Tax administration

Advance tax certainty for major projects

Following a consultation earlier in 2025, the Autumn Budget confirms the introduction of the Advance Tax Certainty Service, a new HMRC facility designed to provide binding clarity on the tax treatment of major investment projects in the UK before material investment is made. This measure forms part of the government’s broader commitment to enhancing stability and predictability in the UK’s business tax environment, as previously set out in the Corporate Tax Roadmap. The service is scheduled to launch in July 2026, with technical guidance and supporting legislation to follow the Autumn Budget. The service is being launched on a pilot basis, with potential improvements to be considered after the first year. In setting out the terms of the service, the government has published a summary of consultation responses it received and its own responses to that input.

The service will be available to any entity—UK resident or non-UK resident—investing in a major project in the UK, defined as new investment on a specified project that is not a continuation of ordinary spending. The financial threshold for eligibility is set at £1bn of in-scope UK project expenditure (excluding financing costs and acquisition of ownership interests), with the government indicating that this threshold may be reviewed after the first year of operation. The service is also open to joint applications from multiple entities, including consortia and independent businesses, and can accommodate cases where the investing entity is not yet established at the time of application. Clearances will remain valid following changes in ownership, provided the underlying facts and requirements remain materially unchanged.

The scope of the service covers Corporation Tax, VAT, Stamp taxes, PAYE and the Construction Industry Scheme. However, it will not provide clearances on transfer pricing (which remains within the Advanced Pricing Agreement process), asset valuations, or hypothetical scenarios. Purpose tests, such as the Unallowable Purpose rules, are excluded from binding clearance, though HMRC may indicate where it considers the risk of future compliance intervention to be low. The clearance will be binding on HMRC as to its view of the law applied to fully disclosed facts, unless there is a material change in facts or a change in legislation or case law. The clearance does not bind the applicant, and HMRC will only be bound where the applicant’s tax return is made in accordance with the clearance.

The process will require early engagement meetings as a prerequisite to formal application, allowing HMRC and applicants to clarify eligibility, scope and information requirements. Following submission, a formal scoping meeting will finalise the scope and timetable. HMRC aims for an average turnaround time of 90 days per application, though this will be tailored to project complexity and urgency. A named HMRC lead will be assigned to each case, and applicants may engage agents to act on their behalf. The government has decided not to publish anonymised clearances at this stage, citing confidentiality concerns, but will keep this under review. No fee will be charged for the service initially, with the position to be reassessed after the first year.

Clearances will be issued for an initial period of up to five years, with a pragmatic approach to renewal where projects extend beyond this period. The onus will be on applicants to notify HMRC of any material changes in facts, ownership or law that may affect the clearance. Where only part of a clearance is affected by such changes, HMRC will consider whether the remainder can be renewed separately. The Autumn Budget does not provide for an appeal or review process for rejected applications, but existing routes to challenge HMRC’s position after filing a tax return remain available.

While the Advance Tax Certainty Service is intended to provide significant benefits in terms of upfront certainty and support for major investment, businesses may face several challenges in accessing and using the scheme. The £1bn financial threshold will exclude many projects, at least initially, and the focus on the largest investments may limit the service’s relevance for smaller but still strategically important projects. The requirement for early and full disclosure, as well as the need to engage in multiple stages of discussion with HMRC, may create a significant administrative burden, particularly for complex or multi-entity projects. The exclusion of certain tax areas—such as transfer pricing and purpose tests—from binding clearance may leave some key uncertainties unresolved for investors. The absence of an appeal or review process for rejected applications also means that businesses will need to ensure their applications are robust from the outset, as there is no formal recourse if HMRC declines to issue a clearance.

Mandatory registration and minimum standards for tax advisers

The government has announced in the Autumn Budget a new legal requirement for tax advisers, who interact with HMRC on behalf of clients, to register with HMRC and meet minimum standards. This measure will take effect from May 2026, with a transition period of at least three months. The requirement will be legislated for in the Finance Bill 2025-26, and draft legislation was published in July 2025. The policy aims to ensure that all tax advisers engaging with HMRC on behalf of clients are subject to consistent minimum standards, thereby improving HMRC’s ability to monitor and, where necessary, exclude advisers who do not meet its Standards for Agents or who cannot lawfully act as tax advisers - thereby increasing taxpayer protection and reducing the tax gap. The government is investing £36m to modernise and streamline HMRC’s existing registration services, moving towards a single digital registration route, with a non-digital alternative for those who are digitally excluded.

