Autumn Budget 2025 for businesses

The Chancellor confirmed the government’s commitment to the corporate tax roadmap announced in the 2024 Budget to maintain the 100% full expensing first-year allowance for companies incurring capital expenditure on certain qualifying plant and machinery.

However, the following changes to the capital allowances regime was announced:

• A reduction in the writing down allowance for the main pool from 18% to 14% from April 2026. This is the pool that attracts the highest rate of tax writing down allowances and includes remaining allowances available on assets such as machinery, computer equipment, furniture where the original expenditure was not covered by the 100% relief available under full expensing or the annual investment allowance (AIA).

• A new 40% first-year allowance for main pool additions from January 2026. This will mainly benefit UK assets that are leased, which are not covered by 100% allowances under full expensing. Unlike full expensing. this allowance will also be available to unincorporated businesses. This can benefit property investment companies who lease furnished properties and who would otherwise not obtain relief under full expensing for the furniture let within the property.

• There were no changes to the annual investment allowance (AIA) which provides 100% relief for certain qualifying plant and machinery additions up to £1 million. The qualifying conditions for the AIA are less strict than the full expensing conditions, and also apply to unincorporated businesses, and therefore the AIA still has value.

Permanent establishment and Diverted Profits Tax

Changes will be made to the UK’s permanent establishment rules to align with international standards and provide clarity for businesses operating cross-border. These updates are designed to reduce uncertainty and ensure consistency with OECD principles and the global minimum tax framework under Pillar Two.

In addition, the UK’s definition of a permanent establishment will be updated to reflect OECD Model Tax Convention wording, reducing ambiguity for businesses with complex international structures.

HMRC will issue guidance on how permanent establishment profits are treated under the Multinational Top-Up Tax and Domestic Minimum Tax, ensuring businesses avoid double taxation and maintain compliance with global minimum tax rules. These changes will apply to accounting periods beginning on or after 1 January 2026.

Alongside these reforms, the government will abolish the Diverted Profits Tax (DPT) and replace it with a simplified approach integrated into the corporation tax regime. The new rules will focus on unassessed transfer pricing profits, removing the separate DPT charge and aligning profit attribution with OECD standards. This change aims to streamline compliance, reduce complexity, and ensure that UK tax rules remain competitive while effectively countering profit diversion. Transitional guidance will be published to help businesses adapt to the new framework, and will apply from 1 January 2026.

We submitted a response to the government’s consultation about these changes earlier this year.

Corporation tax late filing penalties

The government has announced an increase in corporation tax late filing penalties for returns where the filing date is on or after 1 April 2026.

This marks the first adjustment since 1998 and is designed to reinstate positive compliance behaviour among taxpayers while restoring the penalties to their original real-terms value.

Reforms to Corporate Interest Restriction reporting

Corporate Interest Restriction (CIR) administration has often been seen as an unnecessarily complicated burden to taxpayers. As part of the government’s commitment to simplify compliance and reduce administrative burdens, significant changes have been announced to the CIR reporting framework.

Current rules require groups to appoint a reporting company within 12 months, or risk invalid returns. The Budget removes this deadline and allows retrospective appointments for periods ending on or after 31 March 2024.

From 31 March 2026, the requirement to notify HMRC of the appointment will be replaced with a self-certification process within the CIR return itself. Groups will also need to reconfirm the reporting company for each period, as appointments will no longer roll forward automatically.

However, a new penalty of £1,000 will apply if a group submits a CIR return without having validly appointed a reporting company beforehand. Additional disclosure and electronic filing changes will follow for periods ending on or after 31 December 2026.

An employee ownership trust (EOT) is a trust that allows a company to become owned by its employees, whilst offering capital gains tax (CGT) relief on 100% of the capital gain of the vending shareholders (such that the vendors would pay no CGT if the qualifying conditions were met).

Over recent years disposals to EOTs have become popular and therefore the cost of the relief has significantly exceeded original expectations.

Accordingly, the government has reduced the CGT relief from 100% to 50% of the gain for disposals on or after 26 November 2025. Relief against the capital gain arising is limited, with business asset disposal relief (BADR) and investors’ relief not being available to reduce the gain.

