Tax Update June 2025

HMRC has announced that it was subject to a fraud resulting in the loss of £47m. Taxpayers whose accounts were accessed are being contacted.

Around 100,000 personal tax accounts are said to have been accessed without authorisation. This has resulted in a loss to HMRC of £47m. HMRC is writing to all affected taxpayers, who will not lose out financially themselves. Anyone affected will need to recreate their log in details.

www.att.org.uk/technical/news/unauthorised-access-hmrc-online-accounts 

www.gov.uk/guidance/unauthorised-access-of-hmrc-online-accounts 

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

The rate applied to the main taxes is now 8.25%. The rate of interest on repayments from HMRC is 3.25%.
This change applied from 19 May for quarterly instalment payments and 28 May for non-quarterly instalment payments.

www.gov.uk/government/news/hmrc-interest-rates-for-late-payments-will-be-revised-following-the-bank-of-england-interest-rate-cut-to-425 

The FTT has found that rental income from a jointly owned property was taxable solely on the wife, as the husband had neither received nor was entitled to the income.

A property was let through the Airbnb platform for three years, and the income was not reported. HMRC issued the taxpayer with discovery assessments, but chose not to issue penalties due to the circumstances. She argued that the discovery assessments were overstated, as the rental income belonged to both her and her then husband.

The property was jointly owned throughout. The taxpayer let it out by herself, and had the rent paid into a sole account, as her husband was overseas and they were not in contact. She held financial power of attorney for him so was able to make decisions alone. The HMRC officer took the position that she needed to prove that her former husband had benefitted from the rental income in order for it to be taxable on them both. The taxpayer pointed out that though none of the funds had been transferred to him, she had used it to cover matters for which he should have been responsible such as joint loans and the upkeep of their child, as he did not give her other financial support. She had had to stop paying anything into a joint account as he withdrew funds from it.

The FTT noted that the correct test to determine if her husband was taxable was whether or not he was in receipt of, or beneficially entitled to, the half share of the income.  The FTT agreed with HMRC that he was not. It found that the letting business was carried on by the taxpayer alone and it was she who was therefore taxable on its income.  

Moss v HMRC [2025] UKFTT 595 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09535.html 

The UT has upheld an FTT decision on the validity of enquiry notices relating to losses incurred in one year, but carried back to and included on the tax return of the previous year.

The taxpayer entered into an avoidance scheme since found not to work. Losses were created through this scheme in 2006/07, which he carried back to 2005/06 through his 2005/06 tax return. The HMRC enquiry notice into the claim was issued on the basis that the claim had been made outside a return, though it was included on the 2005/06 return. HMRC also issued an enquiry into the 2006/07 return, which included a note about the claim.

The FTT agreed with the taxpayer that the original enquiry notice into a claim outside a return was invalid, as issued on the wrong basis. However, the enquiry into the 2006/07 return was valid, so the closure notice disallowing the loss could still be upheld, and the taxpayer lost his appeal.
The UT dismissed the taxpayer’s appeals, finding that the claim in 2005/06 was not made ‘in’ his return but ‘on’ it as a standalone claim, meaning the enquiry notice into the claim was valid. It also agreed with the FTT that the enquiry into the 2006/07 return was valid.

Murphy v HMRC [2025] UKUT 165 (TCC)

www.bailii.org/uk/cases/UKUT/TCC/2025/165.html 

HMRC has written to a number of persons with significant control (PSCs) asking them to check if they have declared all income and gains for 2023/24.

HMRC has reviewed information from Companies House and written to the PSCs in two groups: those who may have missed off income or gains, and those who did not submit a return for 2023/24. Both are asked to take corrective action by 25 July 2025. Those who do not believe they need to submit a return are asked to contact HMRC to confirm.

www.icaew.com/insights/tax-news/2025/jun-2025/hmrc-writes-to-persons-with-significant-control

The FTT found that a company had substantial non-trading income, so its shares were not eligible for entrepreneurs’ relief (ER, now known as business asset disposal relief) on sale.

Three taxpayers sold shares in a company. They met most of the requirements for ER, but HMRC argued that the company was not trading in the year before the disposals.

The company held a property, and had applied for planning permission to build on adjacent land. The FTT accepted that this meant that the company was intending to trade. However, it found that as the company’s only source of income was substantial rental receipts from the property, which was a non-trading activity, the company’s shares did not meet the qualifying conditions.

Eyre & Ors v HMRC [2025] UKFTT 566 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09530.html

The FTT has found that two taxpayers were not eligible for entrepreneurs’ relief (ER, now known as business asset disposal relief), as the company had substantial non-trading activity, but they had not acted carelessly so their appeals against penalties were allowed.

Two taxpayers sold their shareholdings in a company, of which they were both directors, on the same date. They claimed ER to reduce the CGT on the sale. HMRC denied their claims, and they appealed to the FTT against this decision, and penalties for carelessness issued alongside it.

The activity was the provision of moorings, along with services and maintenance of boats. The taxpayers argued that very little time was spent on non-trading activities. The FTT however noted that a significant proportion of the company’s income was derived from these, such as collecting moorings fees, as opposed to trading activities such as boat repairs. The FTT found that the company was carrying on activities which to a substantial extent included non-trading activities and so ER was not available.

On the question of penalties, HMRC argued that the discussions that took place between one taxpayer and his adviser were insufficient from the perspective of a reasonable taxpayer. The absence of formal written advice showed careless behaviour. The FTT found that as oral advice had been obtained from a professional and competent adviser, reasonable care was taken and therefore the appeals against the penalties were allowed.

Moffat v HMRC [2025] UKFTT 663 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09546.html 

The FTT has ruled that the TIS rules did apply to a capital reduction and so receipts should be taxed as income not capital.

