error
Subscriptions are not available for this site while you are logged into your current account.
close
Skip to main content

Loading

The page is loading.

Please wait...


      HMRC have published Guidelines for Compliance 13. This guidance covers steps to be taken in assessing both fact and law in arriving at a filing position and is relevant to all taxes. HMRC’s commentary is grounded in the self-assessment regime, and in particular the requirement to provide a declaration that the information provided to HMRC is correct and complete to the best of the taxpayer’s knowledge.

      The guidance is clearly a continuation of HMRC’s efforts to change perceived behaviours in the tax market. It is intended to address HMRC’s concern that in some cases taxpayers do not undertake sufficient checks before making a declaration of this kind. HMRC are also concerned about situations in which taxpayers adopt a ‘novel view’ of the law without being satisfied that it is correct, or where an ‘improbable interpretation’ of the law is applied by a taxpayer.

      Matters of law

      Angela Savin

      Partner, KPMG Law

      KPMG in the UK

      A ‘novel interpretation’ of the law is widely defined by HMRC as being an interpretation that a court or tribunal has not yet considered. HMRC indicate that a taxpayer should ensure that they have a ‘good reason’ to believe that the interpretation they wish to adopt is correct, including considering whether professional advice is required to satisfy themselves of the position.

      Where there is more than one possible interpretation of the law, HMRC indicate that a taxpayer must choose the interpretation that they believe is, on balance, most likely to be correct. HMRC recognise that the arguments may be finely balanced with more than one reasonable interpretation, in which case a judgment will be required that the position taken is, on balance, correct (meaning that on balance, it is the view which a court would be expected to form). However, adopting a position which is only ‘arguable’ will not be sufficient.

      An ‘improbable interpretation’ of the law is one where you believe that it is unlikely that a court or tribunal would agree with it. HMRC indicate that returns should not be filed on such a basis.

      Matters of fact

      The declaration made to HMRC also extends to the factual information. This includes figures provided in returns and the way facts are interpreted and applied.

      HMRC consider that if there are doubts about the information provided to HMRC, a taxpayer should consider whether the courts and tribunals would agree with the way the facts have been used and interpreted.

      HMRC are clear that it is not necessary to gather evidence to a ‘litigation standard’ (although in some circumstances it will be) but stress the importance of record keeping to support the positions adopted, particularly in areas of greater uncertainty or complexity.

      Practical implications

      HMRC indicate that the steps to be taken should be proportionate in light of the uncertainties faced, the tax impact and the complexity of the arrangements adopted.

      This may include seeking professional advice from an appropriate and suitably qualified adviser. HMRC expect taxpayers to provide all relevant information to their advisers and to check the advice they receive to the best of their ability.

      Although HMRC acknowledge that there is no obligation on a taxpayer to tell HMRC about an interpretation of the law which the taxpayer considers to be correct, the guidance encourages taxpayers to tell HMRC about uncertainties and ‘novel interpretations’ and makes practical suggestions about how this can be done.

      Where a taxpayer files a position which they do not reasonably believe to be correct, penalties may be considered by HMRC. It is to be expected that these guidelines will be used by HMRC as a touchpoint to test behaviour in future penalty-related discussions.

      Although this guidance does not represent a change in law or HMRC’s policy, it is to be expected that the matters addressed in it will be a renewed focus for HMRC moving forward. If you have any questions on the impact for you or your organisation, please speak to the authors or your usual KPMG in the UK contact.

      For further information please contact:

      Our tax insights

      Something went wrong

      Oops!! Something went wrong, please try again