The GAAR panel has released opinions on two schemes, one for IHT and one for employment taxes. For both, it considers that entering into the tax arrangements is not a reasonable course of action, and neither is carrying them out, in relation to the relevant tax provisions.

The IHT scheme was used to reduce the value of an estate for IHT without incurring IHT on a lifetime transfer. This was done by acquiring shares in a company then giving those shares to an employee trust.

The other scheme is about employee rewards. Under this scheme, pension obligations are created, then sold to another employee. The consideration for that sale is paid to the first employee.

The GAAR panel has stated in both cases that entering into the tax arrangements in not a reasonable course of action, and neither is carrying them out, in relation to the relevant tax provisions.

www.gov.uk/government/publications/gaar-advisory-panel-opinion-of-29-october-2024-reducing-the-value-of-an-estate-for-inheritance-tax-and-avoiding-inheritance-tax-on-a-lifetime-transfe

www.gov.uk/government/publications/gaar-advisory-panel-opinion-of-29-october-2024-reward-through-creation-of-an-obligation-to-make-pension-payments-to-employees-and-the-transfer-of-tha

The FTT has looked at the DOTAS regulations in two separate cases, finding in both that the arrangements were notifiable.

In both, HMRC applied for an order that the arrangements should be treated as notifiable under DOTAS, and were granted it.

In one case, the arrangements involved reducing tax on employee remuneration. The employee would become a member of an LLP, through which the services would be offered back to the former employer.

Remuneration would reach the former employee as an unsecured loan from a trust, which would be written off at some point in the future or be kept in place to reduce IHT on the estate. As well as these meeting the criteria, the respondent was found to be acting as a promoter.

In the other case, the intention was to allow directors to extract profit from a company without incurring income tax. In exchange for a reduced salary they would receive loans through a trust. This respondent was also acting as a promoter.

HMRC v Curzon Capital Ltd [2019] UKFTT 63 (TC), [2019] SFTD 506

www.bailii.org/uk/cases/UKFTT/TC/2019/TC06949.html

HMRC v Asset House Piccadilly Ltd [2025] UKFTT 206 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09429.html

The 2025/26 Budgets have been approved by the respective Parliaments

The Welsh Parliament has approved the 2025/26 budget. Income tax rates and bands still match those in England and Northern Ireland.

The Scottish Parliament has approved the 2025/26 budget.  There have been no changes to the income tax rates however the bands have increased.

These are in line with the draft Budgets previously published.

www.gov.wales/final-budget-2025-2026

www.gov.scot/publications/scottish-budget-2025-2026/pages/3/ 

HMRC’s self-assessment reporting threshold for trading income will triple to £3,000 in this Parliament.

Currently, HMRC’ guidance states that anyone who earns over £1,000 in trading income must report this to HMRC, whether or not there is tax to pay. This reporting threshold will rise to £3,000 per tax year, although there is no proposed change to the actual £1,000 allowance.  There will be a new simple, online return to report any tax due. The implementation date has not been set, but the Treasury expects it to be within this Parliament.

www.gov.uk/government/news/boost-for-side-hustlers-as-300000-people-to-be-taken-out-of-tax-returns-government-announces 

The Treasury also announced plans for a new whistleblower rewards scheme.

The Treasury has indicated that it plans to introduce a scheme to reward those who provide information about serious non-compliance in large corporates, by wealthy individuals, or through offshore and avoidance schemes. The reward will be a percentage of the tax recovered.

www.gov.uk/government/speeches/exchequer-secretary-to-the-treasury-20-years-of-hmrc-reflections-and-looking-ahead 

HMRC has issued letters directed at individuals who it believes are trading on online marketplaces and not disclosing their income.  

This is based on data received direct from online marketplaces for the 2022/23 tax year. The letters prompt individuals to disclose any income and ensure their affairs are up to date. The letter requires a response within 30 days, whether or not there is income to declare.

www.tax.org.uk/hmrc-one-to-many-letter-online-marketplace-sales 

Up to and including 5 April, it is possible to make Class 3 NIC contributions to fill in gaps in NIC records from 2006 onwards. From 6 April, it will only be possible to do this for the six preceding tax years. Gaps in NIC qualifying years can affect state pension entitlement.

