Tax Update April 2025

HMRC has confirmed its position on double remittances, despite concerns being raised by the CIOT.

One of the areas of uncertainty around the replacement of the non-dom regime is the treatment of ‘double remittances’. These are instances where a non-dom has a past remittance that was non-taxable, for example because they were non-resident at the time, and then remits the same funds again. HMRC’s view is that the new remittance is taxable unless the first remittance was subject to income tax or capital gains tax.

HMRC has responded to concerns raised by the CIOT about this treatment under the new legislation. HMRC stated that it has been its “longstanding interpretation of s.809P(12)” that second and subsequent remittances are only free from tax if they were charged to tax on the first occasion and the amendment made to the relevant legislation from 6 April 2025 merely clarifies the law rather than changing it.

A limited relief has been introduced that can apply if the taxpayer is UK resident in 2024/25 and 2025/26 and where the second remittance took place before 6 April 2025. The relief deems the first remittance as having been taxed such that there is no charge on the second remittance. One problem is that the relief is time limited, as it only applies where the second remittance occurs before 6 April 2025. If HMRC is incorrect in its historic interpretation of s809P(12) then the relief might be ineffective, in which case there could be a third remittance if the funds continue to be used in the UK after 5 April 2026, which would not be protected from a tax charge.

https://www.tax.org.uk/hmrc-responds-to-ciot-concerns-on-double-remittances-and-finance-act-2025 - Finance Act 2025: non-domiciled individuals, double remittances and 6 April 2025

The FTT has found that while the agent had failed to respond to HMRC by the deadline, given the specific circumstances of the case it was fair and just to allow the taxpayer’s appeal to be reinstated.

An appeal was brought to the FTT as a result of HMRC denying business property relief (BPR) claimed on loan notes in an estate. The appellant’s agent appealed a notice of determination issued by HMRC. However, the agent then failed to comply with an ‘unless order’ in time, meaning the appeal was struck out. The agent then applied for reinstatement, and also submitted an application to bring the application out of time.

The agent had acted for the taxpayer for many years and had experience of the tribunal process. However,  notifications from HMRC and the FTT started going to his junk folder and they therefore went unseen. Upon the agent receiving written correspondence regarding the case, he contacted the FTT and HMRC promptly. HMRC argued that it was the taxpayer’s responsibility to keep tabs on the progress and not blindly rely on their advisor.  

The FTT found that the agent’s failings to respond to HMRC were serious and significant but could partly be attributed to the issues with emails going to junk. It also found that the agent’s failure to have diarised a follow-up if HMRC failed to submit its statement of case by the agreed deadline, alongside the email issue, was dramatic. Usually, failure of an agent is attributed to the taxpayer. However, the taxpayer was elderly with no knowledge of the tax system and put their faith in their agent and therefore it was fair and just to allow the out of time application.  

The FTT therefore allowed the appeal to be reinstated.

Kotecha v HMRC [2025] UKFTT 330 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09458.html 

The FTT has found that a taxpayer has a domicile of origin or dependence in the UK. His father’s move to the UK in 1938 had resulted in him settling long term and establishing a UK domicile, which the taxpayer inherited. It also found that the taxpayer did not subsequently acquire a domicile of choice in Israel.

This case concerns the domicile status of the taxpayer, with tax at stake of over £6m.

The taxpayer was born in the UK in 1949, and has lived in the jurisdiction of England and Wales almost all his life. The FTT examined his domicile of origin, which depended on his father’s domicile at the time of his birth, and a possible domicile of dependency, which would have resulted from a change in his father’s domicile before he reached his majority on 1 January 1970.

The taxpayer’s father was born in Eastern Europe. His domicile of origin was outside England and Wales, and he moved around Europe on a few occasions. He moved to England in 1938 due to the danger he was in as a Jewish man in Europe, and was naturalised as a British citizen in 1948. The family held no non-UK property. The father left the UK in 1972, was naturalised as a US citizen though it was contested as to whether or not he lived in Israel or in the USA, and he remained overseas until his death in 1995.

The taxpayer stated that his father’s move to the UK in 1938 was on a temporary basis due to the threat, and he had always intended to leave the UK. On his own domicile position, he stated his intention was to end his days in Israel, an intention that he contended was formed in 1970 during his period of residence there. While currently in poor health, he intended to return to Israel to end his days, once he found someone to take over his position as a religious leader in the UK and overcome other obstacles.

The FTT found that the taxpayer had a domicile of origin or dependence in the UK. His father had moved throughout Europe before reaching the UK, with no long term residence, but after reaching the UK had settled in one locality and established a stable life.

