Tax update August 2025

The FTT found that companies had not met the requirements for their share issues to be eligible for the enterprise investment scheme (EIS).

Six companies appealed HMRC’s decision that shares issued by them were not eligible for EIS. The FTT agreed with HMRC that they were ineligible, which meant that EIS relief wasn’t available to the individuals who had subscribed for shares.

The FTT considered the conditions for EIS eligibility. One of the requirements is that shares must be issued for the purposes of carrying on a qualifying business activity within two years of the date of issue. It found that the trade was not being conducted on a commercial basis with a view to profit by the two year deadline. The installation of a single rooftop solar panel was not a commercially viable activity and evidence suggested it was done solely to meet the EIS requirements. 

Overall the FTT found that only one of the four qualifying conditions considered was met, and the shares issued were therefore not eligible for EIS.

York SD Ltd & Ors v HMRC [2025] UKFTT 877 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09589.html 

The UT has found that a taxpayer’s honest belief that he was self-employed was not enough to qualify him for SEISS (self-employed income support scheme) payments.

HMRC had attempted to reclaim two SEISS payments made to a taxpayer on the grounds that he was not self-employed at the relevant time, but was the director of a limited company. The FTT had found that he was eligible to one of the payments as he held an honest belief at the time that he was self-employed.

The UT found against the taxpayer in relation to both payments. He did not meet the eligibility conditions and his honest belief that he was entitled to the payments was not sufficient for him to be eligible.

The taxpayer was unrepresented, and it became clear that this is another case where an artificial intelligence (AI) program was used to prepare the taxpayer’s skeleton argument. This originally included case references to cases that did not exist. The judge reminded unrepresented litigants that the accuracy of AI should not be relied upon without checking. 

HMRC v Gunnarsson [2025] UKUT 247 (TCC)

www.bailii.org/uk/cases/UKUT/TCC/2025/247.html 

The FTT has refused permission for a taxpayer to file a number of late appeals. The reasons he gave for being unable to deal with the appeals did not stand up, as he had been running a business throughout the period.

A taxpayer appealed closure notices, amendments, assessments, and penalties for deliberate behaviour, failure to provide information, failure to file tax returns, and late payment, totalling £875,623 without interest.

The taxpayer argued that none of the decisions were notified to him. HMRC had sent letters to the address he had given as his home, but in fact this was his accountant’s home. The taxpayer had chosen to give that address to allow the accountant to deal with letters. When HMRC discovered that this was not the taxpayer’s home, when checking before starting enforcement proceedings, letters were thereafter sent to the taxpayer’s home.

The FTT found that the taxpayer had been validly notified, so the appeals were not prevented from being late in that way. The taxpayer did not say that he had not received the decisions, and it was likely that they had been passed on to him. He had not proved that he was not notified.

The FTT also dismissed the taxpayer’s excuses for late appeals, including issues relating to his health, as not reasonable. There was no reliable evidence that the issues had prevented him from making the appeals, as he had continued to run his business throughout.

The FTT refused permission for any late appeals.

Milhill v HMRC [2025] UKFTT 919 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09600.html 

HMRC yearly interest rates on overdue tax will decrease by 0.25%, following the Bank of England base rate cut from 4.5% to 4.25%. 

The rate applied to the main taxes will become 8%. The rate of interest on repayments from HMRC will become 3%. 

This change generally applies from 27 August, but for quarterly interest payments it applies from 18 August and the rates also differ.

www.gov.uk/government/publications/rates-and-allowances-hmrc-interest-rates-for-late-and-early-payments/rates-and-allowances-hmrc-interest-rates  

HMRC has announced that it will be running an education campaign on how to calculate private use adjustments correctly, alongside increasing enquiries. 