There is a limited easement for those who have not been able to contact the DWP by phone. As reported by the BBC:

"Anyone who is unable to make contact with the DWP ahead of the deadline can use an online call-back request form.

People who submit a call-back request by the 5 April deadline will still be able to pay voluntary National Insurance Contributions back to April 2006, after the deadline has passed.

Anyone in this position should save a screenshot of their call-back confirmation message. A return call should come within eight weeks."

It is advisable to check records before 5 April. It is worth identifying any errors or discrepancies as early as possible. You can do so through your personal tax account or using the other options in the link below.

www.gov.uk/check-national-insurance-record

www.bbc.co.uk/news/articles/c99n1550510o

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09448.html 

A taxpayer has failed in his argument that the Ramsay doctrine should be applied to arrangements into which he had entered. Although the whole scheme was ineffective, an element still gave rise to taxable income and thus a tax charge.

The taxpayer participated in an arrangement declared under DOTAS. This sought to give investors tax relief on interest on loans to invest in a partnership. Interest was also received. HMRC issued discovery assessments on the grounds that the scheme did not work. It did however hold that the interest received was taxable income, though no tax relief was given for the other element of the scheme.

The taxpayer argued that the transactions should be looked at as a whole as per the Ramsay doctrine. The transactions were circular, so not taxable.  He had previously abandoned attempts to claim a loss.

The FTT dismissed his appeal. Despite his argument that all the steps in the scheme lacked commerciality, this did not mean that every step was ineffective. The interest received should be treated separately from the failure to obtain interest relief. Income did arise, though no profit had come to the taxpayer, so the dry tax charge was upheld.

The taxpayer’s other argument that the high income child benefit charge was a breach of his human right to family life was not upheld.

Lynch v HMRC [2025] UKFTT 300 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09450.html 

In the first case on this point to come to a hearing, the FTT has found that offshore income gains (OIGs) and accrued income profits (AIPs) were taxable on the UK resident settlor of a protected offshore trust.

The taxpayer, a UK resident non-dom, had settled four offshore trusts before becoming deemed domiciled. OIGs and AIPs arose in these trusts after she became deemed domiciled. HMRC believed that these were taxable on her, but she argued that they were protected foreign source income, as they were ‘relevant foreign income’.

The FTT looked at the definitions in the legislation and ultimately reached the conclusion that these were not relevant foreign income. The extra-statutory material did not make it sufficiently clear that that was the intention of Parliament, and the FTT could not go behind this.

Louwman v HMRC [2025] UKFTT 295 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09445.html 

The UT found that a promissory note given by the deceased could be deducted from the value of the estate. This meant that the scheme under which she had remained in her home but it had technically been transferred to a trust was valid for IHT, contrasting with the FTT decision.

The taxpayer sold her home to the trustees of a trust called the life settlement. She had an interest in possession (IIP) in this trust. In exchange, she received a promissory note. She then assigned the note to another trust, the family settlement. She was excluded from benefitting under this trust, in which her three children had IIPs. She remained living in the property rent-free until her death.

The intention of the scheme was that the assignment of the note was a potentially exempt transfer, and she did in fact survive more than seven years after that transfer. The estate was calculated with the property being deemed to form part of her estate under her IIP in the life settlement, but with a deduction for the value of the note, which was worth the same as the property had been at the time of transfer.

HMRC’s position was that there should be no deduction from the value of the deceased’s interest in the property for the value of the note, or alternatively that the note should be part of her estate for IHT. The FTT found for HMRC.

The UT has overturned that decision and remade it, finding that the scheme was effective. The point on which the FTT found against the taxpayer was that it did deduct the note from the estate, but found that that value was nil. The UT however found that this debt was incurred by the trust and it should not be treated as incurred by the late taxpayer, so the note had value that was deductible.

HMRC’s cross appeals on points including how the scheme was implemented and anti-avoidance arguments were dismissed.

