Tax update September 2026

The FTT has held that entrepreneurs’ relief (ER, now known as business asset development relief) was available on a disposal of shares. The company was found to be the holding company of a trading group.

The four taxpayers held shares in a holding company (H) until 2016, when they disposed of them. The sole asset of this company was 100% of the share capital of another company (A). The taxpayers had all held at least 5% of the ordinary share capital in H and had had at least 5% of the voting rights in it, as well as being directors of H. These are some of the requirements to claim ER, but in addition A needed to be a trading company for the year leading up to the disposal. HMRC contended that that requirement was not met, so ER was not available.

A owned a property, which was initially a rental investment, but in 2011 the directors decided to develop the property. In 2012, it granted an option to a third party to buy the shares in H. Under the terms of the option agreement permission for the development was sought, and the directors of A undertook lobbying and other activities to meet this goal. The option was exercised after planning was granted. The taxpayers argued that in the run-up to the sale, although the properties were let the key activity of the company was the trading activity of property development.

The FTT found for the taxpayers. The development trade generated substantially more profit than the rental income. The rental income was essentially a legacy of past investment activity, and that investment activity was being wound down. All the work of the directors focussed on the development, not the lettings, and the costs of the two activities reflected the same split.

The FTT also noted that while the test of substantiality is applied over the 12 months before sale, this would paint an incomplete picture of the company’s activities. It would be wrong to ignore the long term results of A’s very successful property development just because building had nont started during the 12 month period.

Overall A’s non-trading activities were not substantial in the context of the activities in the year before sale, so ER was available.

Pontin v HMRC [2026] UKFTT 1166 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2026/1166.html

The FTT found that the semi-submersible on which the taxpayer worked was not an offshore installation for the purposes of the legislation and ship seafarer’s earnings deduction (SED) was available.

Over the three years to which his claim related, the taxpayer worked on a self-propelled vessel which performed seabed clearance for the oil and gas industry. It travelled between the wells and wellheads where the operations were carried out. SED is available to taxpayers working on a ship, but not if they work on an ‘offshore installation’ which is put to relevant uses when stationary.

The definition of relevant uses included activities of which the vessel was capable, such as exploiting the wells. However, during the taxpayer’s time on the vessel it did not carry out these activities. It worked only on decommissioning wells that were no longer to be used.

The FTT accepted that the vessel had not been put to the relevant uses in the time, so was not an offshore installation. Therefore, SED was available.

King v HMRC [2026] UKFTT 1163 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2026/1163.html

The FTT found that the taxpayer in this case was liable to pay the CGT on a property sale, as she was its beneficial owner. The assessment was however recalculated at a lower amount.

A property was owned legally by one individual. The title had been transferred between family members several times, then sold. After the sale, the legal owner's mother brought proceedings in the County Court on the basis that she was the beneficial owner and should receive the sale proceeds. She won, and HMRC therefore argued that it was beneficially owned by her for tax purposes, and that after the sale the proceeds were held in trust for her. Therefore, CGT was payable by the mother.

The FTT agreed with HMRC's position. It had made a valid discovery, and the conclusions drawn were correct. The assessment was upheld, but recalculated as it had used the originally agreed sale price, rather than the lower figure it was actually sold for. It also confirmed that deductions should be allowed for the legal costs of establishing title.

Kaur v HMRC [2026] UKFTT 1277 (TC) 

www.bailii.org/uk/cases/UKFTT/TC/2026/1277.html

The UT has agreed with the FTT that the TIS (transactions in securities) 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 later 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.

The UT has agreed with the FTT on both points. It found that there was no drafting error, and agreed that the scope was too narrow to apply here.

The Executors of Paul Hunt & Ors v HMRC [2026] UKUT 342 (TCC) 

www.bailii.org/uk/cases/UKUT/TCC/2026/342.html

The fuel prices for petrol, diesel, liquefied petroleum gas (LPG) and electric cars have been updated to reflect the new rates from 1 September 2026. The previous rates can be used for up to 1 month from the date the new rate applies.

