GfC13: What HMRC’s latest guidance means for your business

What is GfC13 and why does it matter?

GfC13 is part of HMRC’s ongoing effort to promote good tax governance. It focuses on two fundamental principles: first, that the facts reported in tax returns must be accurate and supported by evidence; and second, that the law must be applied correctly. Where uncertainty exists, HMRC expects taxpayers to adopt the interpretation most likely to be correct, rather than taking an aggressive or improbable position.

The guidance also emphasises the importance of resolving uncertainties before filing. If there is doubt, taxpayers should seek professional advice and maintain a clear record of the steps taken to reach their position. In respect of advice sought, HMRC states that “you have an obligation to choose an adviser who is trained and competent for the task in hand”. Furthermore, as well as ensuring that the advisor is provided a full and accurate set of facts, HMRC “expects you to check the adviser’s work, to the best of your ability and competence”. These requirements are clearly open to interpretation and so it is imperative that sufficient documentation is retained to demonstrate the steps taken, particularly if HMRC later challenges a tax return.

Why has HMRC issued this guidance now?

The publication of GfC13 reflects HMRC’s continued focus on transparency and accountability. With initiatives such as Making Tax Digital (MTD) already in place and further digitalisation on the horizon, HMRC is signalling that robust internal controls and audit-ready processes are no longer optional. Businesses are expected to demonstrate that they have systems in place to manage tax risk effectively, and that compliance is embedded within their mindset and governance framework.

This is particularly relevant as HMRC continues to invest in data analytics and real-time monitoring. The ability to identify anomalies quickly means that businesses with weak controls are more likely to come under scrutiny.

Implications for tax compliance

Tax compliance remains a key area of focus under GfC13. HMRC expects businesses to strengthen internal controls, ensure that tax processes are documented and tested, and address uncertainties early rather than waiting for an enquiry. Maintaining a clear audit trail from source data through to tax return submission is essential, and digital links will play an increasingly important role in demonstrating compliance.

In addition, businesses should consider the implications of the Corporate Criminal Offence (CCO) regime, which reinforces the need for procedures that prevent the facilitation of tax evasion. Our recent article on CCO outlines practical steps organisations can take to strengthen their compliance frameworks and align with HMRC’s expectations.

This is not just best practice – it’s essential. If HMRC decides to carry out an enquiry, having robust supporting documentation and clear processes in place will be critical in demonstrating that reasonable care has been taken.

For larger organisations, the Senior Accounting Officer (SAO) regime adds an additional layer of accountability. A named officer, often the CFO, must certify that tax accounting arrangements are adequate. Failure to comply can result in personal financial penalties, making governance a board-level priority.

What does “reasonable care” look like in practice?

HMRC does not expect perfection, but it does expect proactive governance. Businesses should be able to demonstrate that they have documented processes for calculating tax liabilities, that controls are tested and monitored, that specialist independent tax advice has been taken where appropriate and that any advice received from external advisers is based on full and accurate information. Keeping an evidence trail of reconciliations, exceptions, and corrective actions is also critical.

For example, if a business identifies a potential tax error, it should document the steps taken to investigate and correct the issue. Similarly, where a complex transaction raises uncertainty, obtaining written advice from a suitably qualified professional adviser and retaining it on file can help demonstrate that reasonable care was taken.

Consequences of non-compliance

Although GfC13 is not legally binding, HMRC will use it as a benchmark when assessing penalties.  This is where some of the wording in the guidance is, perhaps, unhelpful. The starting point for a penalty to be charged on an inaccurate return, is where the error is caused by a failure to take reasonable care, or ‘carelessness’. Higher penalties will be charged where the error is due to a ‘deliberate’ error, i.e. where the taxpayer has knowledge that the return was incorrect. However, the GfC13 document introduces non-legislative phrases such as “an improbable interpretation of the law”, which it defines as an interpretation that the taxpayer believes is unlikely to be agreed with by the Tax Tribunal. If a business consciously submits a return that it believes would be found to be incorrect by the Tax Tribunal, this would arguably be considered a deliberate inaccuracy, leaving the business exposed to the most serious HMRC action and so the use of such a phrase plays down its potential seriousness.

Submitting an incorrect tax return has always left a business potentially exposed to financial penalties and the GfC13 document does not change that. What it does do is reinforce the fact that businesses need to take all reasonable steps to ensure that areas of uncertainty are resolved before the return is submitted. In short, the cost of getting it wrong can be significant – not only in terms of tax and penalties but also in terms of the time and resources required to resolve disputes.

Looking ahead: digitalisation and e-invoicing

HMRC’s digital-first strategy means businesses should prepare for greater automation and the likely introduction of e-invoicing and real-time reporting, following global and EU trends. Manual spreadsheets will become increasingly risky, and businesses will need to ensure that digital links and structured data are embedded within their processes.

This shift is not just about compliance; it is also an opportunity to improve efficiency and reduce risk. Businesses that invest in technology now will be better positioned to meet future requirements and to respond quickly to HMRC enquiries.

What should businesses do now?

Now is the time to review your tax processes and governance frameworks. Are they documented, tested, and audit-ready? Do decision-makers understand their compliance responsibilities? Investing in technology to automate processes and reduce risk is no longer a “nice to have” but a necessity. Where uncertainty exists, seek professional advice early and keep a record of your decision-making process.

Next steps and how we can help

GfC13 is not about adding unnecessary complexity; it is about building confidence in your tax compliance framework. Businesses that act now to strengthen controls, embrace digitalisation, and document governance will reduce risk and be better prepared for the future of tax.

For businesses of all sizes, particularly those with complex tax obligations, this is a timely reminder to review internal processes and ensure compliance frameworks are fit for purpose.

At Crowe, we work with businesses to assess their current processes, identify gaps, and implement practical solutions that meet HMRC’s expectations. If you would like to discuss how GfC13 affects your organisation or arrange a tax health check, please get in touch with our team.