This decision meant that the FTT did not have to consider whether or not the taxpayer had acquired a domicile of choice in the UK, but it did reject his argument that he had acquired a domicile of choice in Israel.

While the changes introduced from 6 April 2025 have reduced the relevance of domicile, it will be a while before it completely disappears and domicile disputes are likely to rumble on for some time.

Weis v HMRC [2025] UKFTT 348 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09463.html 

The FTT has upheld HMRC’s position that business property relief (BPR) was not available on a five furnished holiday lets (FHLs). Although staff were employed by the business, and some additional services were offered, the business was mainly one of holding investments.

The deceased had owned five FHLs as well as one uninhabitable house she was in the process of turning into accommodation. These were all in the same area. She also owned her own home and an additional property where the full-time letting manager lived. There were up to eight additional part-time employees. The main home included an annexe with a reception and office used in the business.

The properties were available for short term lets for most of the year, and bed linen and towels were provided. There was a dedicated website to show availability for the lettings. Each property was fully furnished and had a kitchen and laundry facilities, with items including books and DVDs also in place for the use of visitors. The business did housekeeping and cleaning between lets, and where customers were staying for over a week then the property was cleaned during the stay. Welcome baskets with tea, milk, eggs, and the local newspaper were provided, as was information on the local area. There was supposed to be a facility to contact staff at any time, but there was not always someone on call.

The executors argued that BPR applied, as the business was the provision of hospitality facilities. Guests were welcomed in person by staff, and encouraged to use the reception. Staff helped guests when asked, such as taking them to minor injuries and booking mobility scooters.

The FTT found that this amounted to staff helping customers on request. There were not always staff available, and this was part of the operation of the FHL business rather than an activity from which income was derived. Activities such as gardening were ancillary or incidental to the business, as they were necessary to any property. Provision of facilities such as welcome baskets was common in FHL businesses. As a whole, the business was mainly one of holding investments, so BPR was not available. This is not a surprising outcome given recent case law in this area, which has demonstrated that a very substantial level of services needs to be provided to cross the line from investment to non-investment.

Tanner, Executors for the Estate 0f v HMRC [2025] UKFTT 328 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09456.html 

The FTT has denied R&D tax relief for a tax scheme that hoped to generate losses for investors far in excess of their actual investment.

The scheme attempted to use R&D relief to generate tax losses for investors over and above their original investment. The scheme was intended to operate in a similar way to the more well-known film schemes.

Although the FTT accepted that R&D was being carried out, it denied relief finding that the taxpayer was not carrying on a trade – a requirement for R&D relief.  They concluded that the activities were more akin to investment, and that payments were not made ‘wholly and exclusively’ for a trade as they were heavily motivated by tax relief considerations.

L.R R&D LLP v HM Revenue & Customs [2025] UKFTT 245 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09438.html 

The FTT has found that licence fees generated as part of a failed R&D scheme did not constitute income for tax purposes due to their circular nature.

This is the second case relating to this particular R&D scheme. In 3.1 above, the FTT ruled that the scheme as a whole failed as it was more akin to an investment than a trade. This further appeal concerns one element of the structure. On a strict legal analysis, the partners were entitled to receive licence fees. In reality, these fees were used to pay off indebtedness, and the individual partners did not and never expected to receive anything. The FTT needed to determine if the licence fees represented taxable income as argued by HMRC.

The taxpayer argued under the Ramsay principle that the whole scheme was a self-cancelling arrangement and it was wrong for HMRC to single out the licence fees as taxable. The FTT found that the licence fees did not constitute taxable income due to the circular nature of the funding arrangement. The FTT did acknowledge that it was unusual for the taxpayer to argue on the grounds of the Ramsay principle. 

This decision contrasts with the recent Lynch case [2025] UKFTT 300 (TC) where the Courts focused more on the legal form of the transactions and found that even though the overall scheme failed one element of the scheme could still be taxed.

The Vaccine Research Limited Partnership v HM Revenue & Customs [2025] UKFTT 402 (TC) 

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09476.html 

HMRC has updated its guidance page on 'Preparing for the multinational top-up tax and the domestic top-up tax'. The revised guidance gives more detailed instructions on when and how to register.

A new section has been added, which covers reporting requirements, the UK self-assessment return, and the GloBE Information Return (GIR). The GIR is a standardised return designed to streamline the global administration of the Pillar 2 rules. The updated guidance is intended to help businesses prepare for the multinational and domestic top-up taxes.

