Budget 2025: HMRC powers

Domestic reporting of UK resident cryptoasset users under the Cryptoasset Reporting Framework

The UK is implementing CARF, the Cryptoasset Reporting Framework developed by the OECD. This will require so-called Reporting Cryptoasset service providers (RCASPs) to collect relevant tax information and undertake due diligence in respect of their users on an annual basis. The measure means that HMRC will have CARF data on all UK taxpayers using UK based RCASP, together with information from non-UK RCASP. Under existing measures, HMRC would not have had this information, as the common reporting standard (CRS) which allows tax authorities to exchange information with one another does not cover cryptoassets. The measure will be effective from Royal Assent of the Finance Bill.

Umbrella company market: Changes to Income Tax rules to tackle non-compliance

Umbrella companies sit between the worker and an agency that then onward supplies that worker to the end user. A very typical example is a nurse, that may contract with an umbrella company that in turn contracts with an agency that works with a specific NHS Trust. The structure is seen to provide a level of flexibility for both the end user ( the NHS) and the worker, as they only need a contract with one entity, who then offers their services via the agencies that interact with the local NHS Trusts.

The current law broadly works by saying that if the worker would be treated for tax purposes as an employee, the umbrella company must tax them as such when it pays them. This is called off-payroll working (some will know it by IR35 which applies to personal service companies).

The problem is that there are a number of cases,  including a very high-profile case that is rumbling through the courts, whereby it is alleged that the umbrella company is not fulfilling its duties and withholding PAYE as it should.

The government is therefore legislating to make agents – who they believe have the control over the supply chain – and the end user, jointly and severally liable to the PAYE that should be accounted for where there is an umbrella company in the supply chain. In essence, they are moving the burden to the agency (or the end user if they have the direct relationship with the worker).

Closing in on promoters of marketed tax avoidance schemes

The government is introducing a suite of measures to continue to tackle avoidance schemes:

• DOTAS – the penalty regime will be updated so that HMRC can directly issue penalties to taxpayers instead of seeking tribunal approval

• DASVOIT – the penalty regime will be updated so that HMRC can directly issue penalties to promoters instead of seeking tribunal approval

• USRs (universal stop regulations) – Regulations will be introduced enabling HMRC to issue stop notices to those promoting arrangements that have no realistic prospect of success. Failure to comply will attract sanctions including publications, financial penalties and criminal prosecutions

• PANs (promoter action notices) – These will be issued to business that provide goods or services used in the promotion of tax avoidance schemes requiring them to stop doing so. Again, the same range of sanctions as for USRs will apply

• AAINs (anti-avoidance information notices) – Granting HMRC the power to issue notice to compel those that HMRC reasonably believe are connected to the promotion of marketed tax avoidance schemes requesting relevant information. This will include the ability for HMRC to issue such a notice to financial institutions (having received approval from the tribunal) to obtain banking data of promoters or those connected with promoters. The same sanctions will apply for non-compliance

• Legal professionals facilitating avoidance – this measure widens the scope of HMRC powers allowing them to publish those involved under certain circumstances

Tackling tax adviser facilitated non-compliance by enhancing HMRC’s powers

Further measures are being introduced to target and tackle tax advisors that deliberately facilitate non-compliance of their clients’ tax affairs.

The changes build on legislation introduced in 2012 as a result of consultation. The measures include:

• Allowing HMRC to obtain information from tax advisors using a file access notice where there is reasonable suspicion that they have deliberately facilitated non-compliance in their clients’ tax affairs

• Removing the requirement for tribunal approval before issuing a file access notice, replacing it with a senior HMRC officer approval mechanism, where a file access notice is approved by HMRC it will be appealable to the tribunal

• Revising the penalties for failure to comply with a file access notice to include where inaccurate information is provided, and allowing HMRC to increase the penalty amounts with tribunal approval

• Introducing a new penalty framework to sanction tax advisers who are found to have deliberately facilitated non-compliance in their clients’ tax affairs

• Introducing new powers to publish information about tax advisers where HMRC has used relevant sanctions

Tackling Construction Industry Scheme fraud

Measures will be introduced to:

1. Provide for the immediate cancellation of Gross Payment Status (GPS)
2. Make the business who entered into the transaction connected to fraud liable for the lost tax
3. Allow a penalty of 30% of the lost tax to be charged to the business found liable, as well as to its directors and other persons connected to the business

The time limit for reapplication where GPS has been immediately removed is also increased from one year to five years.

Loan charge independent review

HMRC will establish a new loan charge settlement scheme, which is aimed at giving those using historic disguised remuneration schemes a chance to bring their tax affairs up to date with more favourable terms. This measure will take retrospective effect from 5th April 2019.