Tax update September 2025

The date of the Autumn Budget has been announced by the Treasury.

The Chancellor has confirmed that the Autumn Budget will be held on 26 November. Tax rises are expected, and you can keep up to date with predictions and speculation on our Budget page, as well as by reading our detailed Budget articles.

What could be in the Autumn Budget 2025?

Autumn Budget hub

www.gov.uk/government/news/budget-to-address-economy-thats-not-working-well-enough-for-working-people 

Daniel Tomlinson MP was appointed as Exchequer Secretary to the Treasury (XST) on 1 September 2025 as part of a reshuffle.

The XST is chiefly responsible for dealing with HMRC and the tax system. He replaces James Murray MP. We wish him well in his new role. 

www.gov.uk/government/ministers/exchequer-secretary-to-the-treasury  

HMRC has announced a voluntary repayment scheme for businesses and individuals who overclaimed on support schemes during the pandemic.

Individuals and businesses have until December 2025 to repay any outstanding money they were not entitled to, otherwise they may face tougher sanctions including prosecution once the Government receives additional investigatory powers next year.

The Government continues to recoup money lost to covid fraud, so this is applicable to all covid-related support schemes.  

If you are concerned around support payments you or your business have received and would like help with making a disclosure and repayment, please do get in touch.

Covid repayment window opens - GOV.UK

Taxpayers in simple rather than self-assessment will be allowed to use the online facility to apply for time to pay arrangements, for tax debts of up to £50,000. 

The online application system, as opposed to applying by phone, has previously been available to taxpayers in self-assessment with debts under £30,000. Some other conditions, such as no other HMRC debts being in place, will still apply. 

Time to pay arrangements can prevent additional penalties accruing, if stuck to, but interest is still charged. 

www.icaew.com/insights/tax-news/2025/aug-2025/simple-assessment-taxpayers-can-apply-online-for-a-payment-plan

HMRC’s latest campaign consists of letters to taxpayers who may have failed to declare capital gains and income arising whilst they were non-UK tax resident.

Individuals who become non-UK tax resident, but return within five years, are known as temporary non-residents. Some income and capital gains which are not generally taxable on non-residents come back into charge on their return to the UK within five years. 

HMRC is writing to self-assessment taxpayers who have indicated that they were non-UK resident for at least one tax year since 2018/19, would be classed as a temporary non-resident, received income or sold assets while non-UK tax resident, and did not declare all the income or gains when returning to the UK. 

Recipients are asked to check their returns from 2018/19 onwards, and take corrective action within 60 days of the date on the letter. Where the taxpayer believes that their tax returns are correct they should also get in touch with HMRC within the 60 days or HMRC may use the information it holds to raise an assessment.

Do get in touch if you receive one of these letters and would like help dealing with it.

www.icaew.com/insights/tax-news/2025/aug-2025/temporary-non-residents-asked-to-check-tax-returns  

The FTT found that despite the transfer of a partnership interest into an LLP, it was still the transferor who should be taxed on the income, not the corporate member credited with the profit share.

The taxpayer, a former professional footballer, had interests in two film partnerships. He assigned these to an LLP. He was a member of the LLP, as was a company, which was entitled to the profits from these assignments. The intention was that the taxpayer would no longer be liable for income tax on the partnership profits, as he was no longer entitled to them. Losses generated in the earlier years of the film partnerships had been used by him, so this was a secondary scheme to prevent him from being taxed on the profits. 

The FTT found for HMRC. Looking at the real arrangements as a whole, the income was still being applied for the benefit of the taxpayer, so he was still entitled to it. In addition, on review of the documentation, the assignment of the rights to the LLP may have been ineffective. 

Burley v HMRC [2025] UKFTT 989 (TC) 

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09613.html  

The FTT has found that it was the individual, not the company he had assigned his image rights to, that had entered into sponsorship agreements. Therefore the income was taxable on him.