The venture capital schemes, including the venture capital trust (VCT) and the enterprise investment scheme (EIS), offer valuable tax breaks for qualifying investors looking to invest in early-stage, higher-risk UK companies.

The following changes were announced in the Budget from April 2026:

• The company annual investment limit will increase to £10 million (or £20 million for knowledge intensive companies).
• The company’s lifetime investment limits will increase to £24 million (or £40 million for knowledge intensive companies).
• The gross assets test will increase to £30 million immediately before the share issue and £35 million immediately thereafter.
• The rate of VCT income tax relief will fall from 30% to 20%.

Whilst the rate of VCT income tax relief has fallen, often the main benefit for investors of making venture capital scheme investment is often the exemption from capital gains tax on the future sale of the VCT or EIS shares. The announced increase in limits will therefore make this overall package of measures more attractive to potential investors in these early-stage, higher-risk companies.

In addition to the pension salary sacrifice and Enterprise Management Incentive (EMI) share option changes, there were various other employment tax changes and announcements.

Working from home

Introduced back in 2011 the administrative easement allowing employees to claim a flat rate of £6 a week (previously £4 a week) for allowable expenses without the provision of a receipt will be abolished from April 2026. While the existing exemption will still apply for the use of employer provided equipment while working from home, this will be extended from April 2026 to include the reimbursement of such items that are purchased by the employee (such as monitors, headsets and the like).

Eye tests and flu vaccines

The current legislation only allowed for tax relief where these were provided by the employer and so reimbursed costs were considered taxable benefits. The legislation will be extended from April 2026 so that reimbursements are treated in the same way as employer provided benefits.

PAYE and overseas workday relief

Changes will be made from April 2026 to the amount of income subject to PAYE for newly resident employees that would be eligible to claim Overseas Workdays Relief (OWR). It will no longer be possible to exclude more than 30% of their income from PAYE by way of a Section 690 application from this date in such cases.

Company cars

There will be a temporary easement to the increased benefit in kind charges for plug-in hybrid electric vehicles (PHEVs) with a nominal CO2 emission figure to be used instead of the car’s actual CO2 emissions. This measure will apply for the current tax year and up to 5 April 2028, and anyone accessing an eligible PHEV company car on or before 5 April 2028 will remain eligible for the easement until the earlier of variation or renewal of the arrangement or 5 April 2031.

Previously proposed changes to the taxation of cars provided through an ECOS or Employee Car Ownership Scheme from April 2026 have now been delayed until at least April 2030, with transitional rules allowing for existing arrangements to be covered by the current legislation until April 2032, provided the agreements are not varied or renewed prior to that date. These changes are intended to introduce a tax charge on the provision of the car where there are certain restrictions within the scheme as to the employee’s private use, them being the registered keeper of the vehicle and/or there being a set buyback or onward sale arrangement in place.

Umbrella companies

Further details were published in respect of the previously announced April 2026 changes. These changes will result in the responsibility for PAYE and NIC liabilities for employees provided though an umbrella company to fall on the employment agency or end client even where the umbrella company continues to pay the employee. Any company which routinely uses umbrella companies for the provision of staff should contact all stakeholders in respect of their supply chain to discuss the impact of these changes from April 2026.

Mandatory payrolling of benefits

Further guidance was published regarding the previously announced mandatory payrolling of benefits from April 2027, reinforcing the likelihood of this being implemented within the previously announced timescale. It’s also still possible for those employers who wish to adopt payrolling benefits from April 2026 to do so, but they will need to register with HMRC before April 2026.

National Minimum Wage (NMW)

The NMW for all age groups will increase to varying degrees from April 2026. These increases are likely to be seen as a further blow to businesses in sectors such as retail and hospitality.

The enforcement of NMW will also pass to the newly formed Fair Work Agency (FWA) from HMRC. They will also be responsible for the enforcement of other employment rights such as holiday pay and statutory sick pay. It is anticipated that the enforcement work will be undertaken by former HMRC officers transferring to the new agency.

