The Uncertain Tax Treatment regime could be expanded

Fears are growing that HMRC’s proposed extension of the Uncertain Tax Treatment (UTT) regime could mire individual taxpayers and trusts in more complexity in an increasingly demanding tax system.

The UTT regime was introduced in 2022 and is designed to get very large companies and partnerships to flag when they have taken a tax position that could be legally contentious. To be included in the legislation, an entity would currently need an annual turnover of £200m or more, or a UK balance sheet of £2 billion or more. Businesses must tell HMRC when they’ve taken a tax position in a return that might be open to challenge, where the tax advantage is £5m or more.

The consultation, which has now closed and HMRC is considering responses, proposed bringing individual taxpayers and trusts into the regime, and adding additional taxes, such as Stamp Duty Land Tax, Capital Gains Tax, National Insurance Contributions and Inheritance Tax.

Could individuals and trusts be brought within the regime?

The proposals in the consultation suggest this is the direction HMRC is looking to travel. The current regime covers Corporation Tax, VAT and Income Tax, including PAYE. But the hope is that the £5m reporting requirement will remain in place, so any expansion would only affect the very wealthiest people in the UK.

The proposed changes are designed to reduce the ‘tax gap’ between what is being paid and what HMRC estimates should be paid. For 2023/24, the tax gap was estimated to be £46.8bn, with the ‘legal interpretation’ portion of the tax gap estimated at £5.4bn, according to HMRC figures.

HMRC argues that if it is notified early about potentially contentious tax positions, it can solve disputes sooner, rather than having to discover them through an inquiry or litigation. But expanding the scope would create greater complexity for individuals and trusts.

Tax is often uncertain because legislation is complex and guidance can be difficult to get right as a result. The addition of a reporting ‘trigger’, where HMRC’s view on an aspect of tax isn’t known, could be difficult to apply in practice, and may mean taxpayers who are unsure whether they should notify or not, deciding to report anyway to avoid the risk of penalties.

Is this HMRC overreach?

Some professional bodies have raised concerns about including individuals and trusts in their responses to the consultation. For example, the Association of Taxation Technicians (ATT) has warned that the £5m threshold must be retained to avoid a disproportionate impact on individuals and trusts.

It also stated: “We also recommend leaving Inheritance Tax (IHT) out of any expansion of the taxes covered by UTT. IHT can involve long periods of time between tax planning taking place and the tax event (often death) occurring, IHT reporting duties on death often fall on people who were not involved in the planning, and because reporting may be unnecessary in the case of some IHT events (e.g. ‘successful’ Potentially Exempt Transfers) where there is no tax charge.”

The ATT is also concerned about the practical implementation of the new reporting ‘trigger’. The consultation response added: “As proposed, this addition risks creating an impractical burden on taxpayers. Instead, we recommend relying on the existing triggers at least until an extended UTT regime has had time to become established, and its effectiveness and impact on trusts and individuals can be properly assessed.

“Finally, the ATT reminds HMRC of its responsibilities in areas of uncertainty and potentially different legal interpretation – UTT should not become a means for HMRC to excuse itself from proactively identifying such areas and clarifying them in either legislation or guidance.”

Any changes have not yet been finalised, so we will have to wait and see what happens to the UTT regime. HMRC’s response to the consultation is expected this summer.

We can help you

If you think you may be affected by the proposed changes, or have any other concerns about your tax position and the current tax regime, then please contact us and we will do everything we can to assist you.

Many businesses use AI, but are they using it well?

AI is helping to save businesses hours each week, but the question now is not whether they should use it, but whether they are using it safely and ethically?

AI can be a genuinely useful tool for small businesses especially helping to draft first versions of emails, policies, proposals, social media, meeting notes, and so on. It can also turn a long, complex document into a plain English summary, suggest ways to improve a sales message, or help prepare for a difficult client conversation.

However, AI should be considered more of an assistant than a replacement for the work done by staff or a business owner. Everything your AI model – ChatGPT, Claude, Copilot, etc. – churns out can sound completely convincing. But it can make mistakes, including using outdated information to give you an incorrect answer. So, you must review any content you ask AI to create, or any analysis it does for you, carefully, especially if what you’re asking for help with is vital to your business or relates to legal or financial decisions.

What you should and shouldn’t do with AI

It might be tempting to ask AI to analyse patterns in information, such as employment records. But it is very unwise to add sensitive data to public AI platforms. Businesses also need to consider data protection rules if personal data is being processed.

If you are using an AI system that you know is secure, then it would still be sensible to be cautious. Even in this position, it would still be prudent not to add any very sensitive information to be analysed. But anyone in your IT department, or a company you use for IT support if you have a smaller business, may be able to give you guidance on this.

Remember too, no matter what you ask AI to help you create, you are still legally responsible for what you publish or send out, even if you got AI to help you write it. This is another reason why it’s vital to review everything that is produced.

How can you use AI ethically?

Using AI ethically should be mostly common sense, alongside learned good practice. For example, no-one should ever use AI to mislead customers, create fake testimonials, or impersonate people. It is also impersonal to recruit with AI, so consider the impression you’re giving your potential staff if you filter possible new recruits this way.

Creating an AI policy for the business to follow is the best way to keep your team working in the right way, as then everyone knows what is allowed, what is expected, and what tools can be used. You should include what information must never be added to an AI platform, and when the use of AI should be disclosed.

