HMRC is plotting a crackdown on one of the most popular tax loopholes used by UK households. The Labour Party government's tax arm is set to target the wealthy using an inheritance tax (IHT) and capital gains tax loophole.
Extension of Uncertain Tax Treatment Regime
HMRC plans to extend a regime called the Uncertain Tax Treatment (UTT), which it introduced in 2022 for large businesses, to private individuals if they receive a tax advantage of £5 million or more. This means if individuals take this advantage, they would need to report it to the taxman, who would then investigate how they had interpreted the rules.
In 2022, rule changes meant large businesses with a turnover of at least £200 million and a balance sheet of £2 billion were affected. HMRC now intends to extend UTT to cover stamp duty, National Insurance, inheritance tax, and capital gains tax. HMRC can fine businesses £5,000 for failing to notify it of a tax advantage within the scope of UTT.
Expert Reactions
Fiona Fernie, at tax firm Blick Rothenberg, said: “This risks being perceived as HMRC unfairly targeting one group, and allowing the other to ‘get away with’ not paying its dues. This proposal is yet another mismatch between who is actually responsible for the majority of the tax gap, and who is being targeted by HMRC. The continued focus on the wealthy risks being seen as political grandstanding rather than a proportionate, evidence-led approach to reduce the gap.”
Jonathan Burt, at law firm Charles Russell Speechlys, said: “This is the central paradox of the consultation. In areas like inheritance tax and stamp duty, where the law can be genuinely unclear and subject to interpretation, this would mean telling HMRC you might be wrong when nobody, including HMRC, knows what right looks like.”
Ellen Milner, at the Chartered Institute of Taxation, said: “These proposals are a significant widening of the regime, reaching beyond large businesses into individuals, trusts and additional taxes, and potentially introducing a new, much broader trigger for notification. The key test will be whether that expansion can be delivered in a way that remains clear, proportionate and workable. There is also a broader question as to how far the framework should place corresponding responsibility on government and HMRC to minimise legal interpretation uncertainty in the first place, for example through simpler legislation, clearer guidance and timely clarification of HMRC’s view.”
