provided the applicant reflects HMRC’s view when filing its tax return, the clearance is unilaterally binding on HMRC only. An applicant can take a contrary position to the clearance in its tax return. In this case the clearance is no longer binding on HMRC. In these circumstances, an enquiry into the return should be expected and the taxpayer would need to consider the application of the Uncertain Tax Treatment (UTT) legislation. Additionally, HMRC will not be bound by the clearance if a court decision or changes in statute or accounting practice impact on the relevant tax treatment.
If HMRC are unable to agree that the tax treatment set out by the applicant is correct, the ATCS team will issue an ‘unable to agree’ letter. Per above, there is no right of appeal under ATCS, but representations may be made by the applicant within 10 working days of receiving HMRC’s decision. Where no clearance is granted, the taxpayer would need to consider its filing position carefully and whether the transaction may be in scope of the UTT legislation.
Although all clearances issued under ATCS will be centrally monitored by HMRC, the applicant retains ultimate responsibility for monitoring compliance with the clearance throughout its duration. Applicants will be expected to undertake annual self-monitoring of the clearance conditions, and HMRC may request copies of the outcome of this review.
HMRC may request any further information from the applicant that might reasonably be required to check that the tax treatment in the clearance is still valid. Failure to provide this information may result in revocation of the clearance and a £5,000 penalty.
Applicants are encouraged to contact HMRC if there is any uncertainty as to whether critical assumptions remain valid, for example if there are changes in fact pattern or relevant statute or case law. Failure by the applicant to inform HMRC of material changes may render the clearance invalid and result in a penalty of £5,000.
HMRC may also cancel a clearance if information provided by the applicant is found to be false or misleading. Although the guidance does not mention penalties in this context, note that the draft legislation states that a person is liable for a penalty of £10,000 for carelessly or deliberately making a false or misleading statement to an HMRC officer in connection with a clearance.
The guidance also provides detail on matters such as: when HMRC or the applicant can withdraw from the process before a clearance is issued; circumstances in which a clearance can be modified or revoked; and renewals of clearances beyond the initial five-year period (for example if the project lasts for more than five years).
The draft guidance fills in some of the blanks left by the draft legislation, however, inevitably the guidance will evolve over time as the service beds in. After the first year of the ATCS, a special HMRC policy board will review the process with a view to making further refinements. It will be interesting to see if these could include lowering the financial threshold from £1 billion and/or broadening the scope of uncertainties HMRC provide clearance on (e.g. opining on asset valuations), both of which would be welcomed by large businesses.
Regardless of how the service develops, it is clear that the ATCS process will place an onus on successful applicants to establish and maintain robust internal governance frameworks to identify and report material changes to HMRC post-clearance. Businesses will need to plan beyond the initial application to ensure they can continue to rely on any clearance obtained.
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