Client news update - May 2025

A new service has been launched that allows individuals to verify their identity directly with Companies House through GOV.UK.

The introduction of identity verification is one of the key changes to company law as part of the Economic Crime and Corporate Transparency Act 2023. Companies House has landmark new and enhanced powers to combat economic crime and boost economic growth.

More than six million people will be required to comply in the 12 months after identity verification becomes a legal requirement later this year. According to Companies House, identity verification will provide more assurance about who is setting up, running, owning and controlling companies in the UK.

Louise Smyth, CEO of Companies House, said: ‘Identity verification will play a key role in improving the quality and reliability of our data and tackling misuse of the companies register.

‘To save time later, we encourage directors, people with significant control of companies (PSCs) and those filing information with Companies House to verify their identity during the voluntary window.

‘We expect identity verification to become mandatory from Autumn 2025.’

Internet link: GOV.UK

HMRC has announced a one-year delay to the introduction of mandatory payrolling of benefits in kind. Originally set for April 2026, the change will now take effect from 6 April 2027 as part of HMRC’s ongoing efforts to modernise the UK tax system.

From this date, employers will be required to report taxable benefits in real time through payroll and pay Class 1A National Insurance Contributions (NIC) at the same time. This marks a significant shift from the current process involving post-year-end forms P11D and P11D(b).

The changes will simplify reporting for most benefits, although certain benefits such as employee loans and accommodation will still allow for P11D reporting initially, with full payrolling expected in future.

Employers already payrolling benefits voluntarily should note that, from April 2027, Class 1A NIC will also be paid via payroll, eliminating the need for P11D(b) forms in most cases.

Benefits covered by PAYE Settlement Agreements (PSAs) remain unaffected.

Tax compliance costs the UK’s small businesses nearly £25 billion a year, according to recent research conducted by the Federation of Small Businesses (FSB).

The average small firm spends £4,500 and 44 hours a year on tax compliance, according to the research.

These annual totals could include time spent trying to contact HMRC, the cost of staff time used to manage compliance, and the price of software subscriptions and/or an external accountant, among other outlays.

Poor levels of customer service from HMRC are a recurring theme within the report, making tax compliance even more difficult and stressful for small businesses.

Tina McKenzie, FSB’s Policy Chair, said:

‘Tax compliance is far from a niche issue – it affects all five and a half million small businesses in the UK, costing them £4,500 and 44 hours a year each on average.

‘Collectively, that adds up to an annual total cost to the small business community of nearly £25 billion and over 240 million hours.

‘This is money and time that could be far, far better spent on building up their business, and the overall cost to the economy in terms of lost growth and wasted productivity is enormous.

‘Given the challenges facing the economy, and the need for growth, reducing the burden placed on small firms by tax compliance must be a priority – something the government has recognised as a priority for other regulators. HMRC should be included in the government’s drive to make regulation better support growth.’

Internet link: FSB website

HMRC has published the latest issue of the Employer Bulletin. The April issue has information on various topics, including:

• the new rates of the National Minimum Wage
• reporting expenses and benefits for the tax year ending 5 April 2025
• changes to notifications by employers to operate PAYE on a proportion of a globally mobile employee’s income and changes to Overseas Workday Relief.
• the tax treatment of double cab pickups.
• Capital Gains Tax — working out your adjustment for the 2024 to 2025 tax year.

Internet link: GOV.UK

Sole traders and landlords with an income over £50,000 have been warned that there is less than a year before they will be required to use Making Tax Digital for Income Tax (MTD for IT).

HMRC says the launch of MTD for IT on 6 April 2026 will mark a significant and time-saving change in how these individuals will need to keep digital records and report their income to the tax authority.

HMRC says that by keeping digital records throughout the year, sole traders and landlords can save hours previously spent gathering information at tax return time – allowing them to spend more time focusing on their business activities.

Quarterly updates will spread the workload more evenly throughout the year, bring the tax system closer to real-time reporting and help businesses stay on top of their finances and avoid the last-minute rush.

HMRC is urging eligible customers to sign up to a testing programme on GOV.UK and start preparing now.

Craig Ogilvie, HMRC’s Director of MTD, said:

‘MTD for IT is the most significant change to the self assessment regime since its introduction in 1997. It will make it easier for self-employed people and landlords to stay on top of their tax affairs and help ensure they pay the right amount of tax.

‘By signing up to our testing programme now, self-employed people and landlords will be able to familiarise themselves with the new process and access dedicated support from our MTD Customer Support Team, before it becomes compulsory next year.’

