Monthly Tax Update

Spring Statement

The Chancellor of the Exchequer Rachel Reeves MP delivered her Spring Statement to Parliament on 26 March 2025. In line with the new government’s policy to deliver just one major fiscal event a year, i.e. the annual Budget each autumn, the Spring Statement contained only a limited number of tax announcements. Analysis of these announcements can be found on our dedicated website here, including commentary on individual tax measures. A recording of our Dbriefs webcast is available to watch on demand here. The government’s collection of Spring Statement related documents is here.

Business tax-related announcements included a new consultation on advance clearances in respect of research and development reliefs (further details here, consultation open until 26 May 2025) and a consultation on a new process to provide greater advance certainty on the tax treatment of major projects (further details here, open until 17 June 2025). The latter also sets out the government’s intention 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.

Bills receive Royal Assent

Since the last Monthly Tax Update, Royal Assent has been granted to the following:

·     Finance Act 2025 – enacting many of the key tax measures announced at Autumn Budget 2024, including the replacement of the non-domicile regime.

·     The National Insurance Contributions (Secondary Class 1 Contributions) Act 2025 – enacting, with effect from 6 April 2025, the increase in the employer secondary Class 1 NICs rate from 13.8% to 15%, and the decrease in the employer secondary Class 1 NICs threshold to £5,000 per year.

·     The Non-Domestic Rating (Multipliers and Private Schools) Act 2025 – enacting certain business rates measures in England, including new powers from April 2026 for new lower business rates multipliers for qualifying retail, hospitality and leisure properties and higher multipliers for high value properties.

Increase in interest rates on late paid tax

At Autumn Budget 2024, the government announced its intention to increase the statutory rates of interest due on late payments of tax to HMRC by an additional 1.5 percentage points with effect from 6 April 2025, while keeping rates of repayment interest accruing on overpaid tax amounts unchanged. The required regulations to enact this change were made on 25 March 2025. HMRC have issued a press release and have updated their tables of interest rates accordingly.

Court of Appeal allows capital allowances appeal relating to technical study expenditure

The Court of Appeal has largely ruled in favour of the taxpayers in the capital allowances case of Orsted West of Duddon Sands (UK) Limited, Gunfleet Sands Limited and others v HMRC. The taxpayers own and operate offshore windfarms, and the key issue in the case concerned whether expenditure on various studies, including surveys, conducted before the windfarms became operational, constituted qualifying expenditure “on the provision” of plant and machinery for the purposes of section 11 Capital Allowances Act 2001. The First-tier Tribunal initially allowed some of the disputed expenditure as qualifying for capital allowances, but the Upper Tribunal overturned this decision in 2023, finding that none of the expenditure was qualifying.

The Court of Appeal has disagreed with the stricter interpretation adopted by the Upper Tribunal. It found that the taxpayers’ expenditure on studies informing the design or installation of plant qualified for capital allowances, even if not directly involved in the physical construction. The Court’s interpretation of “on the provision” went further in favour of the taxpayers than the initial First-tier Tribunal decision by also including expenditure on studies that influenced design choices, even if they did not lead to changes in the design of the plant.

Corporate Interest Restrictions (CIR) and reporting company nominations – HMRC update

The corporate interest restriction (CIR) rules include an administrative requirement for an in-scope group to nominate a ‘reporting company’ before it can file an interest restriction return (IRR) for a period. For some groups it will be beneficial to file an IRR, for example, because it allows them to make certain CIR elections. If the usual 12 month deadline for nominating a reporting company has passed, HMRC can appoint a ‘reporting company’ on behalf of a group, but manual guidance released by HMRC in September 2024 set out that they would only be willing to do this in limited exceptional circumstances.

A new update from HMRC – due to be included in an upcoming edition of HMRC’s Agent Update publication and reproduced by the Chartered Institute of Taxation here – sets out a partial relaxation of this approach to “alleviate the issue, as far as we can, for periods ending on or before 31 March 2024.” For periods ending on or after 31 March 2021 and on or before 31 March 2024, HMRC will no longer invalidate filed IRR returns due to the lack of a valid reporting company nomination. The relaxation does not apply for IRR returns for periods ending after 31 March 2024 and HMRC continue to stress that groups should ensure valid nominations are in place before they submit a return.

UK suspends double tax treaties with Russia and Belarus

In February 2025, HMRC updated their pages on GOV.UK to record the UK government’s intention to suspend the UK’s double taxation conventions with Russia and Belarus. This followed treaty article suspensions announced by the governments of Russia and Belarus in 2023 and 2024 respectively.

Statutory instruments (here and here) to give effect to the suspensions have now been made. As a result, both double tax conventions ceased to have effect in UK law with effect from last week.

UK and Peru sign first Double Tax Convention

The governments of the UK and Peru signed the Peru-UK Double Taxation Convention and Protocol on 20 March 2025. This will be the first double tax treaty between the UK and Peru. The treaty will enter into force 30 days after both countries complete their domestic parliamentary procedures for ratification and notify each other accordingly.

Bolt Services: Application of VAT Tour Operators’ Margin Scheme to ride-hailing services

The Upper Tribunal has agreed with Bolt Services UK Limited (Bolt) that they should account for VAT under the Tour Operators’ Margin Scheme (TOMS) on the supply to passengers of private hire vehicle ride-hailing services, upholding the earlier decision of the First-tier Tribunal (FTT). The FTT had held that the supply was a service commonly provided by tour operators or travel agents.

On appeal, HMRC argued that the FTT’s ‘high-level’ approach when considering whether services are of a kind commonly provided by tour operators/travel agents was wrong. HMRC considered that the correct approach was to ask whether the supply by Bolt, in particular, was identical or comparable to services supplied by tour operators/travel agents. HMRC also contended that the supply was materially altered or an ‘in-house’ supply, combining bought-in services (drivers) with Bolt’s own resources (the app platform), and therefore outside the scope of TOMS. The Upper Tribunal acknowledged that while TOMS was designed for traditional tour operators, its scope is not limited to them, and that the key factor is the nature of the services provided, not the classification of the provider. The Upper Tribunal agreed with the FTT that a ‘high-level’ approach to comparing Bolt’s services with those of traditional operators was appropriate. Addressing HMRC’s argument that the supply was ‘in-house’, the Upper Tribunal considered that the drivers’ services directly benefited passengers, not Bolt, and were not materially altered or an in-house supply. Accordingly, the Upper Tribunal found that the supply was comparable to those of traditional tour operators/travel agents and was provided for the direct benefit of travellers, satisfying the key requirements of TOMS, and dismissed HMRC’s appeal.

EMEA Dbriefs tax webcasts

We have three Dbriefs tax webcasts over the next month: Global tax governance and control (15 April); Off-payroll working (IR35) – use of technology and key insights (29 April); and UK Tax Update – May (6 May). Please visit our Dbriefs website for more information, and to view any other recent webcasts on demand.