Finance Bill 2024-25

The government has tabled a number of amendments to the Finance Bill. These include an amendment to the tax rules relating to employee ownership trusts (EOT) following a briefing prepared by ICAEW’s Tax Faculty. The briefing note submitted at the end of 2024 warned the government that without amendment the proposed changes may give rise to undue costs to EOTs and disincentivise EOTs pursuing productive economic activities. The government thanked ICAEW for the briefing and tabled an amendment that broadens the scope of ‘distributions relief’ for EOTs. Read more in our TAXwire article. 

Meetings with HMRC

During the month we attended a number of meetings with HMRC, some in conjunction with other representative bodies. These included:

• A special meeting between the Tax Faculty and HMRC staff to discuss the tax gap and how the professional bodies might be able to assist in reducing it further. We discussed a number of suggestions and also that better data is needed on where the errors might be arising. The Tax Faculty has published an article explaining what the tax gap is and what causes it.
• A regular catch-up between Tax Faculty staff and HMRC’s Making Tax Digital (MTD) team.
• A regular catch-up with HMRC’s Intermediaries team.
• Pan-professional body meetings with HMRC’s MTD policy teams.
• A meeting of HMRC’s Tax Administration Framework Review Forum, where the summary of the responses to the enquiry and assessment powers, penalties and safeguards consultation and new ways to tackle non-compliance were considered.

Tackling tax crime – the Tax Crime Alliance

Staff from the Tax Faculty and other ICAEW colleagues attended a meeting of the reconvened steering group of the Tax Crime Alliance, a consortium of HMRC, HM Treasury and various professional bodies and firms with the aim of seeking to reduce tax evasion. Three workstreams are currently being planned, as follows:

• COP9 This sub-group will focus on the use of the Contractual Disclosure Facility, which should provide individuals with the opportunity to put right their tax affairs without the need for criminal investigation. ICAEW’s work in this area will be channelled through our Compliance and Investigations Committee.
• Corporates Corporate responsibility in respect of fraud is high on the government agenda with the Economic Crime and Corporate Transparency Act alongside the Corporate Criminal Offence for failure to prevent tax evasion. ICAEW involvement in this strand of work will be through ICAEW’s economic crime team with support from the Tax Faculty.
• The role of agents/enablers in facilitating tax crime This strand of work is likely to reach into several existing and forthcoming developments including anti-money laundering, agent registration, raising standards, regulation of the tax profession and the upcoming consultation on tougher measures against agents who facilitate non-compliance. As this workstream covers a number of areas, a cross-ICAEW team will monitor and input into developments. 

Making Tax Digital

The Tax Faculty, in conjunction with other professional bodies, continues to engage closely with the MTD team in advance of the start of the public beta in April 2025 and the start of MTD proper in April 2026. In the run up to MTD go live, members are reporting increases in software costs, which continue to undermine the business case for the adoption of MTD.

Representational and policy work

Informal written representations made to HMRC include around longstanding challenges faced by employers and agents when applying for unique taxpayer references for incoming expatriate employees who lack an existing HMRC ID number.

The Tax Faculty, working in conjunction with colleagues from the Chartered Institute of Taxation, continues to engage with HMRC to try and improve ways of working in the research and development (R&D) advice sector, both to improve standards and ensure that bona fide claims are not delayed unduly. This is a topic discussed in the latest episode of The Tax Track podcast (see below).

The Tax Faculty finalised several responses in the month, which are listed below. The faculty is also working, along with colleagues from ICAEW’s Corporate Finance Faculty, on ICAEW’s draft response to the taxation of carried interest – outcome of call for evidence. 

Professional conduct and the PCRT

As reported in previous months, the pan professional bodies that form the PCRT group are considering how the upcoming changes to the International Ethical Standards Board for Accountants (IESBA) code in relation to tax planning and related services might be reconciled with the existing PCRT. We are currently considering further feedback from our discussions with IESBA and other bodies and will be circulating for comment a further draft in February. 

In addition, and as reported last month, the PCRT bodies have established working groups to consider the impact of AI and how the MTD changes – in particular the need to maintain digital records and submit quarterly reports – will impact on members’ professional responsibilities under the PCRT. A first meeting of the AI group was held, chaired by Sophie Wales, ICAEW’s Director of Regulatory Policy, where it was agreed that some topical guidance (similar to that already published in respect of R&D) should be prepared. Similarly in relation to MTD, a meeting of a working group was held that was chaired by the Tax Faculty’s Senior Technical Manager Lindsey Wicks. At that meeting it was also agreed that some topical guidance should be prepared for tabling at a further meeting of the working party in March 2025, with proposed publication of the guidance later in 2025. 

The Tax Faculty has also been in discussions with HMRC, member firms and other professional bodies about continued concerns about conflicts of interest and confidentiality in the wake of international developments in this area. The topic is proving more problematic to resolve than expected and there will be further discussions to try and reach a mutually satisfactory arrangement that ensures that firms and professional bodies can continue to engage in the early stages of consultations with HMRC. 

Representations and TAXguides

The Tax Faculty has published the following representations:

• ICAEW REP 002/25 The Tax Administration Framework Review – New Ways to Tackle Noncompliance
• ICAEW REP 005/25 Inheritance Tax on Pensions – Liability, Reporting and Payment
• ICAEW REP 006/25 Simplifying the Taxation of Offshore Interest
• ICAEW REP 008/25 Tackling the Hidden Economy: Expanding Tax Conditionality to New Sectors

Tax Faculty meetings

During the month there were meetings of the Tax Faculty Board, the Tax Policy and Reputation Committee and the VAT and Duties Committee. 

Faculty webinars, events and podcasts

Our monthly podcast series The Tax Track continues to gather new listeners and get good feedback and engagement. The latest episode was on the topic of R&D tax relief. Tax Faculty staff members Angela Clegg and Richard Jones joined host Stephen Relf to discuss issues with HMRC’s compliance approach, HMRC’s new disclosure facility and recent decisions of the First-tier Tribunal.