Private use adjustments to business expenses in self-assessment returns are seen by HMRC as an area where tax is being underpaid. It will be running a digital campaign on how to calculate these correctly, and common problems. It will also be opening more enquiries into private use adjustments.

www.tax.org.uk/getting-private-use-adjustments-right  

The CA has dismissed HMRC’s appeal that workers should be paid national minimum wage (NMW) for travel from their home to work around the country.

The taxpayer employed poultry workers on zero-hour contracts. These employees were collected directly from their homes, in employer arranged minibuses, and travelled to poultry farms across the country to carry out their duties of employment.  

A ‘time worker’ is entitled to be paid at least NMW for hours treated as working time in each and every pay reference period.  HMRC had argued that as the workers were classified as time workers for the purposes of NMW, this time spent travelling to their place of work should be treated as ‘working time’. One of the reasons for this argument was under the interpretation of Regulation 34 of the NMW Regulations 2015. This states that the hours when a worker is travelling, and ‘where the worker would otherwise be working’, should be treated as working time. 

The UT dismissed the appeal on the basis that time spent travelling from home to the employer’s premises, including under the employer’s control, should not be treated as working time.  It was recognised that the workers would not ‘otherwise be working’ during the commute time and were able to use this time as they wished, subject to the constraints of being in the back of a minibus.  Therefore, travel time was not required to be treated as working time and no further remuneration was payable. 

HMRC v Taylors Services Ltd & Ors [2025] EWCA Civ 956

www.bailii.org/ew/cases/EWCA/Civ/2025/956.html 

HMRC has announced that between July 2025 and December 2025 it will be conducting a trial involving not sending return and payment reminder letters to companies that are supported by an authorised agent.  Only 5% of companies supported by an agent will be impacted by this trial.

HMRC is testing how the removal of these reminders will impact the payment of corporation tax liabilities. If there is a substantial increase in CT debt overall, the trial will halt completely. 

HMRC trialling the removal of Corporation Tax payment reminder letters | Chartered Institute of Taxation

HMRC is writing to a number of companies that it has identified as potentially having incorrectly declared the number of associated companies within their CT returns.

The letters explain how entering the incorrect number of associated companies may result in higher marginal rate relief being claimed than a company is entitled to.

Recipients are asked to check the number of associated companies entered are correct. They must take action within 30 days, either by amending the return, making a disclosure, or telling HMRC why they don’t need to declare any associated companies. If no action is taken HMRC may open a compliance check. 

HMRC One to Many letter - Marginal Rate Relief  | Chartered Institute of Taxation

In HMRC’s transformation roadmap published on 21 July 2025, it was announced that HMRC no longer ‘intend to introduce MTD for CT’. 

This roadmap is a strong statement of intent over the digital direction of tax administration. 

There remains a commitment to “developing an approach to the future administration of CT that is suited to the varying needs of the diverse CT population”, and to consult early and widely on the design and timing of changes.  While there is no defined successor to MTD for CT, the roadmap does provide a broad direction of travel and there is a strong commitment to digital reporting.  It is almost inevitable that this will lead to changes in how the CT600 forms are structured and filed.

For more information on this, please read our article below.

Making Tax Digital for corporation tax is dead. Long live… ?

The FTT for Scotland agreed with a taxpayer that the extension by minute of variation of a Scottish lease, first entered into under SDLT, did not create a new lease under LBTT.

The taxpayer entered into a lease on a property in Aberdeen in 2013 under the SDLT regime. LBTT replaced SDLT in Scotland on 1 April 2015. The taxpayer then extended the lease in 2020 by way of a minute of variation.

RS treated the extension of the lease as the creation of a new lease for LBTT purposes, resulting in an LBTT liability. This decision was challenged by the taxpayer.

Under English law, the extension of a lease is treated as a surrender and regrant, creating a new lease. Under Scottish law the extension is just a continuation of the lease.

The FTT found that in this scenario, the extension by minute of variation did not create a new lease for LBTT purposes. There was therefore no LBTT liability. RS may appeal this decision.

