20 June 2025
HMRC have published the latest edition of their annual statistical publication Measuring tax gaps. The estimated ‘tax gap’ – HMRC’s best estimate of the difference between the amount of tax that should in theory have been paid, and what was actually paid – for the 2023/24 tax year was 5.3% (down from a revised estimate for 2022/23 of 5.6%), representing an estimated £46.8 billion of missed receipts out of total theoretical tax liabilities of £876 billion for the year.
A breakdown of the tax gap by tax-type lists ‘corporation tax’ as accounting for an estimated 40% of the total tax gap, followed by ‘income tax, national insurance contributions and capital gains tax’ representing an estimated 31% of the total tax gap, and VAT representing 19%. Broken down by taxpayer groups, an estimated 60% of the tax gap is attributed to small businesses, whilst the proportions attributable to mid-sized businesses and large businesses are 9% and 12% respectively. ‘Failure to take reasonable care’ remains the main behavioural reason for missing receipts, representing an estimated 31% of the total tax gap.
A Private Intermittent Securities and Capital Exchange System (PISCES) is a new type of stock market that allows private companies to have their shares traded intermittently. Following on from a consultation on draft regulations in March 2025, HM Treasury has formally made the regulations that provide for an exemption from Stamp Duty and Stamp Duty Reserve Tax for transfers of shares in connection with trading activity that takes place on a PISCES. The accompanying explanatory memorandum is here. The regulations come into force on 3 July 2025.
The OECD has released a report titled Tax Administration Digitalisation and Digital Transformation Initiatives. The report uses data from the OECDs ‘Inventory of Tax Technology Initiatives’ to look at the technology tools and digitalisation solutions implemented by 54 members of the OECD Forum on Tax Administration. It is intended to assist tax administrations when considering potential domestic reforms and help identify the most valuable opportunities for future collaboration with other tax administrations. The report’s findings include that more than 70% of tax administrations are using artificial intelligence to enhance the effectiveness and efficiency of the administration and that tax administrations are increasingly receiving data directly from taxpayer business systems and third parties.
HMRC have published Revenue and Customs Brief 3 (2025) on the VAT treatment of income received from charity fundraising events. VAT exemption applies to the supply of goods and services by a charity or qualifying body in connection with an event where the primary purpose of the event is to raise money and the event is promoted as being primarily for the raising of money. In Yorkshire Agricultural Society, the Upper Tribunal found that an event may have more one primary purpose. The brief states that HMRC’s policy remains that the primary purpose of the event must be that of fundraising and that the event must be advertised as a fundraising event. If a charity or qualifying body believes that their event has more than one primary purpose, they must be able to provide evidence and an explanation as to why the purposes cannot be separated in terms of their importance.
HMRC have also published Revenue and Customs Brief 4 (2025) on VAT deduction on the management of pension funds. The brief announces a change in HMRC policy on employers’ ability to deduct VAT incurred on the administration of defined benefit pension funds and on the management of the fund’s assets. The policy change is to eliminate the dual use apportionment of investment costs by employers and trustees; instead “all the associated input tax incurred will be seen as the employer’s and deductible by the employer, subject to normal deduction rules”. The impact of this change is a potential increase to VAT recoverability on both investment and administration costs, and simplified VAT accounting processes. The new policy will apply from 18 June 2025.
The next EMEA Dbriefs tax webcast is on Tuesday 1 July 2025 at 12.00 BST/13.00 CEST. In Update on consultations on transfer pricing, permanent establishments and diverted profits tax, hosted by Alison Lobb, we will discuss HMRC’s technical consultation on changes to transfer pricing, permanent establishments, and diverted profits tax rules. We will also discuss the consultation on further potential transfer pricing changes, including the introduction of additional documentation.
On Monday 23 June 2025 at 12.30 BST/13.30 CEST we will be hosting India-UK Free Trade Agreement - Unlocking new avenues for trade and collaboration. The webcast will discuss the UK-India Free Trade Agreement (FTA) and explore how the agreement can help unlock increased trade collaboration, as the two countries aim to grow bilateral trade to USD 60 billion by 2030.