Using AI the right way can be a real benefit to your business, and keeping on the right side of ethical use will help prevent any problems further down the line.

We can help you meet your obligations

If you would like to know more about business ethics and how to keep your business moving forwards in the right way, then please get in touch and we would be happy to give you the guidance you need.

Do a mid-year business review to see if you’re on track

Most businesses will have goals that they want to hit by the year end, which is a good idea. If you know your destination, it’s easier to find the road to get there. But by doing a mid-year review, you can take a business snapshot to see if you are likely to meet those goals.

Most of us now use accounting software to deal with the Making Tax Digital regime, and this has another major benefit. Most of these systems will offer you options to check on various business reports throughout the year. So, you can see where your business is performing better or worse, and fix it.

QuickBooks, Xero, FreeAgent, or any other similar accounting system, will allow you to compare your income, costs and profits with the same period last year and see how healthy your business is. Things to consider are whether you’re selling more or less than last year, whether your costs are higher, and where your best profit margins are on different products.

You should also assess your cashflow, as that is the lifeblood of any business. See who owes you money, how quickly invoices are paid, whether you have sufficient cash to cover tax, wages, supplier payments, and upcoming bills. A business may look good on paper, but without cashflow, it can all fall apart very quickly.

Is there enough time to make changes?

If you do a mid-year business review, and you see things that could be done better, then you have time to make the necessary changes.

For example, you can also see anywhere you spend a lot of time without getting much return. This level of analysis will really help move your business to the next level. You can also check where you might be able to cut costs – lose unused subscriptions, review your prices to see if your margins are high enough, and chase any invoices that are overdue.

Setting monthly targets will also help you see on a more micro level whether your business is heading in the direction you want it to.

Let us help you

If you want some help with analysing your business at the half-year point, then please get in touch with us and we will do what we can to help you.

Late payments to small businesses face biggest crackdown in 25 years

Large companies who persistently pay small suppliers late, or have unreasonably long payment terms, are facing the toughest UK crackdown in more than 25 years, as the Government aims to tackle one of the biggest cashflow problems affecting small businesses.

The Commercial Payments Bill, also named publicly as the Small Business Protections Bill by the Government, was introduced to Parliament in May 2026 and aims to rebalance the power dynamic between large firms and smaller businesses that work with them. This includes sole traders and freelancers.

Late payments can lead to serious cashflow issues for small businesses, resulting in staff being paid late, or not at all, forcing small business owners to rely on credit, and especially spending hours chasing money which should have already been paid. Those hours mount up and could be used to move the business forwards. Government research has found staff at small businesses across the UK can spend up to 133m hours collectively chasing payments across the economy each year.

Late payments are estimated to cost the UK economy around £11 billion a year, according to Government figures, and they contribute to 38 businesses closing every day. Businesses are estimated to be typically owed £26 billion in late payments at any time, with firms affected owed an average of £17,000.

What proposals are in the Bill?

The new Bill aims to make late payments a thing of the past, as it will cost large companies more and be harder to justify. A key proposal is for a 60-day cap on payment terms for large companies paying smaller suppliers.

Long contractual payment terms, where the payment is technically made ‘on time’ but may be, say, 65 days or more after the work was completed, can create similar cashflow issues. To combat these practices, the Government is proposing reforms allowing smaller businesses to charge mandatory interest on late payments at 8% above the Bank of England base rate. This would give a current rate of 11.75%, as the Bank of England base rate was 3.75% at the time of writing.

You can already claim statutory interest and debt recovery costs if another business pays late, but the new rules would enshrine the right in legislation, making it harder for larger companies to work around it with contract terms.

Are there teeth behind the proposed legislation?

The Small Business Commissioner is expected to receive stronger powers to help deal with late payments in the UK. These include the power to investigate poor payment practices, adjudicate disputes and fine persistent late payers. Potential penalties could run into millions for large companies who are the worst offenders, as it could equate to a percentage of their overall turnover.

Emma Jones, Small Business Commissioner, said: “I am on a mission to make life easier for small firms by getting money moving faster through the economy by tackling late payments. The measures the Government has announced will strengthen the role of my office in taking on the worst payers alongside ensuring small businesses have a stronger voice on payment terms and late payment interest.

“I work with many firms, including those on the Fair Payment Code, who see the value of prompt payment to their business, but for too many late payments and long payment times persist with little accountability.

“These reforms will reduce the hours spent chasing debt, allowing small businesses to focus on more productive and enjoyable growth.”

Will it really make a difference?

Time will tell whether the rules change the behaviour of late-paying larger companies, but it is clear that late payment is no longer being treated as ‘just a normal part of business’. It ultimately has an impact on the wider economy.

Large companies who don’t pay smaller suppliers fairly, and on time, would face legal repercussions if the Bill becomes law in its current form. Prime Minister Keir Starmer said: “Small businesses are the backbone of our economy – run by people who take risks, create jobs and keep communities going. This Government is firmly on their side.

“Too many small business owners are spending hours chasing money they are owed and when payments don’t come through, the cost is personal. It’s about whether you can pay your staff, keep the lights on, or invest in your future.

“We’re changing that with the toughest action on late payments in a generation, so small businesses get paid on time and get the backing they need to grow, create jobs and serve their communities.”

Contact us

If you would like to find out how to deal with late payments and what options you have when it comes to cashflow, then please get in touch with us and we will explain what you need to know.