Last week, the Economic and Social Research Institute (ESRI) published its Quarterly Economic Commentary. In the press release which accompanied the publication, the ESRI noted that the Irish economy is in a strong position. Unemployment is currently 3.9 percent while income growth is expected to exceed 3.5 percent this year. The international climate is creating uncertainty however, and the impact of the any ensuing trade wars will have adverse implications for the domestic economy. The overall impact will be compounded if the US specifically targets pharmaceutical products

The new agent e-linking application went live last week, providing an online approval system for linking agents and customers. A summary of the new process and the steps involved in accepting an agent link request through myAccount and ROS are outlined in a dedicated Revenue webpage. Our news item from 3 March 2025 includes further information on the new process.  

Last Friday, the Department of Finance hosted the most recent meeting of the Business Tax Stakeholder Forum. The Institute attended the meeting under the auspices of the CCAB-I. The forum is an opportunity for key business tax stakeholders to engage with department officials of business tax matters. Among the items discussed were tax simplification, both domestic and EU, an update on the Funds Sector 2030 project, and EU and international tax developments. In recent times, the forum has provided a key opportunity for the Institute to engage with the Department of Finance and share our views on tax policy. Before Christmas, we provided feedback on areas of focus for tax simplification. You can read that submission here.

The Chancellor of the Exchequer Rachel Reeves delivered the Spring Statement last week on Wednesday 26 March. As expected, this was mainly an economic update coupled with further spending and welfare cuts. No tax rises were announced this time around with many commentators saying the Chancellor has ‘kicked the proverbial can down the road’ and that this will not be the case in the Autumn Budget later this year. The measures were focused on driving economic growth, building an NHS fit for the future, and keeping the country safe. However, what is clear is that UK businesses are entering a time of economic slowdown with tax increases looming next month (the key tax changes taking effect from April 2025 will feature in next week’s update). The Chancellor also claimed in her speech that households in the UK will be “over £500 a year better off” even after inflation. For millions still feeling the pinch, it was a surreal moment as fiscal drag is expected to create over 1 million more higher rate taxpayers in 2025/26 due to frozen personal tax thresholds. HMRC has sent several emails summarising the key announcements which you can read here and here, and the Institute for Fiscal Studies has published its reaction to the Spring Statement here.  The Chancellor has left little room for manoeuvre because of her own fiscal rules but has committed an additional £2 billion for social and affordable housing for 2026/27. More broadly, the Office for Budget Responsibility has improved its forecasts for economic growth in 2026 and beyond but halved its growth forecast to 1 percent in 2025. With geopolitical uncertainty continuing, the impact of global trade policies on the UK economy remains to be seen and the wider impact on the UK economy will need to be carefully monitored.   On the tax front, a further package of measures to close the tax gap featured which aim to raise over £1 billion in additional gross tax revenue per year by 2029/30. As part of this, it was announced that Making Tax Digital for income tax is being extended to the £20,000 to £30,000 cohort from April 2028. Late payment penalties for certain taxes will increase from April 2025 and four consultations were launched in this space. A range of additional measured also featured in the Spring Statement publications. 

