9 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.
Changes to HMRC interest rates following Bank of England rate change
Yesterday, the Bank of England’s Monetary Policy Committee announced a decrease in the official Bank Rate by 0.25 percentage points from 4.5% to 4.25%. HMRC have issued a press release on the automatic 0.25 point decreases to interest rates for late tax payments and tax repayments as a result. The new rates take effect from 19 May 2025 for quarterly instalment payments of corporation tax, and from 28 May 2025 for most other tax payments. HMRC will shortly update their interest rate tables accordingly.
Consultation on tax treatment of predevelopment costs postponed
On 11 April 2025, HM Treasury announced the postponement of a planned consultation, referred to in the Corporate Tax Roadmap at the Autumn Budget in October 2024, on the tax treatment of predevelopment costs. The consultation was intended to address concerns raised by businesses in response to the Upper Tribunal’s 2023 decision, in HMRC’s favour, in the capital allowances case Gunfleet Sands and others (since renamed Orsted West of Duddon Sands and others). In March, the Court of Appeal largely allowed the taxpayers’ appeal in that case, holding that most of the disputed predevelopment expenditure, incurred on various preliminary studies and surveys conducted before the taxpayers’ infrastructure projects became operational, was qualifying expenditure incurred “on the provision of” plant and machinery for capital allowances purposes (see Deloitte’s Business Tax Briefing for details). HM Treasury has postponed the consultation to give the government and businesses time to consider the implications of the Court of Appeal judgment, and will determine next steps “in due course”. It has subsequently been confirmed that application has been made to the Supreme Court for permission to appeal the judgment. The Supreme Court will decide whether or not to grant permission in due course.
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)
WTGIL Limited: VAT on black box insurance – Court of Appeal
WTGIL Limited (formerly Ingenie Limited) was set up to provide black box insurance to young drivers. It entered into agreements with a panel of insurers, marketed insurance through its own website and through price comparison websites, and engaged Ageas Retail Limited to administer the policies. Policyholders were required to have Ingenie’s telematics devices fitted to their cars, and the information from them would be used to monitor driving behaviour and increase or decrease premiums accordingly. Ingenie made a claim to HMRC to recover VAT incurred on purchasing the devices, which HMRC rejected on the basis that Ingenie was making exempt supplies of insurance intermediation services. The Upper Tribunal had considered that Ingenie was supplying services that were not exempt insurance intermediation services, but as there was no direct link between the services and any consideration provided by the policyholder, there was no taxable supply of services for consideration that entitled Ingenie to recover input tax.
The Court of Appeal has now held that, in providing and fitting the devices, Ingenie was making exempt supplies of insurance intermediation services. The Court referred to “the simple point that telematics car insurance is a form of motor insurance provided in return for an annual premium”, and that Ingenie was acting as an intermediary. This view was supported by the contractual terms and the statutory language of the VAT exemption. Accordingly, Ingenie’s appeal was dismissed, albeit for different reasons than its appeals were dismissed by the Upper Tribunal and the First-tier Tribunal. (Contact: Nicole Faith)
EMEA Dbriefs tax webcasts
We have four Dbriefs tax webcasts over the next month: Cash pooling strategies in a changing UK tax landscape (14 May 2025); Carve outs – tax and legal structuring – key design considerations (21 May 2025); Accessing Horizon Europe funding for UK organisations and institutes (22 May 2025); and Are your reward practices fit for the future? (4 June 2025). Please visit our Dbriefs website for more information, and to view any other recent webcasts on demand.