Tax Update Spring 2025

On Monday the government announced a package of tax administration, simplification and reform measures which are intended to support economic growth by reducing burdens on taxpayers and increasing certainty for businesses.

The announcements are relatively wide reaching covering tax and customs but a selection of some of the points relevant to businesses are summarised below:

Transfer pricing, permanent establishments and diverted profits tax

Following on from a consultation in 2023 the government has published two consultations and draft legislation in relation to transfer pricing, permanent establishments and diverted profits tax.

Some of the key points to highlight from these consultations are as follows:

Transfer pricing – The introduction of an exemption from transfer pricing for UK to UK transactions coupled with a removal of the exemption for medium sized enterprises, amendments to the participation condition, and new requirements for multinationals to report certain information on cross border transactions to HMRC.

Permanent establishments -  Aligning the UK definition of a permanent establishment with the  2017 version of the OECD model tax convention and changes to the investment manager exemption, alongside a revised statement of practice on the interpretation of the latter.

Diverted Profits Tax – DPT as a separate tax will be repealed and replaced with a new charging provision within corporation tax for unassessed transfer pricing profits, which will retain the essential features of the DPT regime.

Corporate Interest Restriction administration simplification

The government plans to engage with stakeholders on opportunities to simplify and improve the administration rules for Corporate Interest Restriction and, in particular, reporting company appointments under the regime. 

Modernisation of the stamp taxes on shares framework

A summary of responses to the stamp taxes consultation from 2023 was published.  This confirmed the intention of the government to go ahead with the proposed unification of SDRT and stamp duty into one stamp tax on shares regime.  The government is aiming to introduce these reforms, along with a new online portal for payment of the new tax in 2027.    Modernisation of stamp taxes is long overdue so this reform is to be welcomed even if some of the details, for example removing the stamp duty £1,000 de minimis exemption, are less than ideal.

VAT Capital Goods Scheme

The intention is to simplify the scheme by removing computers from the scope of the capital goods scheme entirely and increasing the capital expenditure threshold for land, buildings and civil engineering works to £600,000  - a significant increase from the current £250,000.  These proposals will be welcomed by businesses who have to deal with this administratively burdensome scheme.

E-invoicing

HMRC and Department for Business and Trade have now published a consultation on promoting e-invoicing across UK businesses and the public sector.   The consultation seeks views on the impacts that different e-invoicing models would have on UK businesses including the potential mandating of e-invoicing.

Check Employment Status for Tax 

HMRC is revising its Check Employment Status for Tax (CEST) digital tool with effect from 30 April 2025, along with revised guidance on how to answer the questions. The changes are intended to make it easier to use the tool.  HMRC reiterates that is committed to standing behind the outcomes of this tool where it has been used correctly.  

Payrolling benefits

Mandating the payrolling of benefits in kind will be delayed until April 2027 rather than, as announced at the Autumn  Budget, April 2026.

And finally, HMRC is going to stop sending letters!  Well, not entirely but it is committing to reduce paper letters (including stopping issuing 6 types of non-essential letters connected with Corporation Tax from June 2025) which is expected to save £50 million per year by 2028-29.