Tax Update March 2026

The Government is considering widening the scope of the uncertain tax treatment regime.

Currently, the regime only applies to large businesses, but the proposal is to include SDLT, NIC, CIS, IHT and CGT, as well as individuals and trusts with a tax advantage over £5m. The consultation also suggests including a third trigger, to require legal interpretation uncertainties to be notified where HMRC’s position is not known and there is more than one credible interpretation, which would significantly widen the scope of the regime.

The consultation notes that will help close the tax gap and increase certainty for the taxpayer. It will close on 4 June 2026. Any legislation would be introduced in the next available Finance Bill for implementation for returns filed after 1 April the year after.

www.gov.uk/government/consultations/consultation-extend-notification-of-uncertain-tax-treatment-utt-regime 

The taxpayer worked for a company, initially as a self-employed consultant working on commission. After two years he was appointed a director. Two years after that, the company collapsed. Some years later HMRC looked at the taxpayer’s remuneration as a director. The taxpayer made a COP9 disclosure to the effect that he had believed his director salary had tax deducted at source. Although he now knew that this may have been inaccurate, he did not have any records of what total pay might have been, and his accountant had since died. HMRC’s records showed that no PAYE nor NICs had been paid by his employer on his salary.

In order to charge the taxpayer for the company’s PAYE failures, HMRC needed to prove that an HMRC officer had formed an opinion that the company had wilfully failed to deduct PAYE, and that the taxpayer knew about this. 

The taxpayer’s position was that he had provided his accountant with all his bank statements and business records. Monies due to the sales team were sometimes passed through his bank account, so not all receipts on the statement were his income. Once he became a director he assumed he no longer needed to file returns, as he thought PAYE was being operated. He had relied on the company, and knew nothing about its payroll.

The burden of proof was on HMRC, and it failed to reach that mark, partly as the HMRC officer concerned no longer worked for HMRC and did not give evidence. The taxpayer’s appeals against the determinations succeeded.

Witton v HMRC [2026] UKFTT 267 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2026/267.html  

The FTT found that the time limits in the transactions in securities (TiS) regime did not override the standard time limits.

One close company acquired the entire share capital of another close company by a share-for-share exchange. The acquiring company then had substantial amounts of cash. It then issued bonus shares to the four shareholders, in the same ratio as the existing shareholding. The company then reduced its share capital by cancelling many of the shares, again keeping the same percentage shareholdings. The consideration paid for the capital reduction was the majority of this cash, paid by being credited to the taxpayers’ loan accounts. The company then borrowed cash from the subsidiary that it had acquired earlier to repay the credits, resulting in the taxpayers getting cash, which they declared as capital gains, and three of the four claimed entrepreneurs’ relief.

HMRC took the position that this should be treated as income rather than capital under the transactions in securities (TiS) regime. The FTT found that ‘relevant consideration’ could include the distributable reserves of a wholly owned subsidiary, as here, so these were profits available for distribution.

The taxpayers, however, won their case on time limits. The TiS legislation mentions that it does not authorise the making of an assessment more than six years after the tax year in question. HMRC argued that this meant that the time limit was six years, rather than the general four year limit for this kind of assessment. The FTT, after considering Parliamentary intention and the exact wording, found that the mention of six years did not override the standard time limit, so HMRC’s assessment was out of time and invalid.

Oscroft & Ors v HMRC [2026] UKFTT 251 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2026/251.html  

The taxpayer successfully argued that he was in time to amend carry forward claims to carry-back claims, and that HMRC had made an appealable decision.

The taxpayer made losses in two non-consecutive years, and argued that he should be able to carry back each against profits of the previous year. In each case he had included the losses on his current year return. HMRC argued that this constituted a claim for the losses to be carried forward. The taxpayer argued that if so he could undo them, and that in any case the extended time limit for making a carry back claim applied. He also argued that correspondence from HMRC gave him a right of appeal.

The FTT found that he had initially made carry forward claims, but that this did not prevent him later claiming to carry the unused losses back. It found that a letter he had sent was sufficient to make the carry back claims, and that they were in time. The extended time limit applied because of a later amendment creating unrelieved profits in the earlier year.

In addition, correspondence from HMRC was valid notice of HMRC’s intention to enquire, and a later letter a valid closure notice, so the taxpayer did have a right of appeal.

The FTT found overall for the taxpayer.

Lester v HMRC [2026] UKFTT 323 (TC)

www.bailii.org/uk/cases/UKFTT/GRC/2026/323.html  

The FTT upheld a £1m penalty on a scheme promoter, finding that its activities after issue of the stop notice contravened the terms.