Internet link: HMRC press release

Chancellor Rachel Reeves has said British businesses will be supported to trade freely as she takes action on practices that undercut fair trade, such as the dumping of cheap goods into the UK.

The government announced immediate action by the Trade Remedies Authority (TRA), the body responsible for defending the UK against certain unfair international trade practices.

The Chancellor also announced her intention to review the customs treatment of Low Value Imports, which allows goods valued at £135 or less to be imported without paying customs duty.

Major UK retailers have called on the government to amend the customs treatment, arguing that it disadvantages them by allowing international companies to undercut them.

William Bain, Head of Trade Policy at the British Chambers of Commerce (BCC), said:

‘There are still many twists and turns to go in the trade war between the US and China. It remains to be seen whether cheap Chinese goods will flood the UK as a result.

‘But the risk is present. It is sensible for the TRA to have all the necessary tools and resources to take action to prevent the UK being swamped with unfairly cheap products.

‘If domestic production suffers from a surge in imports or dumping of goods it is right that business has clearer access to make their case to the TRA. It must have the resources it needs to enforce a level playing field.’

Internet link: GOV.UK BCC website

A lack of trust and a shortage of expertise at board level are limiting the adoption of AI in UK businesses, according to research from the Institute of Directors (IoD).

Just over half of survey respondents said limited expertise or understanding of models and tools at management and board level was restricting adoption of AI. In addition, 50% said that lack of trust in AI outcomes was their biggest concern.

Security risks, such as cyber, data protection and privacy, as well as employee skills gaps and ethical risks, are also significant barriers for business leaders.

Of the half of UK business leaders whose organisations use AI, 78% cite increased productivity and operational and administrative efficiencies as the most significant benefits.

Dr Erin Young, Head of Innovation and Technology Policy at the IoD, said:

‘While UK business leaders in early AI adoption are enthusiastic about greater productivity and efficiencies, they face a complex set of barriers to top-down implementation and governance – from skills and expertise gaps at board level, to a lack of trust and fundamental concerns about reliability, security and business value across AI capabilities, tools and applications.

‘Given a focus on addressing private sector user-adoption barriers in the UK government’s AI Opportunities Action Plan, it is important that these concerns are addressed strategically for businesses of all sizes across sectors in the Industrial Strategy.’

Internet link: IoD website

HMRC has launched a new online interactive tool to help guide both businesses and individuals through tax compliance checks.

The Interactive Compliance Guidance tool available on GOV.UK provides information to help customers understand:

•         HMRC compliance checks.
•         Why HMRC has requested specific information or documents.
•         How to request extra support due to health or personal circumstances.
•         How to appoint someone to act on your behalf.
•         What to do if you disagree with a decision made by HMRC.
•         How to pay a tax assessment or penalty.

The new tool brings together existing compliance guidance and videos in one place, making it easier to find and navigate the appropriate information, HMRC says.

Joanne Walker, Low Incomes Tax Reform Group (LITRG) Technical Officer and Customer Experience Advisory Group (CEAG) member, said:

‘When unrepresented customers have a tax compliance problem, it can be difficult for them to find the help they need.

‘This new interactive tool from HMRC makes compliance guidance readily accessible in one place, and easier for people to find the information that is relevant to them. The links to the extra support available will be especially valuable for the most vulnerable customers.’

Internet link: HMRC press release

The government is introducing legislation to regulate cryptoassets and improve consumer protection for the asset class.

The new rules will apply to firms offering services for cryptoassets like Bitcoin and Ethereum.

The government says that around 12% of UK adults now own or have owned crypto, up from just 4% in 2021. But it says owners have too often been left exposed to risky firms and scams.

Under the new rules, crypto exchanges, dealers and agents will be brought into the regulatory perimeter. Crypto firms with UK customers will also have to meet clear standards on transparency, consumer protection and operational resilience, like their counterparts in traditional finance.

Chancellor of the Exchequer, Rachel Reeves said that the UK and US will use the upcoming UK – US Financial Regulatory Working Group to continue engagement to support the use and responsible growth of digital assets.

Ms Reeves said:

‘Through our Plan for Change, we are making Britain the best place in the world to innovate — and the safest place for consumers. Robust rules around crypto will boost investor confidence, support the growth of Fintech and protect people across the UK.’

Internet link: GOV.UK

If you have your eye on a rundown or contaminated property, then the UK’s Land Remediation Relief (LRR) can offer powerful tax reliefs on qualifying spend. Typically, owners, occupiers or investors can receive relief at up to 150%, developers at 50% and loss making companies can even cash in the deduction for a tax credit at a rate of 16%.

Read Steve Martin, Corporate Tax Adviser’s full article: