The OECD Inclusive Framework has published an updated consolidated Commentary to the Pillar Two Global Anti-Base Erosion (GloBE) Model Rules. The commentary explains the intended outcomes under the GloBE rules and incorporates the various pieces of Administrative Guidance that were approved by the Inclusive Framework before the end of March 2025.
Pillar Two updated consolidated commentary published by the OECD
Public Accounts Committee (PAC) publishes report on the cost of the tax system
On 30 April 2025, the PAC published its conclusions and recommendations following its inquiry into the cost of the tax system. The report states that “It now costs over £20 billion a year to administer tax, with most costs falling on businesses. In 2023–24, HMRC spent £4.3 billion on tax collection and it estimates that tax administration costs businesses at least £15.4 billion.” There are a number of recommendations made on how to address these rising costs, including that HMRC should publish realistic plans to simplify the tax system and should take steps to return compliance productivity to pre–pandemic levels and to take advantage of new technology including AI. There is no requirement for the Government to act on the PAC’s recommendations but it normally publishes a response to PAC reports in due course with details of which recommendations it agrees with and what action will be taken as a consequence. In this regard, the Government is likely to refer to some of the measures included in its recent ‘TUSAR’ package of announcements covered in the last edition, many of which are aimed at simplification and improving efficiency.
HMRC update guidance on unallowable purpose following court wins
On 7 May 2025, HMRC updated their guidance in the Corporate Finance Manual on unallowable purpose primarily to reflect the outcome of recent Court of Appeal unallowable purpose decisions in BlackRock v HMRC, Kwik-Fit v HMRC and JTI Acquisitions v HMRC (all of which HMRC won). HMRC's changes are generally consistent with the findings in these cases. HMRC also provide an element of additional detail on their view on just and reasonable apportionments of debits under the unallowable purpose rules, which remains an area of uncertainty following these recent cases.
HMRC late payment interest rates revised after Bank of England reduces base rate
On 8 May 2025, the Bank of England Monetary Policy Committee voted to reduce the Bank of England base rate to 4.25 percent from 4.5 percent. As a result, HMRC interest rates for late and early payments have also reduced. HMRC’s late payment interest rate for most taxes is set at the Bank of England base rate plus 4 percent (from 6 April 2025 when there was a general uplift), so their late payment interest rate will reduce from 8.5 percent to 8.25 percent. Interest charged on underpaid quarterly corporation tax instalment payments is calculated as base rate plus 2.5 percent (again from 6 April 2025), so this reduces to 6.75 percent. These changes come into effect on 19 May 2025 for quarterly instalment payments and on 28 May 2025 for other late payments. HMRC will also reduce their repayment interest rate for most taxes to 3.25 percent, as it is set at Bank Rate minus 1 percent, with a 0.5 percent lower limit. For interest paid on overpaid quarterly instalment payments and on early payments of corporation tax not due by instalments the rate is 4 percent.