The taxpayer was a promoter of a contractor loan scheme, which HMRC issued with a scheme reference number. HMRC issued a stop notice requiring the taxpayer to stop promoting the scheme, followed by a £1m penalty for not complying.

The taxpayer appealed, stating that it had stopped taking on new business after the stop notice, and had just been ‘running off’ its business, but the FTT found for HMRC. The definition of promoting clearly included the carrying on of the business, and as the taxpayer had not taken counsel’s advice until some time after the stop notice was issued it did not have a reasonable excuse for the non-compliance. The FTT upheld HMRC’s decision to issue the maximum penalty of £1m for the breach of the stop notice.

Countrywide Partners Ltd v HMRC [2026] UKFTT 357 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2026/357.html 

The UT has upheld the FTT’s finding that HMRC’s assessments were invalid, as not all of the behaviour was deliberate. Each part of the assessment must meet the correct behavioural threshold for the relevant time limit.

The self-employed taxpayer had been issued with discovery assessments covering six tax years relating to his business between 2009/10 and 2015/16.

At the FTT, it was found that only one element of his conduct (not declaring money received) was deliberate, whereas elements like overclaiming capital allowances and expenses were careless. This meant that assessments were out of time.

At the UT, HMRC pursued its case that the entire assessment for each year should be valid as there had been deliberate behaviour. It argued that the assessment can also include the non-deliberate errors identified in those years which would otherwise be out of time under the standard non-deliberate time limits. The UT however found for the taxpayer, noting that each part of the assessment must meet the correct behavioural threshold for the relevant time limit.

HMRC v Harte [2026] UKUT 112 (TCC)

www.bailii.org/uk/cases/UKUT/TCC/2026/112.html 

The FTT found that intending to reduce IHT to pass more to descendants made a transfer one intended to confer a gratuitous benefit. Six days before his death in 2007, a taxpayer purchased an income interest in an existing offshore trust. This is generally a transfer of value under the IHT legislation, and thus chargeable, but the executor argued that this particular case came within the exemption for transfers not intended to confer a gratuitous benefit. The appeal related to the lifetime tax payable on the transfer, additional tax on death and substantial interest.

The transaction was a set of pre-planned arrangements. The deceased took out a loan to purchase the interest, which was a right to receive income, with the plan that this would not form part of his estate and the loan could be deducted. His advisers initially sought to argue that this was not a transfer of value, but later accepted this and reverted to the lack of gratuitous benefit defence. At the FTT, the executor argued that the deceased did not intend to confer any benefit on any other person by the purchase and related transactions, and that it was an arm’s length transaction.

Proof of intention post death is a complex area, but the FTT found that the deceased had intended to reduce IHT to benefit his family, who would inherit. He was cognitively able at the time of the planning, and there was evidence that IHT was a concern. Therefore the appeal was dismissed.  

Burles v HMRC [2026] UKFTT 314 (TC)  

www.bailii.org/uk/cases/UKFTT/TC/2026/314.html  

There is now a single line for both complex and informal estates. This should also be used by agents. HMRC asks for no chasers for correspondence more recent than 12 weeks.

Also, cover letters for any forms should, if included, be placed behind the form to assist the automatic scanner in identifying the form.

www.att.org.uk/technical/news/contacting-hmrc-help-deceased-estates 

HMRC has updated the reporting requirements for some non-tax advantaged employment related securities (ERS).

For this and all previous and future tax years, employers will no longer have to include data on a non-tax advantaged ERS if the employee is a short-term business visitor (STBV) who is covered by an EP Appendix 4 arrangement and neither IT nor NIC is due.

This is a limited but welcome administrative change.

www.icaew.com/insights/tax-news/2026/mar-2026/return-obligation-relaxed-for-short-term-business-visitors 

The UT upheld the decision that the compensatory element of an early redemption as an imported loss was disallowable, but concluded that relief was available for the costs referable to the post-migration period.

Typically, losses relating to a period of non-residence are not relievable against UK income.  In this case, a loss arose on the early redemption of loan notes, but the dispute was whether it was during the pre- or post-migration period.  The FTT concluded that the whole loss related to the period of non-residence.  The taxpayer appealed.  

The loss HMRC argued related to the period of non-residence and the amount disallowed were broken down into three areas: the compensatory element of the premium for the early redemption, the unamortised issue cost and the unamortised discount on issue.