Pensions and salary sacrifice

From April 2029, the government will be restricting the National Insurance benefits of pension salary sacrifice arrangements to a maximum of £2,000 per employee. There are no changes to the tax relief available on these contributions.

The £2,000 cap will generally only have an impact for employees earning over £40,000 a year, as salary sacrifice schemes for employees with a salary below this threshold will remain unchanged if they sacrifice no more than the 5% mandatory employee contribution level under pension auto enrolment.

Additional reporting will be required for all contributions made through salary sacrifice in order to monitor and assess the NIC due on pension sacrifice contributions in excess of £2,000 a year. Further guidance for payroll software developers will be provided in due course.

Employers should start planning for the following:

• Increased Employer NIC costs,
• Increased Apprenticeship Levy costs (if relevant),
• How this change is communicated to the workforce,
• How it will impact different employee populations in the business,
• Whether changes to terms and conditions and associated scheme documentation is required,
• Whether such schemes are closed and move to either a ‘net pay’ scheme or ‘relief at source’ scheme.

We can expect further announcements to take place before the proposed implementation date.

Enterprise Management Incentive (EMI) share option scheme changes

The size limits for eligible companies will increase from April 2026 as follows:

• Gross assets will increase from £30 million to £120 million,
• The number of employees will increase from 250 employees to 500 employees.

For all eligible companies, the size of the overall option pool will increase from £3 million to £6 million, so doubling the number of shares over which EMI options can be granted.

Time limits on the exercise period will also increase from 10 years to 15 years. Existing option agreements can be amended to take this change into account without losing the tax advantages the schemes offer, provided it is in line with the legislation.

Other tax advantaged share awards

The government also provided feedback on its earlier consultation on the future of its non-discretionary tax-advantaged share plans; the Share Incentive Plan (SIP) and Save As You Earn (SAYE) plans. The feedback was generally positive, with a view that they should remain and even be extended. A number of potential simplifications were also recommended. We are likely to see further details from the government soon, as it continues to support employee ownership through tax advantaged schemes.

Exemption for small and medium enterprises (SMEs)

Following a government policy consultation earlier in the year to consider proposals to amend the exemption for small and medium enterprises (SMEs) from UK transfer pricing, the government announced that SMEs will continue to benefit from the existing exemption. This is good news for SMEs, but in our experience many of these enterprises fall within the transfer pricing rules of other countries, and therefore already implement arm’s length transfer pricing.  Additionally, HMRC can give a notice to medium sized enterprises requiring them to calculate their profits and losses at arm’s length, and the SME exemption does not apply to transactions with non-qualifying territories.

International Controlled Transactions Schedule (ICTS)

The consultation response also confirmed that a new International Controlled Transactions Schedule (ICTS) will be introduced for large companies relevant enterprises and transactions within the scope of transfer pricing. This measure will introduce a mandatory annual filing requirement for multinational enterprises (MNEs) to report cross‑border related party transactions in a standardised format as part of their annual tax return. This will be required for accounting periods beginning on or after 1 January 2027. HMRC will issue detailed regulations that will set out the full requirements and final design of the schedule, but we expect that it will increase taxpayer’s compliance costs and their administrative burden, and put more emphasis on businesses to have in place detailed transfer pricing documentation, in line with HMRC’s requirements.

Other technical changes

Draft legislation was published earlier in the year covering various technical changes to the transfer pricing rules including:

• UK-to-UK transfer pricing exemption for certain UK businesses and provisions.
• Financial transactions relating to guarantees.
• Valuation standards applied to intangible fixed assets.
• Strengthening of the participation condition.

Updated legislation will be published shortly, which will deal with some of the issues raised in consultation feedback. However, the government has confirmed that the UK-to-UK exemption will be introduced; this represents the most significant simplification to the UK’s transfer pricing rules since the introduction of UK-to-UK transfer pricing in 2004. We expect that this exemption will reduce taxpayer compliance costs and administrative burden, simplifying UK domestic transfer pricing arrangements.  This legislation will apply for accounting periods beginning on or after 1 January 2026.

