When the technical advice is right but still not enough

Many tax disputes do not arise because the technical analysis was wrong or the position aggressive. More often, the difficulty is far simpler: years later, the business simply cannot evidence why a decision was taken.

This is a familiar issue for tax functions dealing with enquiries, transactions or historic reviews. The challenge is not defending the underlying legislation, but reconstructing the decision-making long after the commercial context — and the people involved — have moved on.

Recent developments suggest that HMRC is paying increasingly close attention to this gap — and that the trend is accelerating.

Evidence, not just accuracy

HMRC’s Guidelines for Compliance 13 (GfC13) are often viewed as guidance on getting returns “right”. But in practice, they go further: they are about evidencing judgement.

HMRC now expects taxpayers to be able to show:

• why a position was taken

• how uncertainty was identified and assessed

• what advice was relied upon

• how that advice was reflected in the return

• what governance sat around the decision

This marks a clear shift in emphasis. HMRC is looking beyond whether a filing position is technically arguable, and focusing increasingly on whether the process behind it can be demonstrated.

For many groups, that evidence is fragmented — scattered across adviser reports, emails and individuals’ recollections — making it difficult to present a coherent narrative when it is needed most.

A wider governance trend

This focus does not sit in isolation. It forms part of a broader set of expectations around tax governance that have been building for some time.

The Senior Accounting Officer (SAO) regime requires businesses to maintain appropriate tax accounting arrangements and to demonstrate that those arrangements operate effectively in practice.

Business Risk Review Plus (BRR+) similarly examines how tax risk is embedded into commercial and operational decision‑making.

Alongside this, Guidelines for Compliance 17 (GfC17) emphasise the importance of clear, well‑structured group information — including ownership, tax residence and special characteristics. Where a business cannot clearly articulate its own structure, evidencing the rationale for individual tax decisions becomes significantly harder.

Transparency is increasing

Recent policy developments reinforce this direction of travel.

HMRC’s consultation on modernising the reporting framework for company payments to participators signals a move towards more structured, consistent and accessible data. Although framed as a reporting reform, the underlying message is clear: HMRC expects businesses to have accurate, well-governed information readily available — not to reconstruct positions after the event.

At the same time, HMRC continues to invest heavily in expanding its compliance workforce across large business, mid‑market and specialist risk teams. This increased capacity is already translating into more enquiries, deeper information requests and a sharper focus on how decisions were made — not just what was reported.

The implication is straightforward: historic decisions are more likely to be scrutinised, and governance weaknesses are more likely to be exposed.

The lifecycle problem

Tax decisions rarely sit neatly within one accounting period.

A restructuring, election or financing arrangement may be advised upon years before it is reviewed in due diligence or challenged in an enquiry — often by different advisers, teams or regulators. Internally, ownership of the “full story” is frequently unclear, and the trail of reasoning can be difficult to piece together.

HMRC, buyers and tribunals, however, see a single narrative. They ask the same question: why was this done, and how was the position reached?

Where governance has not been designed with future scrutiny in mind, even routine commercial decisions can become difficult to defend.

What good tax governance looks like in practice

Strong tax governance does not require complex systems. In practice, it often comes down to creating a clear, contemporaneous audit trail for decisions with tax implications. For example:

• logging key advisory decisions

• ensuring compliance processes reference those decisions

• recording short notes where judgement or uncertainty exists

• retaining this material in an accessible governance pack

This creates a thread connecting advisory, compliance and future scrutiny. When an enquiry or transaction arises years later, the business can retrieve its history rather than attempt to reconstruct it.

Why this matters now

For heads of tax, this may feel like a record‑keeping challenge. For CFOs and boards, it is a broader question of risk management.

HMRC guidance, transparency initiatives and increased compliance activity all point in the same direction: tax risk is increasingly judged not only by the technical merits of a position, but by the quality of governance and evidence supporting it.

Good governance does not eliminate tax risk — but it makes tax positions far easier to defend when they are eventually tested.

If you are interested in discussing any of the topics covered in this article, get in touch with our Tax specialists below.