Despite an abundance of media speculation the Chancellor delivered a speech focussing on the economy with no major tax announcements. Against a backdrop of lower than expected economic growth, increased government borrowing costs and limited fiscal headroom the Chancellor confirmed welfare spending cuts; increases in defence spending, and measures focused on tackling tax avoidance and improving reporting.

Closing the tax gap

The Chancellor announced additional investment into HMRC to increase its capacity to tackle tax avoidance, and confirmed future plans to make it easier for taxpayers to pay the right tax through a modern and digital tax system.

Targeted action will be taken to prosecute tax fraud by expanding HMRC’s counter-fraud capability, aiming to increase the number of ‘charging decisions’ for the most harmful fraud from 500 to 600 per year by 2029/30. Investigations will also address organised criminal attacks, focussing on illicit finance and complex money laundering schemes.

The new HMRC reward scheme for informants will be launched later this year, targeting serious non-compliance in large corporates, wealthy individuals, offshore and avoidance schemes. The scheme will reward informants with compensation linked to a percentage of any tax taken as a result of their actions.

The government will continue the rollout of Making Tax Digital for income tax, with sole traders and landlords with qualifying income over £20,000 joining from April 2028. The government will continue to explore how it can best bring the benefits of digitalisation to more of the approximately four million taxpayers who have income below the £20,000 threshold.

Collecting taxes

The government is taking further action, on top of announcements made at the Autumn Budget, to invest in HMRC’s debt management capacity. This includes investing in and recruiting 500 more HMRC compliance staff, and 600 debt management staff, forecast to raise an annual total of £240m by 2029/30.

Consultations

In line with the focus on tax avoidance and collection, the government has today published four consultations focussed on improving tax collection and reporting, and reducing tax avoidance and non-compliance. These cover how HMRC can make better use of third-party data to increase automation; proposals to strengthen HMRC’s ability to take action against tax advisers who facilitate non-compliance; measures targeting promoters of tax avoidance schemes; and options to simplify and strengthen HMRC’s inaccuracy and failure to notify penalties.

Further consultations have been published covering a revised system of advance clearance in the Research & Development tax relief system and a new process to give major projects greater advance certainty. The government intends to provide certainty to businesses on the transfer pricing treatment of Cost Contribution Arrangements (CCAs) through the UK’s existing Advanced Pricing Agreement (APA) programme.

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