These rates only apply to employees using a company car and are limited to two circumstances. Firstly, where an employer reimburses its employees for business travel in their company cars and secondly where employees are repaying the cost of fuel used for private travel. 

Advisory fuel rates - GOV.UK

HMRC has published new guidance on how the new mandatory tax adviser registration applies to groups, joint ventures, partnerships and complex investment structures. The guidance confirms that registration is generally not required where there is no genuine third-party advisory relationship.

The mandatory tax adviser registration was introduced with the aim of improving standards within the tax advice market. As a general principle, registration is required where a person provides tax advice, by way of business, to a third party and interacts with HMRC in relation to that person’s tax affairs. HMRC’s new guidance emphasises that the regime is not intended to capture activities undertaken within an organisation’s own tax function, and provides a number of examples of when registration is not normally required. These include, but are not limited to, in house tax teams supporting group companies, partners managing the tax affairs of the partnership and post-sale transitional tax support following a disposal.

Importantly, HMRC states that businesses acting in good faith and relying on this guidance will be treated as compliant and will not face penalties if HMRC subsequently determines that registration should have been required. 

HMRC has confirmed that this guidance is intended to be a temporary measure until more permanent exclusions are incorporated into legislation, but until then provides some clarity for organisations operating centralised tax functions across complex structures.

www.gov.uk/hmrc-internal-manuals/mandatory-tax-adviser-registration/mtar10200

The UT has confirmed that profits realised by an Isle of Man incorporated and tax resident company, from developing and selling UK property, were taxable in the UK under the UK-Isle of Man double tax agreement, despite the company having no UK permanent establishment.

The taxpayer argued that its profits fell within the business profits article of the treaty and, without a UK permanent establishment, should only be taxable in the Isle of Man. HMRC contended that the profits were "income derived from immovable property" and therefore taxable in the UK.

Article 6 of the UK-Isle of Man agreement provides that "income derived from immovable property" may be taxed in the territory where the property is situated. The taxpayer argued this should be limited to income generated from using or exploiting land, such as rental income. However, the Tribunal found the wording was wide enough to cover profits arising from the ownership, development and sale of UK property. In the Tribunal's view, property development profits are derived from the underlying land and therefore fall within Article 6, even where they are trading profits rather than rental income. The appeal was therefore dismissed.

Knights Developments Ltd v HM Revenue & Customs [2026] UKUT 329 (TCC) 

www.bailii.org/uk/cases/UKUT/TCC/2026/329.html 

The FTT has upheld a Personal Liability Notice (PLN) issued to a director following deliberate VAT inaccuracies by his company. The case highlights HMRC's ability to hold directors personally liable where deliberate behaviour can be inferred from the facts, even without direct evidence of wrongdoing.

HMRC issued a personal liability notice to the taxpayer after concluding that deliberate inaccuracies in the company's VAT returns were attributable to him. The company had under-declared VAT by approximately £3.48 million over more than four years, with the Tribunal finding that the taxpayer was the driving force behind the business and closely involved in its finances.  

The Tribunal found that the scale and consistency of the VAT understatements meant the taxpayer, as a competent business man, could not credibly have been unaware of them even though the returns themselves were submitted by his accountant. It therefore concluded that he had deliberately misled HMRC and upheld the PLN of £1.78 million.  

The decision is a reminder that relying on an accountant is not, by itself, a defence to deliberate behaviour. Where a director has significant control over a business and its finances, HMRC may seek to impose personal liability if deliberate inaccuracies are attributable to them.

Parwinder Singh Gill v HM Revenue & Customs [2026] UKFTT 1164 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2026/1164.html

The UT has upheld HMRC's denial of VAT recovery where a consultant acting for the business knew, or should have known, that transactions were connected with VAT fraud.  Significantly, HMRC accepted that the company's sole director neither knew, or should have known of the fraud.  