These changes follow a public consultation, ‘Raising standards in the tax advice market: strengthening the regulatory framework and improving registration’, which ran from 26 March 2024 to 29 May 2024. The consultation received 426 written responses and extensive stakeholder engagement. Most respondents supported government intervention to raise standards, citing concerns about the lack of entry requirements, inconsistent monitoring, and insufficient deterrents for substandard or unscrupulous practitioners. The majority favoured mandatory registration with HMRC for all tax practitioners interacting with HMRC, with 79 per cent of respondents supporting this step. There was also significant support for strengthening the broader regulatory framework, with 60 per cent of respondents favouring mandatory membership of a recognised professional body as the most effective approach.

However, concerns were raised during the consultation regarding the potential costs and administrative burdens of increased regulation, particularly for small and unaffiliated practitioners, and the risk that these costs could be passed on to taxpayers. A more targeted approach may have reduced the administrative burden on tax advisers that are already meeting the required standards. However, the measure will apply to all “tax advisers” and the draft legislation defines “tax adviser” widely and includes all tax advisers interacting with HMRC, regardless of whether the adviser or client is based in the UK or overseas. In addition, per the draft legislation published in July (i) advisers must meet HMRC’s published standards and be registered with an anti-money laundering supervisory authority (ii) HMRC will have powers to monitor compliance, suspend or prohibit registration, and impose financial penalties of £5,000 or £10,000 for contraventions, with additional penalties for senior managers where appropriate, and (iii) advisers must notify clients of any suspension or prohibition, with penalties for failure to do so. The draft legislation also provides for reviews and appeals to the tribunal, and for temporary reinstatement of registration in certain circumstances. Finally, HMRC may also have powers to share information with other regulatory or supervisory bodies as permitted by law.

Notwithstanding the above, the government has stated that they expect the measure to have a negligible administrative impact on tax adviser firms, with one-off costs relating to familiarisation and registration, and ongoing requirements to provide annual assurances regarding anti-money laundering supervision and other conditions. The measure is not expected to affect individual taxpayers directly, except where their adviser is unable to meet the new requirements or is suspended, in which case taxpayers will need to engage a compliant adviser.

The HMRC tax debt strategy

The latest HMRC tax debt strategy update sets out the government’s approach to managing and reducing tax debt, with a focus on improving fairness, efficiency and adaptability in the system. The strategy is structured around four key pillars: preventing tax debt, tailoring interventions, effective and efficient resolution, and being adaptable to changing circumstances. HMRC reports that, supported by increased government investment, it has resolved £48.7bn of tax debt in the first two quarters of the current year, compared to £21.8bn in the same period of 2019-20. At the end of March 2025, the tax debt balance stood at £42.8bn, representing 5 per cent of total tax receipts — a reduction of 0.2 percentage points from the previous year, reflecting improved performance against a growing tax base.

Under the prevention pillar, HMRC is redesigning processes to minimise the volume of liabilities that become debt, including targeted pre-emptive communications and expanded use of payment options such as Direct Debit and Open Banking. The tailoring interventions pillar leverages data, including Credit Reference Agency information, to segment customers and target support or enforcement more effectively. HMRC has resumed the use of Direct Recovery of Debt powers in a test phase, with broader rollout planned for April 2026, and is improving the clarity and firmness of its communications to encourage prompt payment.

The strategy also emphasises expanding digital services and the use of private sector debt collection agencies to increase capacity for resolving tax debt, while retaining and recruiting 2,400 tax debt officers to manage more complex cases. HMRC is modernising its debt case management system, aiming for all tax debts to be managed through a new platform by 2029-30, with benefits including automated processes, data-driven decision making, and improved taxpayer experience.

Looking ahead, HMRC is consulting on mandating Direct Debit for PAYE and VAT payments and requiring Self Assessment taxpayers with PAYE income to pay more of their liabilities in-year via PAYE from April 2029, with a consultation planned for early 2026. Making Tax Digital for Income Tax will be introduced from April 2026 for sole traders and landlords with income over £50,000. For VAT, businesses will be required to issue all VAT invoices as e-invoices from 2029. In January 2026, HMRC will launch a period of detailed collaboration with stakeholders to design and develop the UK’s e-invoicing regime. This process will ensure that diverse viewpoints and concerns are embedded in the policy development and reflected in both the roadmap and the full regime. HMRC will work closely with the software sector, including Making Tax Digital providers, to ensure that the regime supports the development of a diverse and competitive market offer which provides a range of e-invoicing solutions.

