When HMRC introduced the Uncertain Tax Treatment (UTT) regime in 2022, they did so only after abandoning some of their most controversial ideas. Four years later, those ideas are back.

Published: 10 July 2026
Authors: Kate Garcia

HMRC’s latest consultation, which closed on 4 June 2026, proposes a significant expansion of the regime beyond large businesses: bringing individuals, trusts and additional taxes within scope, tightening the existing exemption and, most importantly, introducing a notification trigger based on competing legal interpretations.

The proposal has attracted significant criticism because it effectively returns to territory that HMRC retreated from during the original UTT consultations.

This article explains the current regime, what HMRC now want to change and why the proposals have attracted such a strong response from professional bodies and advisers.

The Current UTT regime

The current UTT regime applies to large companies and partnerships with UK turnover exceeding £200 million or a UK balance sheet total exceeding £2 billion. Notification is required where the tax advantage exceeds £5 million and the taxpayer either:

• adopts a position that is contrary to HMRC’s known position, as apparent from materials published in the public domain or dealings with HMRC; or
• makes a provision in its accounts for potential challenge.

It currently applies to corporation tax, income tax (including PAYE) and VAT, and businesses are exempted from making a notification to HMRC where it is reasonable for them to believe that HMRC are already aware of the uncertainty.

The notification is tied to the relevant tax return, and penalties start at £5,000 for a first failure to notify, rising to £25,000 and then £50,000 for repeat failures.

Why HMRC want change

HMRC point to a “legal interpretation” tax gap of £5.4 billion and the relatively small number of notifications made under the existing regime (30 as at 1 January 2026). HMRC appear to believe that significant uncertainties remain outside the current framework and that broader notification requirements are needed.

What HMRC are proposing

The consultation sets out six main proposed changes:

• adding extra taxes: HMRC propose to include Stamp Duty Land Tax, National Insurance contributions, the Construction Industry Scheme, Capital Gains Tax and Inheritance Tax within the UTT regime.
• extending the regime to apply to individuals and trusts: All individuals and trusts would be included within scope where the tax advantage exceeds a £5 million threshold, with no wealth, income or turnover test applying.
• introducing a third notification trigger: Notification would be required where there is more than one credible legal interpretation and HMRC’s view is not known.
• a single annual notification date: notification would no longer be tied solely to the filing of the relevant tax return.
• a narrower HMRC knowledge exemption: For the exemption to apply, the taxpayer would need to hold confirmation from HMRC that the uncertainty has been brought to their attention, rather than having a belief that HMRC are reasonably aware of the uncertainty.

The proposed third trigger is the most controversial element of the consultation. HMRC want taxpayers to notify where HMRC’s view is not known and there is more than one credible interpretation of the law. The aim is to capture novel or difficult points that may currently fall outside the regime.

Why the trigger is controversial

The difficulty is that the proposal revives many of the concerns that led HMRC to abandon a similar trigger when the UTT regime was first introduced. The core problem is uncertainty about the word “credible”. It is not clear whether this means reasonably arguable, more likely than not, or something else entirely. The consultation provides no clear answer.

This matters because tax advice often involves weighing a range of possible interpretations, particularly where the amounts at stake are significant. If the threshold for “credible” is set too low, taxpayers may feel required to consider and disclose alternative interpretations even where they ultimately adopt a well-supported position.

The test also depends on whether HMRC’s view is ‘known’ or ‘not known’, which is often difficult to determine in practice. This is particularly the case where guidance is incomplete, out of date, unpublished (either because it relates to new policy or has simply never been published) or inconsistent with HMRC’s known operational approach. It is also not unheard of for HMRC to adopt a position that is different from a previously generally understood position.

Practical difficulties

The proposals may be particularly difficult for individuals and trusts. Unlike large businesses, individuals and trusts generally do not have formal tax governance procedures, Customer Compliance Managers or dedicated tax teams. Similar obligations would therefore be imposed on taxpayers who have fewer routes to obtain certainty from HMRC.

It could be argued that some taxes are poor candidates for inclusion. For example, CIS uncertainties are often factual rather than questions of legal interpretation and inheritance tax planning may take place many years before any charge arises.  By the time an IHT return is submitted, will executors be able to identify whether the original advice involved more than one credible interpretation of the law?

Next steps

The consultation is presented as a transparency measure designed to reduce the tax gap. However, many stakeholders argue that the proposals place greater responsibility on taxpayers without imposing any corresponding obligation on HMRC to reduce uncertainty through clearer legislation, better guidance or more accessible clearances.

There is a clear irony. The UTT regime was originally narrowed because subjective tests were viewed as unworkable. Four years later, HMRC are proposing to reintroduce a different version of the same idea. Whether this represents sensible evolution or a genuine trip back to the future remains to be seen.

In light of this, large businesses may wish to stress-test how a “credible interpretation” trigger might apply to any current matters, and wealthy individuals, trustees and their advisers should consider the need to start keeping a clearer paper trail of how significant tax positions are reached.

If you would like to discuss what the proposals could mean for you or your business, please contact a member of the Shoosmiths tax team.