The Government is proposing a significant change to the UK’s tax compliance framework that could increase the responsibilities of both businesses and individuals when errors are identified in tax returns.
If introduced, the new rules would create a formal duty for taxpayers to correct inaccuracies in previously submitted tax returns once they become aware of them.
What does this mean?
Businesses already have obligations to ensure their tax affairs are accurate, but the proposed legislation would go further by requiring taxpayers to actively correct known errors.
Where an inaccuracy is identified but not corrected, HMRC could treat the behaviour as deliberate, potentially leading to:
- Higher financial penalties
- Longer time limits for HMRC enquiries and assessments
- Increased compliance and governance obligations
For many organisations, this could substantially increase the risk associated with historic tax filings.
Why is this important?
While the proposals aim to encourage greater transparency and compliance, there are still several unanswered questions, including:
- How far back businesses may be expected to review historic returns
- What level of knowledge triggers the duty to correct
- How the rules will apply to complex tax positions involving judgement or interpretation
- Whose knowledge within a business could be attributed to the company
These uncertainties make it particularly important for businesses to have robust tax governance processes in place.
What should businesses do now?
Although the legislation is still being consulted on, organisations should consider:
- Reviewing procedures for identifying and escalating tax issues
- Assessing whether existing tax governance frameworks remain fit for purpose
- Ensuring key tax decisions are appropriately documented
- Seeking advice where historic tax positions may require further review
How BHP Can Help
The proposed changes could have significant implications for businesses of all sizes. While the final legislation may evolve, now is a good time to review your processes and understand any potential risks.
BHP’s tax specialists are monitoring developments closely and can help organisations assess the impact of the proposals, strengthen governance arrangements and review historic tax positions where required.
If you would like to discuss how these changes could affect your business, please get in touch with our Tax team here.
This material is for informational purposes only and should not be relied upon as professional advice.