The strategy also includes measures to tackle older, more difficult debts, such as increasing the use of debt collection agencies for older debts and recruiting additional debt management staff. HMRC will monitor progress through quarterly reporting to its Closing the Tax Gap subcommittee and annual publication in its Annual Report and Accounts.

Reform of behavioural penalties

The government has published its summary of responses to the consultation on reforming behavioural penalties, confirming its intention to simplify and strengthen the penalty regimes for inaccuracies and failures to notify. Under the current rules, penalties are imposed where inaccuracies are found in returns and documents submitted to HMRC, or where taxpayers fail to notify HMRC of circumstances affecting their tax liability. These penalties are determined by factors such as the timing and nature of disclosure, the quality of disclosure, and whether the behaviour was careless or deliberate. The government’s response signals a move away from timing-based minimum penalties—specifically, the minimum 10 per cent penalties for non-deliberate failures to notify disclosed after 12 months and careless inaccuracies disclosed after three years—and a focus on encouraging early, voluntary compliance. The government will consider replacing HMRC’s ability to suspend penalties for careless errors with the ability to issue warnings for a first, careless inaccuracy. It will also explore simplifying penalty reductions for unprompted disclosures and the quality of disclosure, and will review the rationale for separate offshore penalty regimes, with a view to simplifying or equalising offshore and domestic penalty rates.

For deliberate and repeated deliberate behaviour, the government intends to strengthen sanctions, including considering higher penalties for repeated deliberate non-compliance. Another significant proposed change is the potential replacement of penalty suspension for careless inaccuracies with a warning system for a first, careless inaccuracy, aiming to provide a clear message to taxpayers and an opportunity to correct errors before financial penalties are imposed. The government does not intend to introduce the more severe non-financial sanctions (such as removal of driving licences or passports) that were floated in the consultation, but will focus on reforming the publication of details of deliberate defaulters and improving existing non-financial interventions.

Simmons & Simmons responded to the consultation, alongside other professional bodies and stakeholders. The government will now develop draft legislation to implement these reforms, drawing on the feedback received. . Businesses and advisers should monitor developments closely, particularly in relation to the removal of timing-based penalties, changes to disclosure criteria, and the future approach to offshore penalties. The government’s stated aim is to ensure penalties are fair, proportionate and effective in supporting the integrity of the tax system, while reducing complexity and administrative burdens for taxpayers and agents. However, the response to the consultation suggests that even among advisers there was little agreement on the appropriate changes to be made. We will continue to monitor these proposals.

Increase to corporation tax late filing penalties

The Autumn Budget 2025 confirms that the government will increase the fixed penalties for late filing of Corporation Tax returns, with effect for returns due on or after 1 April 2026. The new penalty rates will double the current amounts: the penalty for a late return will rise from £100 to £200, and for returns more than three months late from £200 to £400. Where there have been three successive failures, the penalties will increase from £500 to £1,000 for a late return, and from £1,000 to £2,000 for returns more than three months late. These changes are intended to restore the real value of penalties, which has been eroded by inflation since they were last changed in 1998, and to encourage timely compliance by companies.

Closing in on promoters of marketed avoidance schemes

The government intends to introduce new powers to close in on promoters of marketed tax avoidance. These will be legislated for in Finance Bill 2025-26. The government will publish a consultation on further measures to tackle promoters in early 2026 and we will continue to monitor developments on this point.

Key changes include allowing HMRC to issue civil penalties directly under the Disclosure of Tax Avoidance Schemes (DOTAS) and Disclosure of Avoidance Schemes for VAT and other Indirect Taxes (DASVOIT) regimes, without the need for tribunal approval. The government will also introduce universal stop regulations, which will prohibit the promotion of avoidance arrangements that have no realistic prospect of success, and give HMRC the power to specify further arrangements that may not be promoted. Breaches of these rules will attract sanctions including publication, financial penalties and potential criminal prosecution. In addition, new Promoter Action Notices (PANs) will require certain businesses—such as financial institutions, insurers and social media companies—to stop providing services to promoters in breach of a stop notice or universal stop regulation, with sanctions for non-compliance.

