HMRC is consulting on proposals to extend uncertain tax treatment (UTT) to capture more legal interpretation uncertainties and seeks views on widening scope and implementing changes. In other words, a clampdown on scenarios where high net worth individuals use a tax treatment which potential breaches current legislation or where ‘HMRC’s view is not known’.

The plan is to bring wealthy individuals and all trusts into the UTT regime for the first time where legal interpretation uncertainties give rise to a tax advantage over £5m. This means they will have to notify HMRC if they believe their tax treatment potentially breaches HMRC’s approach.

HMRC estimates 12% of the total tax gap is due to misinterpretation of the legislation, amounting to a potential loss of £5.4bn in revenues a year. In addition, at least a fifth of this tax loss is attributed to wealthy individuals misinterpreting the tax rules.