Utmost’s Marc Acheson has warned of the unintended consequences of HMRC extending the Uncertain Tax Treatment (UTT) regime.
The UTT rules were first introduced in 2022 to close the tax gap – the difference between the amount of tax that should be paid to HMRC and the amount that is collected – and apply to businesses, trusts and individuals receiving a tax advantage of £5m or more.
In March the government launched a consultation on extending UTT to cover stamp duty, National Insurance, inheritance tax and capital gains tax to reduce the legal interpretation portion of the tax gap.
According to government figures, the tax gap amounted to £46.8bn in the 2023-24 tax year, with £5.4bn the result of taxpayers interpreting the law differently from HMRC. However, Acheson, Utmost’s global wealth specialists, noted statistics show individual taxpayers are only responsible for 10% of the gap, while 60% is attributable to small businesses.
Acheson said the consultation is the latest in a series of policy initiatives aimed at targeting wealthy individuals to plug fiscal gaps and raise tax revenue.
“While the aim to reduce the tax gap might be well-intentioned, the extension to individuals and trusts could be problematic and have unintended consequences. From a purely numbers standpoint, the vast majority of the tax gap is driven by corporates – primarily small companies – rather than individuals, and differing legal interpretations account for an expected gap of just over £1bn for individuals.”
Acheson pointed out other measures designed to extract more tax revenue from wealthy individuals have already prompted many non-domiciled individuals to leave the UK.
“With recent reports suggesting the ‘Mansion Tax’ may not generate the revenues projected, alongside the application of IHT to businesses and pensions, there is growing unease that the UK is driving wealth away.
“The cumulative impact of all these measures is that we are now increasingly seeing UK-based entrepreneurs and business owners considering options abroad, particularly as other jurisdictions such as Italy, Switzerland and the UAE continue to compete fiercely to attract wealthy individuals to broaden their tax bases.”
The consultation runs until 4 June 2026.
