2 May 2025
Government announces package of tax simplification, administration, and reform measures
On 28 April 2025, the government published a package of technical tax policy announcements and supporting documents, titled Tax Update Spring 2025: Simplification, Administration, and Reform. The government’s policy paper, summarising the day’s announcements, is here, Treasury Minister James Murray MP’s written ministerial statement on the announcements is here, and HMRC’s collection of update documents is here.
A number of new and upcoming consultations were announced as part of the package including:
· A consultation on reforms to the UK’s transfer pricing, permanent establishments and diverted profits tax (DPT) legislation, intended to “benefit taxpayers through improved certainty and better alignment with tax treaties, while protecting the UK tax base.” This is a technical second-round consultation, including draft legislation, following on from an initial consultation on policy reform options held in 2023. A separate consultation on further potential UK transfer pricing changes, including amendments to companies in scope and a proposal for a new transfer pricing reporting requirement (the ‘International Controlled Transactions Schedule’) was also published. Please see our Alert for further details of both consultations. (Consultations deadline: 7 July 2025).
· A consultation seeking views on options for simplifying, modernising and reforming HMRC’s alternative dispute resolution (ADR) and statutory review processes. (7 July 2025).
· A consultation on the introduction and design of VAT relief for business donations of goods to charities. (21 July 2025).
Other tax announcements in the package included:
· The announcement of a delay to the introduction of mandatory payrolling. Mandatory reporting and paying of Income Tax and Class 1A NICs on benefits in kind via payroll software will now be introduced from 6 April 2027 instead of 6 April 2026.
· A response to the 2023 consultation on the modernisation of stamp taxes on shares. The government plans to proceed with a single stamp tax on securities, replacing Stamp Duty and Stamp Duty Reserve Tax (SDRT). The government is aiming to introduce the single tax, its legislative framework, and an online portal to digitise reporting and payment of the tax in 2027.
· Simplifications to the VAT Capital Goods Scheme: secondary legislation will be laid at a later date to remove computers from assets covered by the scheme and increase the capital expenditure value of land, buildings and civil engineering work from £250,000 to £600,000.
OECD publishes Taxing Wages 2025
The OECD has published the latest in its annual series of employment tax reports Taxing Wages. The latest report shows that the average ‘tax wedge’ – i.e. the average total taxes on labour costs paid by employees and employers as a percentage of the total labour cost to the employer – across the OECD for a single worker earning an average wage was 34.9% in 2024 (up by only 0.05 percentage points from 2023). The tax wedge ranged from 53% in Belgium to 0% in Colombia. The equivalent figure for the United Kingdom for 2024 was 29.4%: a decrease of 1.7 percentage points from 2023 mainly due to last year’s employee Class 1 NIC rate cuts. The UK’s employment tax burden in 2024 ranked eighth lowest out of the 38 OECD countries.
Public Accounts Committee releases report on the costs of administering UK taxes
The House of Commons Public Accounts Committee (Chair: Sir Geoffrey Clifton-Brown MP) has published a report titled The Cost of the Tax System. Following on from a National Audit Office report on the same topic from February, which highlighted increasing costs of administering UK taxes, the Committee urges HMRC to lay out realistic plans to simplify the UK tax system and establish robust metrics for annual reporting of the effects of tax simplification on HMRC’s and taxpayers’ administration and compliance costs. The Committee also expresses concerns on customer service and compliance productivity levels, and requests details of actions being taken to improve these.
Much of the report focusses on digitalisation and technological improvements. The Committee requests that HMRC write to them following this summer’s spending review with a timetable for remediating remaining legacy HMRC IT systems. The Committee recommends more detailed consideration of taxpayer needs when designing new digital programmes and systems, with increased evidencing of this within business cases and public impact assessments. It has also requested an assessment from HMRC of how well-placed the tax authority is to take advantage of opportunities offered by new technologies such as artificial intelligence.
Carbon Border Adjustment Mechanism – consultation on draft legislation
The Carbon Border Adjustment Mechanism (CBAM) will place a carbon price on specified goods imported to the UK from sectors that are at risk of carbon leakage. It takes effect from 1 January 2027. On 24 April 2025, HMRC published a technical consultation that aims to gather feedback from stakeholders on the drafting of the primary legislation to make sure it delivers the policy correctly and effectively. The UK CBAM seeks to ensure that UK decarbonisation efforts lead to a true reduction in global emissions rather than simply displacing carbon emissions overseas. The draft legislation sets out the scope of the tax and the calculation of the CBAM liability, alongside the core administrative elements. It is not a further consultation on the policy design. Alongside the draft legislation, the government has published a policy update that contains further details on key features of the UK CBAM. The consultation closes on 3 July 2025. (Contact: Zoe Hawes)
EMEA Dbriefs webcasts
The next EMEA Dbriefs tax webcast is on Tuesday 6 May 2025 at 12.00 BST/13.00 CEST. In UK Tax Update – May 2025, hosted by Rachel Austin, our panel will discuss topical tax developments of relevance to UK businesses in relation to corporate taxes, employment taxes and indirect taxes.