Spring Statement – 26 March 2025

Making Tax Digital

Making Tax Digital (MTD) will apply to certain taxpayers for Income Tax purposes from April 2026. This is the first expansion of the MTD regime since its introduction for VAT-registered businesses in April 2022.

This will place a requirement on these taxpayers to keep digital records and provide quarterly updates to HMC via compatible software. Those affected will be sole traders and property landlords as follows:

April 2026: Those with qualifying income of over £50,000
April 2027: Those with qualifying income over £30,000
April 2028: Those with qualifying income over £20,000

‘Qualifying income’ is determined by looking at the combined gross income (income before deduction of expenses) from these sources declared on the previous year’s tax return.

Advance Tax Certainty for Major Projects

The Government is consulting on a new process to provide increased tax certainty in advance for major projects. The consultation is focused on the very largest and most innovative investment projects, given their scale, complexity and range of tax implications. It is consulting on a dedicated service, tailored to these types of projects, which would provide statutory certainty over how the tax rules would be applied to a project if it proceeds as planned. It will allow for a flexible, open discussion with HMRC to agree areas where tax certainty would be of most value and could be suitably provided to the timelines the project is working to.

The idea is that this should enable the projects involved to more precisely estimate the impact of tax on their rate of return, and so invest more confidently.

The thresholds to be part of the scheme have not yet been set and form part of the consultation. This consultation will run for 12 weeks from 26 March 2025 to 17 June 2025.

Research and Development (R&D) Tax Relief Advance Clearances

R&D tax reliefs are part of the Corporation Tax system and are administered by HMRC. They are considered incentives intended to support companies investing in innovative projects in science and technology, with the aim of stimulating additional private sector investment in R&D.

There is currently a little known voluntary R&D “advance assurance” process that is open to certain businesses. Following submission of information, they are invited to discuss their claim with HMRC and then, if successful, they are given a degree of assurance that the claim will not be subject to an enquiry for 3 years. However, this process is not well known by business owners and uptake of the scheme has been low.

A consultation has been launched to try to enhance this system, the consultation period is from 26 March 2025 to 26 May 2025.

Better use of Third Party Data

Anyone who has interacted with HMRC will no doubt know that the organisation has not kept pace with taxpayer needs, and their fall in customer service has been well documented. A consultation published today recognises the need for HMRC to improve as part of a wider strategy to modernise the tax system and reduce lost tax revenue.

The first phase of this is proposed to be that HMRC will use data already available to them from interest income and card sales in order to pre-populate tax returns and also check that income reported on tax returns fits with spending shown on third party data. Individual transaction data is not provided to HMRC, it is only the totals for each card.

Currently, HMRC doesn’t get interest data until after the end of the tax year, and it can’t always tie the information back to individual taxpayers since not all accounts have identifying numbers such as National Insurance Numbers. The proposal is therefore that it be mandatory to have a NINO or equivalent linked with card and bank accounts so HMRC can more reliably match data to the correct taxpayer.

This will place another burden on the finance sector in client acceptance and ongoing reporting, but perhaps it might help in streamlining and modernising the tax system. Whether it improves HMRC’s service levels, we will reserve judgement.

The consultation will run for 8 weeks from 26 March 2025 to 21 May 2025.

Tax Implications for Companies and Employees in Relation to Employees Trading Their Shares on PISCES

Private Intermittent Securities and Capital Exchange System (PISCES) is a new type of secondary trading platform that will facilitate the intermittent trading of private company shares.  A key application will be as a platform that can be used for employment share incentive schemes.  HM Treasury will introduce legislation in May 2025 to implement PISCES, with trading likely to begin later in 2025.

HMRC has provided a technical note setting out how PISCES trading events will interact in the following share transaction events:

• Employment related securities
• Readily Convertible Assets
• Enterprise Management Incentives
• Company Share Option Plans

Guidance has been provided on capital gains tax chargeable on the disposal of shares and valuation rules.

A draft statutory instrument consultation document providing for an exemption from Stamp Duty and Stamp Duty Reserve Tax (SDRT) for transactions on PISCES has been issued.

The consultation will run for 4 weeks starting on 26 March 2025 and ending on 23 April 2025.

Behavioural Penalties Reform

A consultation has been launched by HMRC to seek views on potential reforms to inaccuracy and failure to notify penalties. It is not proposed to change the current range of penalties but instead consider a reform of the existing framework to simplify how penalties are calculated or alternatively, explore a more fundamental redesign of the penalty system.  The Government will use the feedback to consider reforms to create simpler, easier-to-understand inaccuracy and failure to notify penalties.

Enhancing HMRC’s Ability to Tackle Tax Advisers Facilitating Non-Compliance

HMRC have announced an open consultation aimed at enhancing HMRC powers and sanctions against professional tax advisers who facilitate non-compliance in their clients’ affairs.

The specific proposals being considered include:

• Reviewing current powers and whether these are effective
• Enhancing HMRC investigation powers where there is a suspicion that their actions have led to inaccuracies in a taxpayer's documents
• Powers for enabling HMRC to formally request Information where there are concerns about misconduct
• Tougher financial penalties for tax advisers who are found to have contributed to the tax gap
• Publishing details of HMRC sanctions given to tax advisers
• Disclosures to professional bodies where the is concern about their member’s activities

The consultation will run for 6 weeks from 26 March 2025 to 7 May 2025.

Closing in on Promotors of Tax Avoidance

Promoters of tax schemes have been under scrutiny for a number of years and a further consultation has been announced to discuss a range of stronger measures to enhance HMRC’s ability to address and counteract promoters of tax avoidance schemes, with a proposal aimed at legal professionals and overcoming information withheld under legal professional privilege.

Charter Tax does not promote or sell tax schemes, but there are some firms that do, for whom this this will be relevant.  The key proposals and areas of consideration under consultation are:

• Expanding and strengthening the Disclosure of Tax Avoidance Schemes (DOTAS) regime to include additional targeted schemes and stronger penalties for failure to notify
• Issue of Universal Stop Notices (USNs) and Promoter Action Notices (PANs) to disrupt promoters' activities and prevent further proliferation of avoidance schemes
• Stronger information powers, including introduction of a targeted Connected Parties Information Notice (CPIN) which would compel third parties that HMRC suspects to be connected to the promotion of a marketed tax avoidance scheme to provide relevant information and documents
• Targeting legal professionals where the activity is often protected by legal professional privilege (LPP) leaving HMRC unable to effectively challenge these schemes. HMRC is proposing wider powers for obtaining transparency including by way of waiving LPP in certain circumstances

The consultation period runs from 26 March 2025 to 18 June 2025.

We are here to help

As ever, we are here to help, please get in touch with your usual Charter Tax contact or email us at advice@charter-tax.com.