The taxpayers had inserted a new holding company by way of share for share exchange, creating a large share premium account in the holding company. The company then undertook two large capital reductions, returning funds to the shareholders.  HMRC issued counteraction notices against the second of these reductions, arguing the transaction was within the TIS rules and the taxpayers should be subject to income tax on the receipt.

Whilst the taxpayers accepted that one of the main purposes of the transaction was to achieve an income tax advantage, one of the criteria for TIS to apply, they argued that as a return of capital it did not fall within the TIS rules.  The FTT rejected the taxpayers’ argument, stating that the provision the taxpayers were seeking to rely on applied in limited circumstances where share capital could legally be distributed as a dividend.  As this was not the case here, TIS applied.

Separately, HMRC argued that the legislation as drafted at the time contained a drafting error. The legislation has since been amended, and after considering the facts and the conditions necessary for the Courts to correct a drafting error, the FTT concluded that it did not feel a redrafting was necessary.

As a previous case (Osmond v HMRC [2024] UKFTT TC09390) found that a drafting error had occurred, we may see the taxpayer appeal this case. 

Paul Hunt, James Hunt and Robert Davis v HM Revenue & Customs [2025] UKFTT 538 (TC)  

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09519.html 

The ICAEW has issued a reminder on the rules around submitting a Research and Development (R&D) relief claim notification form, and clarified the steps that companies should take if they have been affected by a drafting error in HMRC’s guidance.

In the article. the ICAEW explains when an advance notification is required, and what information needs to be provided.  Between 8 September 2014 and 17 October 2024 the details provided in HMRC’s guidance contained incorrect information. HMRC says that it will allow claims without a claim notification form where:

• the company made a valid claim in an amendment to a return for an accounting period beginning before 1 April 2023, which was submitted to HMRC between 1 April 2023 and 30 November 2024; and
• the accounting period for which a claim notification form was not delivered, but ought to have been, had a claim notification period ending between 8 September 2024 and 30 November 2024.  

Affected companies must contact HMRC by email providing the information set out in the ICAEW article.

www.icaew.com/insights/tax-news/2025/may-2025/dont-overlook-r-and-d-claim-notification-forms 

HMRC has updated its guidance on the entitlement of EU and EEA resident companies to repayment interest on income tax repayments. From 1 July 2025, only companies within the charge to UK corporation tax will be eligible for repayment interest.

Section 826 of the Income and Corporation Taxes Act (ICTA) provides for 'repayment interest' to be added to a repayment of income tax made to a company that claims relief under a Double Taxation Agreement (DTA).

HMRC has recently updated its guidance to reflect a change in the entitlement of EU and EEA resident companies to repayment interest. Up until 30 June 2025, any company resident in a member state of the EU or EEA was entitled to repayment interest on any repayment of income tax or payment of a tax credit following a successful treaty relief claim. This entitlement will change for payments received on or after 1 July 2025. From this date, repayment interest will only be payable in respect of repayments of income tax to companies that are within the charge to UK corporation tax as regards the underlying income. 

www.gov.uk/hmrc-internal-manuals/international-manual/intm333530 

Nudge letters have been sent to retail companies warning of rogue R&D agents.

HMRC has issued letters directed at companies in the retail sector who have not made a claim for R&D relief who may be approached by R&D agents seeking to misrepresent the tax relief schemes. The letters explain that while possible, it is unlikely for a business in this sector to claim R&D relief, and lists the common activities HMRC sees claimed that do not meet the requirements for relief.

www.tax.org.uk/hmrc-one-to-many-letter-r-d-tax-credits-in-the-retail-sector 

The FTT ruled that supercar driving experiences qualify for the temporary reduced VAT rate introduced during the COVID-19 pandemic. The FTT found that these experiences were akin to a right of admission to a facility similar to a fair or amusement park.

The taxpayer provided driving experiences at off-road venues where a member of the public could drive or be driven at high-speeds in a ‘supercar’. The taxpayer claimed the temporary reduced rate of VAT that was introduced to support the hospitality industry as a result of the Covid-19 pandemic and applied from July 2020 to March 2022.  The reduced rate applied to ‘Supplies of a right of admission to shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and similar cultural events and facilities’.

HMRC challenged this application, arguing that the experiences did not qualify for the reduced rate. However, the FTT found in favour of the taxpayer, determining that the supercar driving experiences constituted a supply of a right of admission to a facility similar to a fair or amusement park. The FTT noted that customers paid for the thrill and enjoyment of driving or being driven in supercars, which was comparable to the excitement offered by amusement park rides.

Ingliston Driving Experiences Ltd v HM Revenue & Customs [2025] UKFTT 564 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09528.html 

The following Tax publications have been published.

• UK transfer pricing reform 2025
• NIC on deferred compensation
• Commerciality and sideways loss relief for equine businesses
• National Minimum Wage, maximum risk
• The UK publishes draft carbon border adjustment mechanism (CBAM) legislation
• The real deal: The Indian trade agreement
• The UK and US trade deal is anything but 

The following webinars are coming up soon.

• 26 June: Planning a business exit? - A webinar to support you
• 16 July: Business rates: What ratepayers need to know to navigate tax complexities around the 2026 revaluation and upcoming other changes

While we are still waiting for a date for the Autumn Budget, and speculating about what it might hold, the Treasury has put out an interesting document - “Tax Policy Making Principles”. This very short note mostly covers things we knew already, like the government’s plan to hold only one major fiscal event a year, but it is nice to see the commitment to predictability and stability laid out. There is also a mention of “L-day”, when we can expect to see some new legislation in the summer.

www.gov.uk/government/publications/tax-policy-making-principles