VAT on private hire vehicle services

With effect from 2 January 2026, private hire vehicle and taxi services will be excluded from the scope of the Tour Operators’ Margin Scheme (TOMS), except where these services are supplied as part of an overall supply of travel services. TOMS is a special margin scheme for VAT accounting purposes that applies to the travel sector and allows VAT to be accounted for on the margin only (ie the difference between the price charged to the traveller and the cost to the operator). Today’s announcement means that standard rate VAT will be due on the value of the services rather than payable on the profit margin. It remains to be seen whether or not private hire vehicle operators will pass on the full cost of the VAT charge to consumers but, ultimately, we would expect some increase in taxi fares by these operators.

This measure appears to have been introduced following the Upper Tribunal decision earlier this year in the case of Bolt (HMRC v Bolt [2025] UKUT 00100 (TCC)), which considered whether the operator was entitled to use TOMS. HMRC lost the Bolt case, with the court deciding the operator could account for VAT under TOMS.

The effect of this measure is that private hire vehicle operators such as Bolt and Uber, which operate in London, and as principal throughout the rest of the UK, will all be on a level playing field with respect to VAT accounting.

VAT treatment for land intended for social housing

HM Treasury (HMT) will consult on potential VAT changes to expand the zero-rate of VAT, to encourage and accelerate the construction of social housing. Saffery has been involved with housebuilding industry groups and large housebuilders on this matter for a number of years and it’s good to see HMT agreeing to consult further.  As we have previously commented ‘golden brick’ – the point at which the VAT zero-rate is available in respect of the construction of new homes – has an impact on the timing of the transfer of sites to registered providers (RP) of social housing.

There is a tension between some social housing funding schemes, including some of the large schemes operated by Homes England, that require the RP to own the land before funding is released and VAT legislation, that requires housebuilders to have partly constructed each unit before the favourable zero-rate can be available.

If the zero-rate is not available, or funding is not available at the correct time, certain sites are not viable for social housing. This consultation is welcomed and a favourable outcome to the consultation should assist in the government’s ambitious housebuilding targets.

Cross border VAT grouping amendment

HMRC’s ‘Skandia’ policy on VAT accounting for VAT groups in specific circumstances is no longer effective from 26 November 2025.

Previously, multinational businesses with UK VAT groups and overseas establishments were required to consider the overseas VAT grouping rules to work out whether or not reverse charge VAT was due on intra-group services received. This created complexity for partially exempt businesses, in particular those in the financial services and insurance sectors, and in some instances would have created a VAT cost for the UK VAT group.

HMRC now considers that an overseas establishment of a company that is VAT grouped in the UK should be treated as part of that VAT group, even when the overseas establishment is located in an EU Member State that does not operate whole entity VAT grouping rules.

HMRC’s Revenue & Customs Brief 7 (2025), issued on 26 November 2025, indicates that businesses that have over-declared reverse charge VAT under the previous policy may be entitled to reclaim overpaid VAT.

This will be welcome news to multinational businesses that are partially exempt such as those within the betting, financial services and insurance sectors. 

Customs Duty on low value imports

The Customs Duty relief on goods imported into the UK valued at £135 or less will cease, making them subject to Customs Duty. The government will announce new Customs Duty payment and data requirements, which will be introduced from March 2029 at the latest. This will allow sufficient time for a new system to be developed with industry, to handle the significant volume of low value goods imported into the UK.

This announcement closely follows the EU’s recent decision to abolish the exemption for low value imports from non-EU countries starting in 2026. The US had previously removed its low value import duty relief earlier this year.

This change will increase administrative complexity, and potentially costs, for e-commerce platforms and overseas sellers of consumer goods in the UK market. It also levels the playing field for domestic retailers and e-commerce traders, who will be hoping implementation does not take until 2029 to complete.

The measure will also prevent a practice of import value manipulation, as Customs Duty will be levied regardless of consignment value.

VAT relief for businesses donating goods to charities

From 1 April 2026 zero rate VAT will apply to goods donated by businesses to charities for onward distribution or use in the delivery of their services. This VAT relief will make it easier for, and encourage, businesses to donate surplus goods, helping charities to deliver their services and provide essential items to those who need them most. The relief will apply to goods up to a specific value, depending on the type of goods.