Executors of Mrs Leslie Vivienne Elborne Deceased & Ors v HMRC [2025] UKUT 59 (TCC)

www.bailii.org/uk/cases/UKUT/TCC/2025/59.html 

A consultation on the proposed changes to APR and BPR has been published, with a focus on how the changes will affect property settled into trust.

The consultation document gives example case studies of how the rules might apply, and asks for feedback and suggestions. Some are technical questions of calculation, and some on the transitional provisions.
Items of particular interest include:

The £1m allowance will apply on a seven year rolling basis similar to the current nil rate band. It will refresh every seven years.

The allowance will not be transferable between spouses or civil partners, unlike the nil rate band.

The Government is consulting on whether or not to impose a higher valuation for assets spread across multiple trusts to prevent individuals from taking advantage of minority discounts.

The consultation will close on 23 April 2025 and we will be responding. You can read more in our article here.

www.gov.uk/government/consultations/reforms-to-inheritance-tax-reliefs-consultation-on-property-settled-into-trust 

Currently, employers can apply for a s690 agreement where they have employees who are non-UK resident or who are treaty non-UK resident.  A s690 direction allows the UK employer to limit the application of PAYE to the proportion of the qualifying employee’s employment income which relates to UK duties performed within the UK.

HMRC has now confirmed that a new scheme for applying for s690 PAYE agreements will launch next month. Existing s 690 agreements that covered the 2025/26 UK tax year onwards will need to be re-applied for.

Employers and agents will be able to notify HMRC using a new online notification form, available from 6 April, and this will allow them to operate PAYE on the reduced amount of income as soon as HMRC acknowledges receipt of the notification. This should be immediate.

The new system will be in place from Monday 7 April, and payroll teams will likely need to finalise payrolls around Friday 11 April, so there is a very tight timeframe for action. Please get in touch if you would like any further information on this.

HMRC has contacted taxpayers with R&D claims that it believes are affected by recent FTT decisions concerning subsidised and subcontracted expenditure.

HMRC aims to conclude these enquiries by 30 June 2025, although some may extend beyond this date if there are additional issues beyond those affected by the FTT judgments.

HMRC has also updated its guidance in response to the FTT decisions, reflecting its decision not to appeal either case.

Tax news in brief 19 February 2025 | ICAEW

The CA has found in HMRC’s favour that claims made for double tax relief were out of time, that the procedural rules are clear and that there is no requirement to extend time-limits until a right is established judicially.

The case continues the long-standing dispute regarding the compliance of the UK tax regime with EU law, particularly concerning the taxation of non-UK source dividends.  Earlier rulings have established that the UK tax treatment of non-UK dividends was inconsistent with EU law prior to legislative changes in 2009.  This case focuses on the application of time limits for double tax relief claims.

By the time the deadlines for claiming double tax relief had passed, the taxpayers had either not claimed relief or had submitted claims for the dividends to be exempt from tax.  For many taxpayers it only became apparent that claims were needed because of court decisions that were made after the claims’ deadlines had passed.

The CA ruled in HMRC’s favour finding that the procedures for making claims were clear, and that there was no requirement for domestic rules to be applied retroactively to accommodate EU law. There is no requirement for HMRC to allow taxpayers to make late claims.

The Commissioners for HM Revenue & Customs v The applicants in the post Prudential closure notice applications [2025] EWCA Civ 166

www.bailii.org/ew/cases/EWCA/Civ/2025/166.html 

The Government has recently published a policy paper providing more details on its promised reform of the Business Rates system.

Much change is afoot in the world of business rates. The Government committed at the Autumn 2024 Budget to make the system fairer and less complex by announcing a long term commitment to lower business rates tax liabilities for those operating in the retail, hospitality and leisure (RHL) sectors.

To do this the Government will introduce a lower small business rate multiplier for RHL sector properties which have a Rateable Value under £51,000, and a new lower standard rate multiplier for RHL properties valued between £51,000 and £499,999. The intention is that these two lower rates will be funded by introducing a higher rate for all businesses, irrespective of property type, for properties valued over £500,000. The two remaining multipliers will be for non RHL properties valued under £51,000 and between £51,000 and £499,999.