Building on the package of tax gap measures which were announced at the Autumn Budget, a further series of announcements were made which included the extension of Making Tax Digital for income tax to even smaller businesses which we report on in more detail in a separate news item. Debt management and compliance investment  According to the government, at the end of 2024, the stock of tax debt (unpaid tax liabilities owed to HMRC) was over £44 billion, more than double the level five years ago. In order to reduce this, the government is further investing in HMRC’s debt management capacity which will include ‘an innovative test and learn pilot to collect more aged debts whilst also moving towards more automated debt recovery.  The government is also investing £87 million over the next five years in HMRC’s existing partnerships with private sector debt collection agencies to collect more unpaid tax debts. An additional £114 million will be invested over the next five years to recruit an additional 600 HMRC debt management staff; 500 more HMRC compliance staff will also be recruited via a £100 million investment.  Late payment penalties  Late payment penalties for VAT and income tax self-assessment taxpayers (as they join MTD) will increase from April 2025 onwards. The new rates will be 3 percent of the tax outstanding where tax is overdue by 15 days, plus an additional 3 percent where the tax is overdue by 30 days, plus an additional 10 percent per annum when overdue by 31 days or more. Consultations  The government also published four new consultations to support HMRC’s efforts in closing the tax gap: How HMRC can make better use of third party data to increase automation and close the tax gap – closes 21 May 2025 Proposals to strengthen HMRC’s ability to take action against those tax advisers who facilitate noncompliance from their clients – closes 7 May 2025 Closing in on promoters of marketed tax avoidance, whose contrived schemes leave their clients with unexpected tax bills – closes 18 June 2025, and Options to simplify and strengthen HMRC’s inaccuracy and failure to notify penalties – closes 18 June 2025. Counter-fraud capability and investigations  Additional criminal investigations will focus on delivering a strong deterrent. This will include tackling those who undermine legitimate trade and small business, fraud committed by the wealthy, fraud facilitated by those in large corporations, and by individuals and companies who make it possible for others to hide money offshore. Investigations will also address organised criminal attacks, focusing on illicit finance and complex money laundering schemes.   As part of the overall investment in HMRC resourcing, HMRC is overhauling its approach to offshore tax noncompliance by the wealthy, recruiting experts in private sector wealth management and deploying AI and advanced analytics to help identify and challenge those who try to hide their wealth, wherever they try to hide it.   During the next five years, the government will increase HMRC’s resources assigned to tackling wealthy offshore noncompliance by around 400 people, who are estimated to bring in over £500 million over the forecast period.   New informant reward scheme  A new HMRC reward scheme for informants will be launched later this year, with the aim of targeting serious noncompliance in large corporates, wealthy individuals, offshore and avoidance schemes. The new scheme will take inspiration from the successful US and Canadian models, rewarding informants with compensation linked to a percentage of any tax taken as a result of their actions.  Phoenixism  To tackle ‘phoenixism’, HMRC, Companies House, and the Insolvency Service will deliver a joint plan to tackle those using contrived insolvencies to evade tax and write off debts owed to others. This includes increasing the use of upfront payment demands, making more directors personally liable for company taxes, and increasing the number of enforcement sanctions to double the amount of tax protected to £250 million by 2026/27.   Change at HMRC  The government will also accelerate change at HMRC, including through introducing voice biometrics, using AI in taxpayer services and compliance, and running a customs digitalisation pilot sharing trusted trader credentials with US Customs and Border Protection.   Tax simplification  Further measures will be announced later in the spring to simplify the tax and customs systems, and in the summer, HMRC will publish a transformation roadmap. These measures will aim to collectively reduce administrative burdens so businesses and individual taxpayers spend less time on tax and customs administration.   Direct recovery of tax debts   HMRC will re-start ‘direct recovery’ of tax debts owed by individuals and companies who have the ability to pay but choose not to do so. The government will also explore options to automate the process for collecting lower value tax debts.   

Revenue has published a new manual RZLT Return which provides information for taxpayers and agents on the process for submitting a Residential Zoned Land Tax (RZLT) return. The manual outlines the process for submitting and amending an RZLT return, and the steps involved in making and viewing a payment of RZLT. An RZLT return must be submitted for each relevant site registered for RZLT and returns may be submitted from 24 March 2025. The first annual return must be filed and any tax due paid on or before 23 May 2025.

Making Tax Digital (MTD) for income tax is being extended to sole trades and landlords with qualifying income of more than £20,000 from April 2028. The Government also announced further changes to MTD as set out in the technical note “Modernising the tax system through Making Tax Digital”, details of which are provided below. The Institute has been engaging extensively with HMRC, together with the other professional bodies, to raise the impact of this major change to income tax reporting on individuals and their agents and the challenges that this will present.  There is now just over a year to the first tranche of mandation of MTD for income tax which will commence from April 2026 for those with gross income of over £50,000 and from April 2027 for those with gross income over £30,000. Even more worryingly, the government has also said that it will continue to explore ‘how it can best bring the benefits of digitalisation to more of the around four million taxpayers who have income below the £20,000 threshold’.  We will be discussing the MTD for income tax Spring Statement measures and announcements with HMRC via various stakeholder forum meetings in the coming weeks and months. Despite our reservations about MTD, the Institute will continue to work with HMRC on MTD readiness and is developing a cross-department MTD strategy to assist members in their preparations. We will also continue to represent members views as we approach April 2026 and will be conducting a short survey on MTD for income tax in next week’s Tax News.  End-of-year tax reporting for MTD   Some users of MTD for income tax will have other sources of income that need to be reported in Self-Assessment (SA). These additional income sources must be reported at the end of the tax year, alongside any necessary adjustments to their business income and expenses.   Previously, users would have been able to use HMRC’s online filing service to submit their final tax return. HMRC has now announced that its online filing service will not be available to do so and that MTD taxpayers must file their tax return through their MTD software. The government will adopt this change and introduce legislation ahead of April 2026.   One or more MTD-compatible software products will therefore be needed to meet SA filing obligations which makes the choice of software used by the agent/taxpayer of extreme importance.   Exempting/deferring certain groups from MTD  The government believes that some taxpayer groups will face disproportionate barriers to operating MTD and should be exempt. The following groups will therefore not be required to use MTD for income tax, (subject to notifying and satisfying HMRC that they are exempt):   taxpayers who have a power of attorney, ·non-UK tax resident foreign entertainers/sportspeople who have no other income sources that count as qualifying income for MTD, and taxpayers for whom HMRC cannot provide a digital service. The following groups will also not be required to join MTD for income tax over the course of this Parliament:   ministers of religion, Lloyd’s Underwriters, recipients of the married couples’ allowance, and recipients of the blind persons’ allowance. Additionally, individuals will not be required to use MTD until April 2027 if they have information that they would need to submit using the SA109 schedule. HMRC will work with stakeholders to finalise the design of a one-year deferral for these groups to allow time to incorporate into MTD the government’s changes to the taxation of non-UK domiciled individuals.   Legislation will therefore be introduced to defer/exempt these groups and the criteria for deferrals/exemptions will be set out in guidance once the legislation is finalised.   Finalising the policy framework for MTD and penalty reform  The government has announced several further changes to the design of MTD and penalty reform. These include:  changes to enable taxpayers with an accounting date of 31 March to start their MTD obligations on 1 April in the first year of operating MTD which will avoid the need for burdensome manual adjustments at the end of the tax year, and a power for HMRC to cancel/reset late submission penalty points and to cancel associated financial penalties; this enables HMRC to cancel penalty points, for instance, in periods prior to insolvency, so that penalty reform reflects HMRC’s general approach to insolvent taxpayers. HMRC will continue to engage stakeholders on these changes before legislation is introduced ahead of April 2026. 