Historically, zero rating only applied to charities that sold donated goods and therefore this will come as welcome news for businesses that donate surplus goods, and to the charities receiving them.

E-invoicing

The government has announced that it will require all business to business (B2B) and business to government (B2G) (but not business to customer (B2C)) VAT invoices to be issued electronically from April 2029. This follows a UK consultation earlier this year and a global trend towards the digitisation of invoicing. The government expects to gather requirements from stakeholders, including the software companies that will underpin e-invoicing, from January 2026, ahead of issuing more detailed guidance as part of the 2026 Autumn Budget.

E-invoicing enables automated invoice exchange between businesses and tax authorities regardless of the accounting systems used. The government’s desire to mandate e‑invoicing is in line with its overall strategy to reduce fraud and enhance real‑time visibility of transactions through digitisation.

Successful implementation of e-invoicing can deliver improved efficiencies and reduced errors in an organisation’s business processes. This, in turn, leads to cashflow benefits: more timely invoice payment, VAT compliance and VAT reclaims. The consultation response issued alongside the Autumn Budget highlighted a “reduction in late payments of 20%”; however, from Saffery’s experience of other countries implementing e-invoicing, it requires significant business process and finance transformation, as well as additional IT spend which may have a greater impact on SME and mid-market firms. Therefore, businesses should begin to consider e-invoicing when making strategic investments into their finance and tax processes over the coming four years and utilise the mandate as an opportunity to review and modernise business/invoice processes.

The government’s requirements gathering over the coming 12 months will need to provide clarity on invoice standards, size of organisations required to comply, and the treatment of international and complex invoices. It should also consider possible tax incentives to encourage early adoption (as in Belgium) and minimise the impact on businesses. 

The government is keen to encourage innovation and growth in the UK by increasing funding for those companies undertaking Research and Development (R&D). Support is provided by grants and the continuation of tax reliefs for those corporate entities investing in qualifying R&D.

The R&D tax regime remains unchanged with most companies being able to benefit from a cash tax credit of up to 16.2% under the merged R&D Expenditure Credit (RDEC) regime. For loss making small and medium sized enterprises (SMEs) there is potential to claim under the Enhanced R&D Intensive Support (ERIS) scheme which provides a cash tax credit of up to 27% of qualifying spend.

The Department of Science, Innovation and Technology set out in October 2025 that every £1 of public R&D investment returns £8 of economic benefit, so the Government is keen to make R&D part of its long-term growth strategy.

To facilitate the claiming of R&D tax relief and following a consultation for which responses will be published imminently, the government will pilot a targeted advance assurance service from Spring 2026. To date, the voluntary advance assurance service has been under-utilised.  The proposals set out in the consultation included mandatory advance clearance for certain companies based on various criteria (including size and sector) and voluntary advance clearance remaining available for other companies. The aim is to provide greater certainty of the eligibility of a potential claim which will enable companies to better plan R&D investment. HMRC will also use this to better identify error and fraud.

Other administrative measures will be introduced in Finance Bill 2025-26 including clarification of the corporation tax treatment of intra-group payments made on or after 26 November 2025 in return for surrendered RDEC or Audio-Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC). This provides clarity that such payments are not subject to corporation tax provided they do not exceed the amount of credit surrendered. We do not envisage that this will have an impact on established accounting and tax treatment for these amounts, given that these payments tend to be accounted for as balance sheet entries.

Non-resident capital gains tax (NRCGT): aligning the rules with corporation tax rules

The introduction of the non-resident capital gains tax rules in April 2019 represented a significant change in the taxation of overseas companies investing in UK property.

While the changes are now well embedded and understood by overseas investors, the government has clarified that the sale of a UK property rich company, one that derives more than 75% of its value from UK land, now specifically covers the cells of overseas cell companies.

A cell company is a structure where a single company is set up but sub-divided into cells which act like mini companies. Such structures can be formed in overseas locations such as Jersey and allow assets and liabilities to be ring-fenced so that they are only available to the creditors and shareholders of that cell. From 26 November 2025, each cell within a cell company is treated like a standalone company for NRCGT purposes so that the cell itself is tested for UK property richness when disposed.

