Welcome to our Tax Disputes and Resolutions Round up: January – March 2025.

It has been a busy start to 2025, to catch you up on all things Tax Disputes & Resolutions, we share our overviews of some of they key talking points and what you need to be aware of to protect your tax position.

Where will HMRC focus its investigations in 2025?

Our experts, share their predictions for 2025 highlighting where HMRC will focus its efforts. As the Labour Government has set out many times, closing the tax gap is a key part of its efforts to increase the tax yield. This includes:

• Crypto assets
• R&D tax relief enquiries
• COP9
• Increase to National Minimum Wage (NMW)
• VAT on private schools

and more

HMRC Naming and Shaming Deliberate Defaulters 

Our Tax Disputes & Resolutions team recently shared an article providing detail on HMRC’s power to Publish Details of Deliberate Defaulters (PDDD), which allows HMRC to publish personal information of individuals or companies who have committed deliberate tax defaults. This includes names, business descriptions, and details of the tax discrepancies. PDDD aims to deter tax defaults by causing embarrassment, but awareness of this power is low.

Research shows that while financial penalties are seen as the main consequence, publication can also be effective in preventing defaults.

New Year, New Nudge Letters

Published at the start of January, we continue to see an extensive use of Nudge Letters well in to 2025.

HMRC has started sending Nudge Letters to encourage taxpayers to voluntarily review and correct their tax affairs. These letters target areas like Business Asset Disposal Relief (BADR) lifetime limits, VAT accounting for private equity transactions, Annual Tax on Enveloped Dwellings (ATED) relief, Anti-Money Laundering (AML) compliance for estate agents, and self-assessment and PAYE registration for delivery drivers. Receiving a nudge letter can be stressful, so seeking professional advice is crucial.

Navigating HMRC’s Property Sector Focus: Key Insights and Updates

HMRC is focusing on the property sector with legislative tax changes and increased access to detailed information. It is issuing ‘nudge letters’ to estate agents, landlords, and offshore companies to remind them of reporting requirements. Recent legislative updates include changes to Stamp Duty Land Tax (SDLT) and the abolition of the Furnished Holiday Lettings (FHL) regime from April 2025. HMRC’s targeted approach aims to address potential tax losses in the property industry. Taxpayers are advised to seek professional advice if they receive a nudge letter or identify errors in their filings to avoid higher penalties.

Closing the Tax Gap

Following the Spring Statement, the government has announced additional measures to close the tax gap and generate over £1 billion in additional tax revenue annually by 2029-30.

Key initiatives include investing £87 million to enhance HMRC’s debt recovery efforts, recruiting additional compliance and debt management staff, and increasing late payment penalties for VAT and ITSA taxpayers.

Counter fraud efforts will see a 20% increase in prosecutions, and a new informant reward scheme will be launched which is inspired by a similar model in the US.

Additionally, HMRC will collaborate with Companies House and the Insolvency Service to address contrived insolvencies. Four consultations on tax compliance and penalties have also been initiated.

HMRC Issues More One to Many Letters

HMRC has extended its “one to many” letter campaign to the private equity sector, estate agents and self-employed delivery drivers. Estate agents are being reminded of their duty to register for HMRC’s anti-money laundering supervision whilst self-employed delivery drivers are being reminded to complete a tax return if their self-employment income for the year exceeds £1,000. The letters to private equity businesses focus on the proper application of VAT partial exemption.

UK Tax Investigations Conference (UK TIC)

Danielle Ford, Partner and Head of Tax Disputes & Resolutions will be presenting at UK TIC on the subject of ‘Tax Disputes Resolved’ on 15 May 2025.

Let us know if you will be attending, we would love to arrange a coffee between Danielle and yourself. Reach out to us on the details below.