Further measures include the introduction of Anti-Avoidance Information Notices (AAINs), enabling HMRC to require persons connected to the promotion of a marketed tax avoidance scheme to provide relevant information, with civil and potentially criminal penalties for non-compliance. The scope of existing powers will also be widened to allow publication of legal professionals’ details in certain circumstances where they facilitate avoidance. The measures will take effect from Royal Assent to the Finance Bill 2025-26.

Tackling tax adviser facilitated non-compliance

The Autumn Budget 2025 announces measures to strengthen HMRC’s powers to address tax adviser-facilitated non-compliance, with effect from 1 April 2026. The proposed changes will amend schedule 38 of the Finance Act 2012, allowing HMRC to obtain information from tax advisers using a file access notice where there is reasonable suspicion that they have deliberately facilitated non-compliance in their clients’ tax affairs. The requirement for tribunal approval before issuing a file access notice will be replaced by a senior HMRC officer approval mechanism, with the notice remaining appealable to the tribunal. Penalties for failure to comply with a file access notice will be revised to include cases where inaccurate information is provided, and HMRC will be able to increase penalty amounts with tribunal approval. A new penalty framework will also be introduced to sanction advisers found to have deliberately facilitated non-compliance, alongside new powers to publish information about sanctioned advisers. If an individual within a compliant business is sanctioned, the business itself may be publicly named in rare circumstances, with an opportunity to make representations to HMRC.

Payments to tax whistleblowers / ‘informants’

The government has announced an immediate increase in the rewards paid to informants who provide HMRC with high-value information. For cases where tax of more than £1.5m is recovered, HMRC will now pay rewards of up to 30 per cent of the additional tax collected that would otherwise have gone unpaid. This change is intended to incentivise the reporting of significant tax non-compliance and applies with immediate effect. The measure is expected to encourage individuals with access to information about large-scale tax evasion or avoidance to come forward, supporting HMRC’s efforts to close the tax gap and improve compliance in high-value cases.

This approach closely follows models seen in other jurisdictions, most notably the United States, where payments to informants are a longstanding and integral part of tax enforcement. In the US, the Internal Revenue Service (IRS) has operated a formal whistleblower programme for many years, offering substantial rewards to individuals who provide actionable information leading to the recovery of unpaid tax. The UK’s adoption of a similar model signals a shift towards greater reliance on third-party intelligence in tackling complex tax non-compliance, and may lead to an increase in the volume and quality of information received by HMRC.

A further consideration is that many other areas of criminal activity have a tax element. For example, bribes and other illicit payments are technically taxable, but are rarely declared to HMRC. As a result, there is every chance that informants may seek to channel their reports to HMRC in order to benefit from the enhanced reward scheme, even where the underlying conduct might also fall within the remit of other enforcement agencies. This could result in HMRC receiving intelligence that might otherwise have been directed to the Serious Fraud Office (SFO), the Financial Conduct Authority (FCA), or the police, potentially increasing HMRC’s role in the wider landscape of economic crime enforcement.

Looking ahead, it is conceivable that similar reward powers could be extended to other agencies such as the SFO, particularly as several SFO and FCA enforcement schemes have tax antecedents. For example, the “failure to prevent bribery” offence was preceded by the “failure to prevent the facilitation of tax evasion” regime. The alignment of incentives across agencies could support more joined-up enforcement, but may also raise questions about the appropriate allocation of reports and rewards. In addition, the increased rewards may prompt individuals within large businesses to bypass internal whistleblowing channels and report directly to HMRC, rather than raising concerns through established corporate compliance frameworks. This could have significant implications for internal investigations, corporate governance, and the management of whistleblowing risk, and is likely to be an area of close interest for compliance and legal teams.

Forthcoming tax administration changes

The government will announce further changes to simplify and improve tax and customs administration at a Tax Update in early 2026. This is likely to include measures to enhance the notification regime for uncertain tax treatments. The aim is to reduce non-compliance by ensuring that businesses are clearer about when and how to notify HMRC of tax positions that may be open to challenge, thereby reducing the risk of disputes.