These rules apply equally to overseas individuals and companies making disposals of cell companies.

Changes to business rates

Rates are often cited as a significant burden for smaller retail and hospitality businesses. As a move to level the playing field for smaller ‘bricks and mortar’ retailers and to help the hospitality sector, Rachel Reeves announced a number of changes to business rates in the Autumn Budget. These changes shifted the burden of business rates from smaller firms in retail, hospitality and leisure to higher value commercial properties including logistics hubs and large office properties using a banded multiplier system.

Over 750,000 properties in the retail, hospitality and leisure sectors will benefit from reduced business rates using a lower sector specific multiplier for properties worth less than £500,000 from April 2026. The value of the saving is expected to be in the region of £900 million.

On the flip side, the largest and most valuable commercial properties with values over £500,000 will be hit by higher multipliers to increase what they pay.

In addition, to soften the impact of the upcoming 2026 business rates revaluations, the government has provided a £2.6 billion support package to help some of the businesses hit hardest by increases. Specific help is being given to film studios through an extension of the 40% business rates tax relief they receive as part of the government’s ongoing commitment to the film industry.

Landfill Tax consultation

There is some good news for housebuilders who were facing a potentially expensive increase in landfill taxes as the Treasury has reversed plans to have a single rate of Landfill Tax. This follows significant representations from the industry, which thought the changes would represent a barrier to achieving the government’s housebuilding target.

The current two rate system, which differentiates between more and less polluting materials will continue, but some increase in costs is still expected as the standard rate of Landfill Tax is expected to rise in line with inflation, with the lower rate rising by the same absolute amount, effectively beginning to close the gap between the two.

Consultations on international student levies and a potential tourist tax

In the last few years, UK student accommodation has been an increasingly attractive asset class for investors as a result of the increase in student numbers in the UK, particularly overseas students who often prefer to live in purpose-built and professionally run student accommodation.

The government has announced a proposal that from August 2028, universities in England will pay a flat fee of £925 per year for overseas students over a certain level, with the aim of using these funds to help subsidise domestic students. Whilst the proposal may be welcome in some respects, the potential impact on the universities’ ability to attract overseas students may have a wider impact on the purpose-built student accommodation sector.

Tourism is a major industry for the UK. Hotels and holiday parks continue to be a significant asset class for many property investors with significant redevelopment of luxury hotels in many major UK cities in recent years.

A new policy has been announced, similar to that in many European cities, which will allow regional mayors to levy an overnight tourist tax on stays in hotels and other tourist accommodation. Again, the potential benefits in terms of funding for local infrastructure and culture may be welcome, but any potential dampening of demand for tourist accommodation and hotels may be an unforeseen consequence of the move.

The government has announced that it is introducing a full relief from Stamp Duty Reserve Tax (SDRT) for shares in companies that commence listing on a UK stock exchange. This relief applies to shares that are listed on or after 27 November 2025.

SDRT is currently charged at two rates:

• Standard rate of 0.5% – which applies to agreements to transfer chargeable securities, eg shares, or
• Higher rate of 1.5% – which applies to chargeable securities transferred into a depository receipt system or clearance service.

This new ‘listing relief’ will provide an exemption from the 0.5% rate of SDRT on agreements to transfer shares in companies that are newly listed on a UK regulated market, such as the London Stock Exchange or the Alternative Investment Market.

The relief is permitted for a three-year period from the date the shares are listed on the relevant market and will cover all types of securities, not just shares, during that period.

Promoters of marketed tax avoidance schemes

The Autumn Budget 2025 introduces tougher measures to tackle promoters of marketed tax avoidance schemes.

The Disclosure of Tax Avoidance Schemes (DOTAS) and Disclosure of Tax Avoidance Schemes for VAT and Other Indirect Taxes (DASVOIT) civil penalty regimes will be updated so HMRC can issue penalties directly, without tribunal approval, speeding up enforcement. New universal stop regulations will ban schemes with no realistic prospect of success. Additional tools such as promoter action notices will target suppliers of goods or services used in promoting avoidance, including banks, insurers and social media companies. Anti-avoidance information notices will enable HMRC to obtain information from those suspected of being connected to the promotion of a marketed tax avoidance scheme. The government will also publish a consultation on further measures in early 2026.