The taxpayer, a professional cricketer, assigned his intellectual property rights to a company in 2005. He made agreements with sporting brands that paid for the use of his image. These agreements were between him and the brands, though the money was returned in his company’s accounts. HMRC contended he remained the person legally entitled to the income derived from these, rather than the company, and that as such the money was taxable on him directly as profits from self-employment. It issued closure notices for four tax years. 

The taxpayer argued that his agreements with the brands related to publicity, and that as he had assigned the rights to the company he had no legal right to benefit from the agreements. He also stated that due to an earlier HMRC enquiry involving sponsorship income, which had been closed, he had a legitimate expectation that the receipts would be assessed on the company. 

The FTT found for HMRC. There was no evidence that the taxpayer’s company was party to the agreements between his and the brands, or even that it received the income. It also found that it could not consider his argument on legitimate expectation. 

This case is a useful reminder to businesses, particularly small businesses not within the scope of the off-payroll working rules, that robust documentation is essential to protect against unintended tax consequences. 

Collingwood v HMRC [2025] UKFTT 1065 (TC) 

www.bailii.org/uk/cases/UKFTT/TC/2025/1065.html  

The FTT has found that ‘life’ in the IHT legislation can refer both to human life, for an individual settlor, and live companies for corporate settlors. 

The taxpayer, a company, established a remuneration trust in 2005. The decennial charge therefore arose in 2015, the amount was not in dispute. HMRC issued a notice of determination in 2020. 

The taxpayer appealed on the grounds that the legislation refers to life (“where the transfer is made during the life of the settlor”), and as a company it was not alive. The FTT was referred to a dictionary which defined life as: 

"Life noun (Time alive): The period between birth and death, or the experience or state of being alive 

Life noun (Time of operation): The period for which a machine or organization lasts." 

The FTT dismissed the argument that ‘life’ should take its ordinary meaning as the period between birth and death of a living thing. Its view was that the legislation was clearly intended to cover both individual and corporate settlors, so the reference to life should not be read as purely to human life, but also to ‘live’ companies, being those on the register. 

Lexgreen Services Ltd v HMRC [2025] UKFTT 1019 (TC) 

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09618.html  

The UT has found that taxpayers who used the Disguised Remuneration Repayment Scheme were not entitled to a refund, as HMRC would have had power to recover the amounts.

The taxpayers had been involved in a disguised remuneration scheme. As part of their withdrawal from the scheme, payments were made to HMRC under the Disguised Remuneration Repayment Scheme. Later, they sought to claim refunds in part, on the basis that although these were part of the settlements with HMRC, HMRC would have had no power to recover those amounts. HMRC refused the applications, and the taxpayers applied for judicial reviews. 

These were considered by the UT, which found that HMRC was correct. HMRC would have been able to recover those amounts, so there was no right to repayment. It also found that the taxpayers had not made sufficient disclosures to use that as a defence. 

Fluid System Technologies (Scotland) Ltd & Anor, R (On the Application Of) v HMRC [2025] UKUT 278 (TCC) 

www.bailii.org/uk/cases/UKUT/TCC/2025/278.html 

The FTT allowed the taxpayer’s appeal, on the basis that they were not aware they were connected to fraudulent VAT evasion.  

The taxpayer was a small business dealing in office equipment.  An opportunity arose to act as a UK intermediary selling electronic goods to customers in the EU.   The taxpayer’s role in the supply chain was effectively a financing role.  Due to their healthy cashflow position, they had the available funds to bridge the gap between paying the input tax on the purchases and recovering the VAT from HMRC. 

In 2022, there was a significant increase in the taxpayer’s turnover, yet profit levels remained the same, raising alarm bells twitho HMRC.  

HMRC argued that ‘a reasonable trader’ in the taxpayer’s position “would understand that each participant in a transaction chain must add value in order to justify its inclusion in the chain” and therefore should have known that they were involved in fraudulent VAT evasion.

The taxpayer was hesitant and aware of the risks involved with the electronics business and took steps to validate the business supplying the goods. HMRC confirmed on a call that the VAT number was valid. 