Archer (UK) Limited v RS [2025] FTSTC 10

http://taxtribunals.scot/decisions/%5b2025%5d FTSTC 10.pdf 

The FTT agreed with the taxpayer that the supply of flooring was separate from the supply of fitting services for VAT purposes.

The taxpayer was a franchiser for multiple flooring retailers who, at the point of selling the product, offered referrals to self-employed carpet fitters.  If the customer so chose, the fitter would attend the customer’s home to fit the flooring. The fitter would then be paid by the customer, and as the fitter was typically not VAT registered, as they were below the VAT registration threshold, no VAT would be accounted for on the supply of the fitting services.  

HMRC argued that, rather than simply introducing and arranging the fitting, the taxpayer was in fact acting as principal and supplying carpet fitting services, and effectively using the fitters as subcontractors. As such, VAT should have been charged and accounted for on the full value of the fitting service. 

The FTT found in favour of the taxpayer citing:

• Whilst the taxpayer ran ’free fitting services’ promotions, the discount was actually on the price of the flooring product.
• The terms and conditions with the customers, agreements with fitters and invoices clearly confirmed the taxpayer was providing an introductory service and not supplying the fitting service.
• The above agreements also made it clear that the fitter was fully responsible for the standard and quality of the fitting work and any liability arising from the fitting.

Any pricing the taxpayer gave for the fitting was just an estimate and the fitting charge had to be paid direct to the fitter for the completion of the work.

While only an FTT decision, given the taxpayer’s arrangements with fitters follows the industry norm, and that HMRC is litigating other cases with similar fact patters, we would expect HMRC may look to appeal this case.

United Carpets (Franchisor) Ltd v HMRC [2025] UKFTT 895 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09596.html 

HMRC has recently issued an update on customs processes for shipping goods from Great Britain to Northern Ireland that require safety and security declarations.

The current system for submitting the relevant declarations, known as Entry Summary Declarations (ENS), is the Import Control System Northern Ireland (ICSNI).  This system is being replaced by Import Control System 2 (ICS2).

Business have been asked to make this move by 1 September 2025, however HMRC recognises potential readiness issues.  For business unable to make the move by 1 September 2025, the old ICSNI system will remain available temporarily.  There is no official date for when the old system will no longer be available, however it has been confirmed that it will be no later than the end of December 2025. 

Customs procedures: shipping goods that require safety and security declarations from Great Britain to Northern Ireland | Chartered Institute of Taxation 

The following Tax publications have been published.

• Making Tax Digital for corporation tax is dead. Long live… ?
• Trumps tariffs hit, but where do you stand as Autumn Budget looms
• Carried interest changes for the internationally mobile
• The government’s Budget promises
• Why de minimis changes could be a big deal at the Budget
• Explaining the budget process
• What’s in a name? The real questions to ask of AI
• Could a UK wealth tax be on the horizon as we approach the Autumn Budget 2025?
• Surviving inheritance: Tax and governance for family businesses after BPR reforms

The following client webinars are coming up soon.

• 23 September: Navigating business relief: a webinar for UK businesses and their owners, in partnership with Family Business UK
• 6 November - Planning a business exit? - A webinar to support you

For those looking for a day out in the school holidays, the biscuit musuem in Bermondsey sounds ideal. History and an accompaniment to tea? What could be better.

Well, a cake wing. This is a recent addition, sponsored by the makers of Jaffa Cakes. The museum had put on an exhibit about Jaffa Cakes, that was rapidly pulled after McVities’ legal team pointed out that they had put an awful lot of effort into establishing that these were not biscuits, and had no place in a biscuit museum. 
A lovely solution for all.

www.theguardian.com/business/2025/jul/03/crumbs-biscuit-museums-jaffa-cake-display-reignites-old-debate

https://southwarknews.co.uk/area/bermondsey/bermondsey-biscuit-museum-unveil-a-new-cake-wing-after-jaffa-cake-debate-with-mcvities/