However, in its eagerness to commit to a much fairer system, there is concern that what the Government will create from 1 April 2026 is a potentially more complex system with five new multipliers which businesses will need to navigate and budget for, whilst not issuing confirmation on the level of the five new multipliers until the 2025 Autumn Budget. This, coupled with the awaited secondary legislation confirming what businesses will meet the eligibility criteria for RHL, creates further uncertainty and scope for error from 1 April 2026.

The road ahead remains uncertain, with further intended change on the horizon as consultation on the wider business rates landscape continues to take place with key stakeholders throughout 2025.

Key areas under discussion are empty rates relief, increasing the frequency of the revaluations, the shortening of the Antecedent Valuation Date from 2 years to 1 years, the road maps for the roll out of the new compliance ‘Duty to Notify’ and the digitalising business rates project, and the benefit of maintaining fiscal neutrality at revaluations.  An announcement on the outcome is intended at the 2025 Autumn Budget.

Businesses need to be aware of the major changes coming with the introduction of five new multipliers in the 2026/27 rate year. They will also need an awareness of the future compliance responsibilities they will have with the roll out of the new duty to notify alongside the digitalising business rates programme.

www.gov.uk/government/publications/business-rates-forward-look/business-rates-forward-look  

The FTT has concluded that it does not have the jurisdiction to enforce an Extra-Statutory Concession that HMRC had not applied.  The ESC in question, ESC 3.18 would have treated management services to both leaseholders and freeholders as zero-rated for VAT purposes.

The taxpayer provided property management services in relation to a large block of flats, where some flats were held on long leases, and others let on short-leases by the freeholder.  The VAT treatment of these management services differs dependent on the type of lease but under an Extra Statutory Concession (ESC 3.18), subject to certain conditions, HMRC may agree to treat the two in the same way, as zero-rated. In this case HMRC said the concession did not apply.

The FTT first considered whether the conditions had been met for the concession to apply, concluding that they had.  However, the Tribunal went on to consider whether it had the jurisdiction to apply Extra Statutory Concessions as a matter of legitimate expectation. Considering the matter under UK law, EU general principles and the Human Rights Act it concluded that it did not have the jurisdiction to interfere with HMRC’s decision, but if it did it would have ruled HMRC’s refusal to apply the concession as unlawful.

Chelsea Cloisters Management Ltd v HM Revenue & Customs [2025] UKFTT 205 (TC)

www.bailii.org/uk/cases/UKFTT/TC/2025/TC09428.html 

HMRC and the Department for Business and Trade have launched a consultation to gather views on promoting e-invoicing across businesses and the public sector.

E-invoicing is the digital exchange of invoice information directly between buyers’ and suppliers’ financial systems, even if these systems are different. The outcome is an invoice which is automatically written into the buyer’s financial system without manual processing.

This consultation aims to obtain feedback on the potential impact of e-invoicing, its benefits and challenges, and suggestions for the most appropriate e-invoicing model.

The consultation runs until 7 May 2025 and welcomes responses from businesses of all sizes.

Promoting electronic invoicing across UK businesses and the public sector - GOV.UK

The following Tax publications have been published.

• Inheritance tax reform: HMRC publishes consultation on agricultural and business property
• Unlocking VAT opportunities for the insurance sector - insights from Hastings Insurance Services Ltd
• HMRC reconsiders capital contribution stance

At the time of writing we are eagerly anticipating the Spring Statement, surely the clearest sign of spring for any tax adviser (we certainly can’t rely on the weather as a sign). At 10 days before the end of the tax year, the Chancellor would be cutting it fine to introduce any tax changes, but we are not anticipating much.   We hope all our readers are looking forward to a New Tax Year with cheerfulness.  

Finally, this will be the last Tax Update from Evelyn Partners. The next newsletter will come to you under our new name of S&W (a nod to our history). The writing team will remain the same.