Further HMRC digitisation, including return submission ‘prompts’

The government has announced a number of initiatives which demonstrate HMRC’s transformation into a data-driven organisation, and its desire for organisations to interact with HMRC in a digital, data-led way, to close the tax gap.

First, HMRC will consult to ‘modernise and standardise’ the corporate tax submission. This follows a consultation earlier in the year and HMRC’s tax gap statistics released in June, which identified corporation tax as the tax type with the largest tax gap. The likely direction of travel is increased detail sharing and tagging. Poland recently implemented a standard audit file for tax (SAF-t) for corporate income tax returns, which could be a basis for future UK changes.

Further to this, HMRC also announced a £59 million investment in a new technology to ‘prompt’ taxpayers when submitting tax returns. Real-time digital prompts will begin in April 2027 for VAT and April 2028 for corporation tax. While detail on what this means in practice remains light, it is likely this aligns to its long term strategy of pre-filled tax returns and will involve data validation and estimation based on other HMRC-held data and modelling. These suggest HMRC is looking to implement automatic enquiries and/or requests for further information to validate variances. In addition, the government is clearly advocating the use of tax filing technology by suggesting the prompts will be provided through the software.

HMRC also announced several changes strengthening its powers to improve taxpayer filing and payment behaviour. These include increases to penalties for VAT, corporation tax and income tax self-assessment (ITSA) compliance failures, its powers to ensure taxpayer errors are corrected, as well as encouraging VAT and PAYE to be paid by direct debit.

Finally, the government announced a large increase in spending on third-party data by HMRC. The OBR financing report estimated a spend of £442 million by 2030-31, which will include purchasing interest income and card sales data.

While the primary focus is on preventing fraud, the initiative is in line with HMRC’s digital transformation journey to increase its understanding of taxpayers. Therefore, these additional data sets will add to HMRC’s database of 55 billion datapoints, and in relation to the card payment data, enable HMRC to estimate sales revenue and other business financials to reconcile with other submissions.

Combined with the news that e-invoicing will come into force in 2029, it is clear that HMRC’s understanding of businesses will soon increase drastically. Therefore, businesses should consider reviewing their tax compliance requirements and processes to ensure they can meet and leverage upcoming digital changes for positive business transformation, and are not unknowingly sharing inconsistent public information and returns with the tax authorities.

Advance Tax Certainty Service for major investment projects

A new Advance Tax Certainty Service will be introduced to provide binding tax clarity for the UK’s largest and most strategically significant investment projects.

This initiative aims to reduce uncertainty for businesses investing at least £1 billion in the UK by offering a statutory clearance process on key tax treatments before projects commence. The service will consider issues and queries relating to corporation tax, VAT, stamp taxes, PAYE and the Construction Industry Scheme.

The service is scheduled to launch in July 2026, with technical guidance to be released shortly.

Share exchanges and company reorganisations – anti-avoidance rules

The government has announced it will amend the anti-avoidance rules that can counter the no disposal treatment applying to share exchanges and company reorganisations.

These amendments will ensure that cases where a shareholder enters into a share exchange or company reorganisation, and one of the main purposes of this is to secure the shareholder a tax advantage, will now be caught by the anti-avoidance rules.

It has been stated that this change will have immediate effect and we await further guidance as to how these changes will operate.

Going forward, it will become more important that advance clearance applications are sought from HMRC in advance of share exchanges and company reorganisations, with these clearance applications clearly set out the commercial rationale behind the proposed transactions to demonstrate that these anti-avoidance rules would not apply.

It has been announced that transitional rules for advance clearance applications received by HMRC before the Budget date will be introduced.

Construction Industry Scheme

The government has announced that from April 2026, HMRC will be given greater powers to tackle perceived fraud in the construction sector, but no further detail on this has been provided. There will also be a technical consultation on how the scheme can be simplified, and administration improved going forward.