Tax advisers and scheme promoters face a crackdown, as the government looks to target those pushing tax avoidance.
Delivering the Spring Statement, Chancellor of the Exchequer Rachel Reeves cut public spending, boosted capital expenditure, and pledged to close the tax gap – but acknowledged the Office for Budget Responsibility (OBR) halving of 2025 growth projections to just 1%.
The chancellor confirmed a tougher economic outlook and announced new measures to grow the economy, including an additional £2.2 billion for defence, as well as further cuts to welfare benefits and civil service staff. She said her decisions would deliver “security for our country and security for working people” and that falling interest rates would give the economy “the stable platform it needs to grow.” However, the OBR’s updated forecast has downgraded the UK’s growth from 2% to 1%.
Responding to her speech the Conservative Shadow Chancellor Mel Stride said Reeves “has made all the wrong choices” in seeing business confidence being “smashed in a million pieces,” adding that today’s numbers confirmed “we are poorer, and we are weaker”.
Closing the tax gap
Reeves promised to support HMRC to crack down on tax avoidance and charge 20% more tax fraudsters every year.
To that end, HMRC published four consultations focused on closing the tax gap.
One of these invites comments on enhancing HMRC’s powers to act against professional tax advisers who facilitate non-compliance in their client’s tax affairs. It seeks early responses as it considers policy on potential measures like stronger penalties and information powers against advisers, and publishing details of advisers subject to HMRC sanctions.
HMRC is also consulting on new measures to tackle promoters of tax avoidance. The proposals include exploring options for tackling legal professionals who design or contribute to the promotion of avoidance schemes, expanding the Disclosure of Tax Avoidance Schemes (DOTAS) regime, and introducing a Universal Stop Notice and Promoter Action Notice.
Alongside the Spring Statement, the Government also confirmed that HMRC will require a new tranche of taxpayers to complete their self-assessment returns using third party Making Tax Digital (MTD) software – not through HMRC’s online filing service.
Those joining MTD from next month will be subject to increased late payment penalties for VAT (from April 2025) and income tax Self-Assessment (from April 2026). MTD income tax Self-Assessment for sole traders and landlords with incomes over £20,000 will also be rolled-out from April 2028.
Other statement measures aimed at ensuring that owed taxes are paid include re-commencing “direct recovery” of tax debts owed by individuals and companies choosing not to pay, and exploring options for automating collection of lower value tax debts. There is also more money for recruiting more HMRC debt management and compliance staff, and for HMRC partnerships with private debt collectors to recoup more unpaid tax debts.
Unlocking investment and growth
The Government will spend £13bn more in capital investment, including in infrastructure, housebuilding and particularly in defence.
Reeves said in her speech the country’s “broken” defence procurement system would be streamlined to give small businesses “better access to Ministry of Defence contracts”.
The Government will publish an interim report this summer on its proposed reforms to business rates, ahead of further policy detail in the autumn Budget.
Next month they will also host a series of roundtables with entrepreneurs and venture capital firms on the role of tax reliefs like the Enterprise Management Incentives, and Enterprise Investment Schemes in promoting a dynamic business environment.
Commenting on the statement’s impact on already struggling small businesses, Roan Lavery of FreeAgent said today was “a big opportunity missed” to provide “much-needed support, clarity and reassurance” for the SME sector on tax reliefs, and on business support issues like late payment and tax simplification.
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