The appeal focused on a self-employed contractor who introduced and arranged the relevant transactions.  Both the FTT and the UT concluded that he knew, or should have known, that the transactions were connected with VAT fraud.

The tribunals also found that his knowledge could be attributed to the company, resulting in the assessments and penalties being upheld. In reaching its decision, the UT concluded that the consultant's previous involvement in missing transaction fraud was a relevant factor when deciding what he knew, or should have known, as this previous experience would have made him familiar with the indicators of a fraudulent supply chain.  

The case highlights that VAT fraud risk extends beyond directors and employees. Businesses should carry out appropriate due diligence on consultants, agents and other intermediaries, as their knowledge and actions may, in some circumstances, be attributed to the business itself. 

Eurolaser IT Ltd v HM Revenue & Customs [2026] UKUT 324 (TCC)  

www.bailii.org/uk/cases/UKUT/TCC/2026/324.html

The FTT has allowed a luxury vehicle hire business to recover input VAT incurred on the acquisition of a high-value hypercar. The decision confirms that, for the purposes of the motor car input tax rules, the key question is the taxpayer's objective intention when the vehicle is acquired, rather than actual use.  

The taxpayer acquired the vehicle in November 2020 as part of its luxury vehicle hire business. HMRC argued that the input tax block for motor cars applied, pointing to limited evidence of completed hires, incomplete mileage records, gaps in insurance evidence and indications of personal enjoyment of the vehicle. The company maintained that the car was acquired primarily for self-drive hire and chauffeur-driven hire, so should not be subject to the restriction provisions applicable for the purchase of a car.

The FTT agreed with the taxpayer. It found that the relevant test is the objective intention at the time of acquisition. The Tribunal placed significant weight on the fact that the taxpayer already operated a genuine luxury vehicle hire business, had secured customer interest before the vehicle arrived, obtained hire insurance and marketed the vehicle as available for hire from the outset. While actual hiring activity was less than anticipated, the Tribunal accepted this was largely explained by Covid-19 restrictions, technical issues affecting the vehicle and a serious accident shortly after acquisition.  

The decision is a useful reminder that entitlement to recover VAT on motor cars can depend on demonstrating the intended commercial use at the point of purchase. Contemporaneous evidence such as insurance arrangements, marketing activity, bookings and business records may prove critical in establishing that intention.  

Luxurico Ltd v HM Revenue & Customs [2026] UKFTT 1252 (TC) 

www.bailii.org/uk/cases/UKFTT/TC/2026/1252.html 

The following Tax publications have been published. 

• Too much, too soon? Capital gains tax at the Autumn Budget

• Location, location, location: Why central management and control matters for tax residence

• Scottish aggregates tax: Not so simple

• The manifesto that continues to tie the Chancellor

• The end of de minimis exemptions for low value imports

The following client webinars are coming up soon. 

• 23 September - Navigating compliance: Accounting, tax and regulatory updates for finance leaders

• 23 September - Family businesses: What you need to know ahead of the Autumn Budget

• 29 September - Navigating cross border complexity: Estate planning for the internationally mobile

• 13 October - Pre-sale exit planning: Setting up for a successful exit

• 17 November - Executing your business exit: Managing the sale process to completion

Ever wondered why the tax year starts on 6 April? Well, part of it started in September 1752. The move from the Julian to the Gregorian calendar meant that everyone went to bed on 2 September and woke up on the 14th. Obviously, the most important consequence was to the tax system. Objections to taxing people for a full year, when really it was only 354 days, meant that the end of the tax year had to jump forward as well from the original 25 March (Lady day). The one extra day in a later move gave the current tax year.

Complicated? Well, at least they didn’t have four MTD deadlines to move. 

https://en.wikipedia.org/wiki/Calendar_(New_Style)_Act_1750