Preparing for the Multinational Top-up Tax and the Domestic Top-up Tax - GOV.UK

The ongoing VAT dispute regarding whether Mega Marshmallows should be standard-rated or zero-rated will return to the FTT following the CA decision that the key issue of whether or not they are normally eaten with the fingers remains unresolved.

The taxpayer argued that Mega Marshmallows were not confectionery because they were intended for roasting or use in s’mores, not as snacks. HMRC contended that Mega Marshmallows were confectionery and subject to VAT. The FTT and UT ruled in favour of the taxpayer, determining that Mega Marshmallows were not confectionery from a typical customer’s perspective.

The UT held that Note 5 of Group 1, Schedule 8, VATA 1994 is not a ‘deeming provision’ but rather a ‘rebuttable presumption’ meaning if something falls within its description it will be treated as confectionary, unless other factors outweigh the presumption.  However, the CA overturned these rulings, finding that Note 5 is conclusive and that products described in Note 5, including “sweetened prepared food which is normally eaten with the fingers” are confectionery.

The case has been remitted back to the FTT, where the burden will be on the taxpayer to prove that Mega Marshmallows are not normally eaten with the fingers or are not considered confectionery by an ordinary person.

Innovative Bites Ltd v HM Revenue & Customs [2025] EWCA Civ 293

www.bailii.org/ew/cases/EWCA/Civ/2025/293.html 

The UT has agreed with the earlier decision of the FTT, ruling that the ride-hailing platform should apply the Tour Operators Margin Scheme (TOMS) to its services for VAT purposes.

The taxpayer, a ride-hailing platform, argued that its services should qualify under TOMS, which allows VAT to be applied only on the margin rather than the full fare. HMRC contended that the taxpayer’s business model did not fit the traditional setup of tour operators or travel agents and that the services were materially altered before being passed on to customers.

The UT has upheld the earlier decision of the FTT, siding with the taxpayer. The UT found that the taxpayer’s services, which involve passenger transport arranged through an app, are comparable to those provided by travel agents, especially for airport and station transfers, even if arranged at short notice.  In addition, the UT found that the services offered by the taxpayer were not changed in any meaningful way after being bought in from the drivers. The drivers remain independent and the app simply matches passengers with available cars.  

With TOMS first introduced in the 1980s this case demonstrates how the rules are no longer consistent with how we live our lives today, and how the Courts are applying a common sense approach.

Bolt Services UK Ltd v HM Revenue & Customs [2025] UKUT 00100 (TCC)

https://assets.publishing.service.gov.uk/media/67e140d1c6194abe97358caa/Bolt_UT_Decision__final_.pdf 

The fact that a planning condition prevented the owner from occupying the property did not mean that it was not a dwelling for SDLT purposes.

The vendor owned two neighbouring properties that had been self-contained dwellings. At the time of sale these were partway through the process of being converted into a joint development that was intended to consist of five residential units. Planning permission was in place, but work had been halted due to the vendor’s assets being frozen. The taxpayer bought one of the original properties, the other was sold to a third party. A planning condition, that the property should not be occupied before the development work for the creation of extra dwellings, remained in force.

The taxpayer argued that this condition and the fact that the building was under construction, so uninhabitable, meant that it was not a dwelling at the time of purchase for SDLT purposes within s.116 FA 2003. The FTT dismissed this argument. The finished building did not yet exist, but when it did, would it be suitable for use as a dwelling? Despite the planning condition, the answer was yes. The condition did not affect the suitability of the building to be used as a dwelling when completed, just the ability of the taxpayer to occupy it. It was not a permanent bar on occupation, just a temporary condition. The higher residential rates of SDLT applied.

Patel v HMRC [2025] UKFTT 373 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09467.html 

The following Tax publications have been published.

• Short Term Business Visitors (STBVs) - a refresher
• Taxes at the Spring Statement and beyond
• UK Statutory Residence Test

The following client webinars are coming up soon.

• 23 April - Navigating Tax: National Minimum Wage - How to mitigate compliance risks in this complex area

We are pleased to see marshmallows back in their rightful place at the cutting edge of tax (4.1). VAT cases on food bring out some interesting points, and here the real test has come down to the method of consumption. The CA wrestled hard with this sticky problem, but has tossed the hot marshmallow back down to the FTT. We are looking forward to the FTT judge’s conclusion, possibly as much as they are to carrying out the tests.

You may also have noticed that it is New Year New Us – just before the start of this tax year we became S&W, which all future communications will come from.

Happy New Tax Year!