Autumn Budget 2025 – key tax compliance, disputes and investigations measures

The press coverage of the Autumn Budget 2025 has understandably focused on key revenue-raising measures, including the 2% increase in income tax rates for dividends, savings and property income, the application of national insurance contributions to salary sacrifice pension contributions and the freezing of income tax thresholds.

There were also a large number of announcements and publications relating to tax compliance, disputes and investigations. In this article, we summarise those key measures. 

Behavioural penalties reform

Alongside publishing a response to the consultation on the reform of behavioural penalties, the Government has announced its intention to modernise inaccuracy and failure to notify penalties.

Given the challenges in applying behaviour-related penalties, any appropriate reform resulting in simplification will be welcomed. This is especially the case in relation to offshore penalties, which are currently complex to determine and apply.

The proposed measures appear to be focused on proactively encouraging compliance. The consultation response states that:

• Increased penalties may apply where taxpayers do not take reasonable corrective action when aware of issues;
   
• A warning system for a first careless inaccuracy may be introduced, in place of penalty suspension;
   
• Higher penalties for deliberate behaviour and a new “recklessness” criminal offence for fraudulently evading direct taxes are under consideration.

Outcome of the independent loan charge review and new settlement opportunity

The Government has confirmed it will accept all but one of the recommendations put forward in the independent review of the loan charge, and in some cases will go beyond the recommendations.

The key measure announced today, and included in the Chancellor’s budget speech, was the introduction of a new settlement opportunity, administered by HMRC. The loan charge policy paper released today states that the features of the new settlement opportunity will significantly reduce the amount impacted individuals pay, particularly for those with the lowest liabilities. It is estimated that most individuals will benefit from a 50% reduction in outstanding loan charge liabilities, and 30% of individuals may be able to settle without paying anything.

Given the damage done to the public view of HMRC by their approach to the loan charge, this settlement opportunity is welcomed. In particular, it considers individual circumstances and provides economic realism.  There is a recognition that the adversarial nature of dealing with HMRC when they are collecting tax is challenging for taxpayers.

Tax collection, compliance and reporting

Reducing the tax gap (the gap between total theoretical tax liabilities and the amount actually paid to HMRC) was a key manifesto pledge of the current Government. Further measures intended to close the gap were announced in the Autumn Budget 2025. These include:

• investing in HMRC’s debt management capacity. The Government confirmed that it will invest £64 million over the next five years in HMRC’s existing partnerships with private sector debt collection agencies, in order to collect more tax debt;
   
• the publication of a new tax debt strategy, which includes HMRC’s approach to improving debt management and customer support;
   
• doubling corporation tax late filing penalties;
   
• an update on the US-style whistleblowing reward scheme. The Government will, effective 26 November 2025, increase the rewards paid to informants who provide HMRC with high-value information. Where tax over £1.5 million is recovered, rewards will be up to 30% of the additional tax collected that would otherwise have gone unpaid;
   
• strengthening HMRC’s powers to “tackle fraud” under the Construction Industry Scheme, including expanding HMRC’s power to remove gross payment status;
   
• the introduction of a new small business evasion and enforcement team intended to tackle “non compliance on the high street”. 350 HMRC criminal investigators will be deployed to carry out targeted criminal interventions aimed at fraud and evasion by small businesses;
   
• confirmation that reporting of UK resident cryptoasset users will be required under the UK’s implementation of the cryptoasset reporting framework (the CARF);
   
• confirmation that the UK will participate in a new international agreement providing for automatic exchange of information on real estate transactions, holdings and recurrent income.

The collection of measures above are likely to yield results provided that the implementation is cost-effective. We expect HMRC’s investment in AI and other digital tools to be a key part of the operation of the above measures.

E-invoicing update 

The government has confirmed that all VAT invoices will be required to be issued in electronic format from April 2029. An implementation roadmap will be released at the Autumn Budget 2026, after consultation with stakeholders.

Excluding supplies of private hire vehicles (taxis) from the Tour Operators’ Margin Scheme (TOMS)

The Government has announced that it will legislate so that the Tour Operators’ Margin Scheme (TOMS) will not be available to private hire vehicle and taxi services, except where those are supplied alongside certain other travel services. This measure will be effective from 2 January 2026.

A business brief released alongside the announcement and consultation outcome sets out that the Government’s view, and HMRC policy, remains that TOMS does not (currently) apply to the private hire vehicle sector, and VAT is due on the full fare where charged by a VAT registered business. The Government is currently appealing an Upper Tribunal decision to the contrary (which held that VAT was not due on the full fare) to the Court of Appeal.

There is precedent for the Government changing legislation where a taxpayer has succeeded on interpretation of that legislation before the courts. In the business brief, the Government appears to be maintaining its view on the current application of TOMS to the sector, and the change is legislation is intended to “put the matter beyond doubt going forward”.

Anti-avoidance in relation to share exchanges and reorganisations

The Government is amending, with effect from 26 November 2025, the anti-avoidance rule relating to share exchanges and reorganisations (contained in section 137 TCGA 1992). Where clearances were received in advance of 26 November 2025, the existing legislation will apply where shares or debentures are issued within 60 days of the announcement, or, if later, within 60 days of receipt of a clearance.

This may be another instance where the Government is legislating as a result of a taxpayer win before the courts – a taxpayer recently had a win on this anti-avoidance provision before the Court of Appeal. The amendments to section 137 TCGA seem designed to strengthen the anti-avoidance rule, as a result of the court’s findings against HMRC.

Revised VAT grouping rules and the Skandia judgment

As part of the releases on Budget day, HMRC published a business brief setting out their revised position on the UK VAT treatment of intra-entity services, which involve establishments located in EU member states that are part of a UK VAT group.

The business brief suggests that VAT reclaims can be made as a result of this revised policy. If periods are within time, businesses may wish to consider submitting error correction notices where appropriate for the relevant group.

We are continuing to monitor all technical developments, consultations and draft legislation released as part of the Autumn Budget announcements. Please reach out to the Key Contacts, or your usual CMS Tax contact, if you would like to discuss any of the above further.