The FTT decided that HMRC did not provide enough proof that the taxpayer should have known about the fraudulent evasion of VAT. The FTT also concluded that HMRC’s connection with VAT fraud was ‘speculative’, rather than conclusive, thus allowing the taxpayer’s appeal. 

Deos Group.co.uk Limited v HMRC [2025] UKFTT 1018 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09617.html 

The FTT ruled that HMRC must disclose when artificial intelligence (AI) is used in compliance checks relating to research and development (R&D) tax credit claims.

A tax professional, specialising in R&D relief claims, suspected that HMRC was using AI in some enquiry correspondence and put in a Freedom of Information (FOI) request seeking confirmation.  Correspondence received from HMRC suggested the usage of AI, such as ‘em-dash’ punctuation and American spellings, when assessing R&D relief claims. 

HMRC responded to the FOI request by confirming that it held the information requested but was withholding it.  HMRC argued that providing such information would prejudice the assessment or collection of tax.  The individual complained to the Information Commissioner (IC) regarding HMRC’s handling of the request. 

The IC considered the public interest and concluded that maintaining the exemption and withholding the information superseded this, despite HMRC changing its official position to a neither confirm nor deny (NCND) stance and the ICO’s own guidance emphasising the accountability and transparency in AI deployment. 

The FTT allowed the appeal and agreed that HMRC must confirm if it holds the information and either disclose the information or provide reasonable grounds for non-disclosure. It also agreed with the appellant that HMRC’s switch to a NCND stance after it had confirmed that it held the requested information was untenable.

Thomas Elsbury v The Information Commissioner [2025] UKFTT 915 (GRC)

Elsbury v The Information Commissioner [2025] UKFTT 915 (GRC) (02 August 2025)

The Government has published an interim report on options for changing the system of business rates. This follows on from a discussion paper. 

A discussion paper on changing the system was published at Autumn Budget 2024. This report summarises the findings made following engagement with stakeholders, and the Government’s current views. Priority areas for change are: 

• Switching from a system where a single multiplier is used to one with multiple rate bands, to allow the use of marginal tax rates
• Enhancing rates relief for small businesses
• Looking at concerns over receipts and expenses checks
• Administrative changes for the valuations process 

www.gov.uk/government/publications/transforming-business-rates-interim-report 

The FTT allowed the taxpayer’s appeal on the basis their supercar driving experience business qualified for the reduced VAT rate during the coronavirus pandemic. 

The taxpayer provided driving experiences in ‘supercars’ at circuits in Scotland and Northern Ireland. HMRC introduced a reduced VAT rate during the COVID-19 pandemic to help support businesses with specific supplies.  Following their accountant’s advice, the taxpayer took advantage of the reduced rate and applied the 5% rate from 15 July 2020.  HMRC issued an assessment and argued that the supplies should have been at standard rate, instead of the reduced rate.   

HMRC argued that the taxpayer’s supplies were far more than simply a ‘right of admission’ on the basis supplies also involved the use of a vehicle, tuition and supervision and therefore did not fall within one of the ‘right of admission’ categories. 

The taxpayer argued that their driving experience business was ‘precisely the type of hospitality and leisure business that Parliament had intended to assist’. In this case, comparisons were made to amusement parks where customers paid for admission so that they could enjoy the rides.  Similarly, customers paid for admission so they could enjoy driving or being driven in a ‘supercar’.  

The FTT agreed with the taxpayer’s argument that providing the vehicle, tuition and supervision were part of the safety and benefit of the experience, thus allowing the appeal. 

Ingliston Driving Experience v HMRC [2025] UKFTT 564 (TC)

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

The FTT has found that an annexe qualified as a separate dwelling for SDLT purposes, and multiple dwellings relief (MDR) applied. This was a finely balanced decision hinging on the position and facilities. 

The taxpayers bought a detached three bed home, with an ‘annexe’ structure attached to the side. This was previously the garage, but had been converted to single storey accommodation. It had its own front door, a utility room/kitchen and a bathroom. The utility room had a door which opened into the hallway of the main house.  