The UT found that the FTT did not focus on the commercial reality, that the issue costs were part of the cost of obtaining the proceeds of loan notes. When the loan notes were redeemed, the unamortised issue costs had to be written off as part of the loss on redemption.  The commercial reality of this is that these costs were written off at the time of redemption and therefore in the post-migration period.  The UT concluded that the unamortised discount was no different from the unamortised issue costs in this respect.

The UT concluded that the compensatory element was referable to the pre-migration period, but relief was available for the post-migration element.

UK Care No.1 Limited v HMRC [2026] UKUT 90 (TCC)

www.bailii.org/uk/cases/UKUT/TCC/2026/90.html 

The Government plans to prescribe a standard format of corporation tax computations. Currently, they are submitted in a variety of formats, but tagged to make them machine readable. This can lead to significant variations in how similar information is presented, and in many cases there are omissions or ambiguities. Unclear expectations can contribute to error and additional enquiries, making more work for HMRC and companies.

The consultation document sets out the proposed timeline, enforcement measures and tests such as a pilot phase. It also notes a proposal to require amended corporation tax returns to be filed online.

The consultation will close on 2 June 2026. Responses are requested from affected parties including software developers, corporates and their tax advisers.

www.gov.uk/government/consultations/modernising-and-standardising-company-tax-returns 

The UT upheld the taxpayer’s appeal that the penalty issued by HMRC was an abuse of process.

HMRC denied the right to deduct input tax amounting to £9.8m on the basis HMRC considered the taxpayer knew or ought to have known that the transactions were connected with the fraudulent evasion of VAT.  

HMRC issued a director’s liability notice (DLN) in the region of £2m on the basis it alleged the dishonesty as a director of the company in connection with the fraudulent evasion of VAT.

The taxpayer appealed against the DLN on the basis it was an abuse of process, however this appeal was dismissed by the FTT.  

The taxpayer appealed the decision of the FTT to the UT.  The dishonesty-based penalty was based on evidence from a previous hearing, despite HMRC promising to not pursue dishonesty charges.  HMRC also could and should have raised the allegation of dishonesty in the Kittel appeal.  The UT found this to be ‘inherently unjust’ on HMRC’s part, particularly when the taxpayer was assured that this evidence would not be used against him in future penalty proceedings.  

As a result, the UT upheld the taxpayer’s appeal and remade the decision setting aside the director’s liability notice.

Ashley Charles Tress v HMRC [2026] UKUT 92 (TCC)

www.bailii.org/uk/cases/UKUT/TCC/2026/92.html 

The FTT allowed the taxpayer’s appeal that public electric vehicle charging points qualified for the reduced rate of VAT, where the electricity supplied did not exceed 1,000 kWh per month.  

The taxpayer supplied charging stations in public places in the North of England and made a claim for overpaid VAT, being the difference between the standard rate and reduced rate, which HMRC processed and credited to their account.  HMRC subsequently clawed back the repayment on the basis they later considered it to be ‘wrongly credited.’

Whilst HMRC argued that the supply of electricity must be made to the recipient’s own premises, the taxpayer disagreed on the basis there is no restriction in the legislation to the nature of the premises the supply must be made, albeit the legislation does specify qualifying supplies must be ‘for domestic use’.

HMRC also contended that the rate should be calculated by apportioning the monthly limit of 1,000 kWh on a daily basis, whereas the taxpayer argued that this method was flawed as a driver may exceed the daily pro-rated allowance, but not the overall monthly allowance. 

The FTT favoured with the taxpayer and the appeal was partly allowed in principle.

Charge My Street Limited v HMRC [2026] UKFTT 318 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2026/318.html 

The following Tax publications have been published.

• IR35 and off-payroll compliance changes for 2026
• Personal tax planning: What to consider before 5 April
• Early advice can prevent costly stamp duty land tax problems
• Short-term business visitors (STBVs): A refresher
• How can R&D relief help agricultural businesses?
• A future for trusts in family businesses?
• Sustaining success in fast-growth businesses

The following client webinars are coming up soon.

• 24 March - Fintech funding landscape: What investors want and how to stand out
• 22 April - Navigating Tax: Managing employer costs with smart reward, equity and compliance planning
• 23 April - Pre-sale exit planning setting up for a successful exit 

Due to publication schedules I am afraid that we are making readers aware after the end of the week, but from 9th to 13th March the ATT ran “Tax Awareness Week” and published a series of articles. These are mostly aimed at the layperson, but any tax adviser who regularly gets questions like “is this a genuine HMRC letter?” or “do I need to pay tax when I sell a property?” from friends may be delighted to see articles which can be sent as a full answer. We look forward to celebrating properly next year!

www.att.org.uk/tax-awareness-week