28 March 2025
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 on the Statement and the Office for Budget Responsibility’s economic forecast 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 tax 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, consultation 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.
Interest rates on late paid tax to increase from next week
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 have now been made. HMRC have issued a press release on the changes and have updated their tables of interest rates accordingly.
Building Safety Levy in England to come into effect from 1 October 2026
On 24 March 2025, the Department for Levelling Up, Housing & Communities (DLUHC) confirmed that the new Building Safety Levy, which will, with certain exemptions, apply to developers of new residential buildings in England requiring a building control application, will come into effect on 1 October 2026. This is a delay from the government’s previously intended start date of autumn 2025. DLUHC has also published a response to its 2024 technical consultation on the levy, confirming the levy’s final design and initial rates. The levy charge, which will be collected by local authorities, will depend on the floorspace of the development and whether the land was previously developed. Primary legislation for the levy was included in the Building Safety Act 2022, and levy regulations will be laid before Parliament later this year.
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. Following ratification, individual articles will then take effect in the UK and Peru in accordance with the timings set out in Article 29.
Innovative Bites Ltd: Are Mega Marshmallows confectionery for VAT purposes?
The Court of Appeal has been asked to rule on whether a food product is ‘confectionery’ and therefore excluded from zero-rating for VAT purposes. Innovative Bites Limited contended that its product, ‘Mega Marshmallows’, were intended to be roasted over a campfire or barbeque or used as an ingredient in a s’more, and that they were not usually consumed as a snack without roasting. HMRC were of the view that the marshmallows were confectionery and standard rated for VAT purposes.
At the First-tier Tribunal and Upper Tribunal, Innovative Bites were successful: considering the viewpoint of a typical customer and giving the term ‘confectionery’ its ordinary meaning, they were not confectionery and were therefore zero rated. The Upper Tribunal disagreed with HMRC’s assertion that Note 5 of Group 1, Schedule 8, Value Added Tax Act 1994 (which provides that ‘confectionery’ includes certain products), is a “deeming provision”, which would mean that if a product fell within Note 5, there can be no further findings of fact, and it is confectionery for the purposes of Item 2. Rather, the Upper Tribunal held that Note 5 is “akin to a rebuttable presumption” and an inclusive definition to clarify potential doubt, and a multi-factorial assessment may therefore still be necessary. However, in its judgment, the Court of Appeal has allowed HMRC’s appeal and remitted the case back to the First-tier Tribunal for further fact finding.
In the Court’s view what Parliament has said about the significance of Note 5 was unambiguous: Note 5 is conclusive, and absent absurdity, products of the types described in Note 5, including “sweetened prepared food which is normally eaten with the fingers”, are confectionery for the purposes of Item 2. In remitting the matter back to a differently constituted First-tier Tribunal, the burden will lie with the taxpayer to prove that the product is not normally eaten with the fingers (a question of fact on which the Tribunal had not made a finding), or indeed, not confectionery as understood by an ordinary person. (Contact: Andrew Roberts)
EMEA Dbriefs webcasts
The next EMEA Dbriefs tax webcast on Wednesday 2 April 2025 at 12.00 BST/13.00 CEST is Tariffs: what are the tax implications for your supply chain?. Hosted by Clive Tietjen, our presenters will discuss recent developments in the global tariff landscape, and how organisations’ tax teams can plan for and manage the wider implications from an organisational, tax and supply chain perspective.