In terms of utilities, the annexe had electric heaters and running water, but drew hot water from the boiler in the main home. The annexe did not have a separate postal address, council tax registration, nor meters. 

HMRC argued that this annexe was part of the main dwelling house, not a dwelling in its own right. The FTT found for the taxpayer that this was a separate dwelling, considering all the factors, as although a finely balanced case this could be occupied as a separate dwelling. The door between the annexe and house could be locked, and shared bills could be addressed in a tenancy agreement. 

Berell & Anor v HMRC [2025] UKFTT 1067 (TC) 

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09626.html 

The SC upheld the CA decision that VAT was payable on ‘success fees’ following the departure from a VAT group. 

Silverfleet Capital Limited (Silverfleet) supplied investment fund management services to the taxpayer when both companies were members of the same VAT group.  At the time the services were performed, the supplies were disregarded and treated as intra-group supplies for VAT purposes.

The ‘success fees’ were triggered when the value of funds exceeded a specific threshold. Silverfleet had left the VAT group prior to the value of funds surpassing this threshold. The dispute concerned whether the ‘success fees’ were subject to VAT or not. 

The FTT decided in the taxpayer’s favour that no VAT was payable on the ‘success fees’, however this was later overturned by the UT and upheld by the CA.

The taxpayer argued that no VAT was chargeable on the ‘success fees’ on the basis the supply of services took place during the period when the two companies were members of the same VAT group and should be disregarded, irrespective of when invoices were issued or payments were made. 

HMRC argued that there had been a continuous supply of services and services must be “treated as separately and successively supplied”, hence the time of supply rules applied.  Consequently, the tax point was the point at which the services were invoiced.  As Silverfleet was no longer within the VAT group at this point, VAT was charged on the ‘success fees’. 

The SC upheld the CA’s decision that the supply occurred once Silverfleet had left the VAT group and that it was correct to charge VAT on the ‘success fees’.

This case emphasises the importance of time of supply when determining whether VAT is applicable or not and businesses should be mindful of this to avoid unexpected VAT liabilities. 

Contracts and accounting systems may need reviewing for businesses that receive or provide continuous services, where one of the businesses exits the VAT group.  Businesses must be mindful of when invoices are raised to mitigate the risk of unexpected VAT liabilities. 

Additionally, businesses experiencing a corporate reorganisation should consider deferred payments (including performance fees) which could also give rise to an unexpected liability if time of payment or invoice arises after exit.

The Prudential Assurance Company Ltd v HMRC [2025] UKSC 34

www.bailii.org/uk/cases/UKSC/2025/34.html 

The following Tax publications have been published.

• Why business owners are keeping quiet about BPR
• Switching to biodiesel could cut generator costs
• New tax relief rules for employee ownership trusts (EOTs)
• Reforming the waste carrier, broker and dealer system in England
• The gift that keeps on giving? How the Budget could squeeze more from IHT
• Latest Budget predictions and speculation
• Business rates in England: Could you qualify for a relief or exemption?

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

Why not both.

The case at 3.1 is not unique in tackling the meaning of a word in the legislation. As all those interested in tax know, this can be hotly debated, regardless of how clear the dictionary seems. Notable examples include “matter” (Embiricos) and “deliberate” in many more cases. Although this case was unlikely to succeed given how wide the exemption thereby created would be, it is an ingenious argument.

Although the judge chose not to address philisophy beyond his teaser of an opening line, given the increasing abilities of AI, the question of what is alive is an ever more relevant philosphical point, even if beyond the scope of the FTT. An good effort anyway.

If only he’d managed to get the judgement into 42 paragraphs.

https://en.wikipedia.org/wiki/The_Hitchhiker%27s_Guide_to_the_Galaxy 

HMRC v Embiricos [2020] UKUT 370 (TCC) 

www.bailii.org/uk/cases/UKUT/TCC/2020/370.html