Within the Spring Statement Green Book were a range of miscellaneous measures worthy of mention including news of a new online service for reporting and paying the high income child benefit charge, the launch of a consultation on advance tax certainty for major projects and a consultation on research and development (R&D) advance clearances.   High income child benefit charge (HICBC)   From summer 2025, employees liable to the HICBC will be able to report their family’s child benefit payments to HMRC via a new digital service and they will also be able to opt to pay the HICBC directly through PAYE, without the need to register for self-assessment (SA) and file SA returns.  Advance tax certainty for major projects consultation   At Autumn Budget 2024, the government announced in its Corporate Tax Roadmap that it would be consulting on a new process to provide increased tax certainty in advance for major projects. A consultation has therefore now been launched seeking views on taxpayers’ priorities which also sets out thinking on how a new process could work to support investment decisions. Responses should be sent to advancetaxcertainty@hmtreasury.gov.uk or advancetaxcertainty@hmrc.gov.uk by 17 June 2025.  As part of this, businesses will also be able to obtain certainty on the transfer pricing treatment of cost contribution arrangements through the UK’s existing advance pricing agreement programme.  R&D reliefs advance clearances consultation   The government has also published a consultation on widening the use of advance clearances in R&D tax credits. The aim of the consultation is to explore options to reduce error and fraud, provide certainty to businesses and improve the taxpayer experience. Views are sought on whether a system of advanced clearances would deliver these aims and the best way to design and operate such a system. This consultation closes on 26 May 2025 with responses to be sent to randd.advance.clearances.consultation@hmrc.gov.uk.   

The European Commission has welcomed the European Court of Auditors' special report on VAT fraud on imports. The report emphasises the importance of addressing VAT fraud, with particular regard to simplifying import customs procedures. The Commission aims to better protect the EU's financial interests and ensure a fair and competitive business environment by strengthening the EU's tax legislative framework and improve cooperation between tax and customs authorities with measures such as VAT in the Digital Age (ViDA) and the Import One Stop Shop (IOSS).

The FISC subcommittee will host a public hearing on Thursday 24 April 2025 to discuss the role of tax in aligning the green transition and competitiveness.

As we reported earlier in the month, from 31 March 2025, HMRC launched its new email enquiry service for agents to help escalate and resolve individual (and not employer) PAYE and self-assessment queries which are over four weeks old. More details of how the new service should work are set out in an email to agents. For several years, the Institute has been advocating for HMRC to establish an email enquiry service for agents including in last year’s Pre-Budget submission and in a letter at the end of 2024 to HMRC on services. The Institute participates in the new HMRC Stakeholder Forum, the Customer Services for Tax Agents and Representative Bodies Working Group, which aims to assess current agent services and to develop improved services for agents contacting HMRC with client queries. This new email enquiry service is an output from that forum which will continue its work including reviewing the workings of the new service.   

Last week, the United Nations Committee of Experts on International Cooperation in Tax Matters met to further progress the implementation of its 2021-2025 work plan. The Committee, comprising 25 members representing diverse tax systems and geographical regions, considered emerging tax risks in areas such as the digitalised economy and crypto assets and also discussed tax treaty negotiation and increasing tax transparency.