Category: HMRC notices

When a couple separates or divorces, most attention focuses on the emotional and practical aspects. However, it is important to consider the tax implications of transferring assets, as these can have significant financial consequences if not managed carefully.

It is most important to consider if there are any Capital Gains Tax (CGT) implications. For transfers between spouses or civil partners, the rules changed on 6 April 2023. Couples that separate or divorce can transfer assets on a ‘no gain/no loss’ basis for up to three years after they stop living together. If the transfer is part of a formal divorce agreement, there is no time limit, ensuring no immediate CGT arises.

Private Residence Relief (PRR) may exempt individuals from paying CGT if the family home meets certain qualifying conditions. It is also important for couples to consider making a legally binding financial agreement. If an agreement cannot be reached, the court can issue a financial order, outlining how assets, financial support, and other arrangements are handled.

Careful planning during separation or divorce can help avoid unexpected tax charges and ensure that financial matters are resolved fairly for both parties.

The new rules will allow companies to raise more capital under the following schemes although investors will need to factor in reduced VCT Income Tax relief when assessing opportunities.

The Venture Capital Trusts (VCT) and Enterprise Investment Scheme (EIS) are designed to encourage private investment into trading companies. Both schemes help support business growth while at the same time encouraging individuals to fund these companies.

A number of changes to the schemes were announced at Budget 2025 and will apply from 6 April 2026.

The main changes are as follows:

• Gross assets limits: Companies’ gross assets will increase for EIS and VCT eligibility to £30 million immediately before the share issue (from £15 million) and £35 million immediately after the issue (from £16 million).
• Annual investment limits: Companies will be able to raise up to £10 million annually (from £5 million) and £20 million for knowledge-intensive companies (from £10 million).
• Lifetime investment limits: Companies’ lifetime limit will increase to £24 million (from £12 million), and £40 million for knowledge-intensive companies (from £20 million).
• VCT Income Tax relief: The rate of Income Tax relief for individuals investing in VCTs will reduce from 30% to 20%.

These increases in annual, lifetime and gross assets apply only to qualifying companies that are not registered in Northern Ireland and are not engaged in trading goods, or in the generation, transmission, distribution, supply, wholesale trade, or cross-border exchange of electricity. These companies remain eligible under the current scheme limits.

These changes are designed to encourage larger investments into qualifying companies. Investors should be aware of the reduced VCT Income Tax relief available and ensure that investments still remain worthwhile.

While there are many state benefits available, it is not always clear which of these are taxable and which are tax-free.

HMRC’s guidance outlines the following list of the most common state benefits which are taxable, subject to the usual limits:

• Bereavement Allowance (previously Widow’s Pension)
• Carer’s Allowance or (in Scotland only) Carer Support Payment
• Contribution-Based Employment and Support Allowance (ESA)
• Incapacity Benefit (from the 29th week you receive it)
• Jobseeker’s Allowance (JSA)
• Pensions Paid by the Industrial Death Benefit Scheme
• The State Pension
• Widowed Parent’s Allowance

The most common state benefits that usually tax-free include the following:

• Attendance Allowance
• Bereavement Support Payment
• Child Benefit (income-based – use the Child Benefit tax calculator to see if you’ll have to pay tax)
• Disability Living Allowance (DLA)
• Free TV Licence for Over-75s
• Guardian’s Allowance
• Housing Benefit
• Income Support – though you may have to pay tax on Income Support if you’re involved in a strike
• Income-Related Employment and Support Allowance (ESA)
• Industrial Injuries Benefit
• Lump-Sum Bereavement Payments
• Maternity Allowance
• Pension Credit
• Personal Independence Payment (PIP)
• Severe Disablement Allowance
• Universal Credit
• War Widow’s Pension
• Winter Fuel Payments and Christmas Bonus

If your business imports goods into the UK, it is important to be familiar with the Customs Declaration Service and to ensure that any duty payments are made correctly and on time to avoid delays, interest or penalties.

The Customs Declaration Service (CDS) is a specially designed IT platform used for completing customs declarations for businesses that import or export goods from the UK. All electronic import declarations must be submitted through the CDS.

When you import goods into the UK using the CDS, you must pay any tax due promptly. Payments should reach HMRC by the deadline, and if that falls on a weekend or bank holiday then the payment must arrive by the previous working day.

Late payments may result in interest charges and / or penalties. You will need your unique 16-character reference number starting with “CDSI,” which is specific to each declaration, to make a payment. Using the wrong number can delay the release of your goods.

Payment can be made online through your bank account or with a debit or corporate credit card (personal credit cards are not accepted). Online bank payments are usually instant but may take up to two hours to appear, while card payments are recorded on the date made.

Payments can also be made by bank transfer. CHAPS or Faster Payments usually arrive the same or next day, while BACS take about three working days. UK payments should go to HMRC’s Customs Duty Schemes account (sort code 08 32 10, account number 14077970). Overseas payments must be made in GBP. There are also options to pay by cheque, allowing three working days for delivery. If there are payment issues or further advice is required, you can contact HMRC’s National Clearance Hub.

The remittance basis of taxation for non-UK domiciled individuals (non-doms) was replaced with the new Foreign Income and Gains (FIG) regime from April 2025. This new regime is based on tax residence rather than domicile. Under the new rules, nearly all UK-resident individuals must report their foreign income and gains to HMRC, regardless of whether they had previously claimed remittance basis or are claiming relief under the FIG regime.

Former remittance basis users not eligible for the new FIG relief are now taxed on newly arising foreign income and gains in the same way as other UK residents. However, they will still be taxed on any pre-6 April 2025 FIG that is remitted to the UK.

A key feature of the new regime is the 4-year FIG relief. This is available to new UK residents who have not been UK tax resident in any of the 10 preceding tax years. These individuals can opt in to receive full tax relief on their FIG for up to four years. Claims must be made via a self-assessment return, with deadlines falling on 31 January in the second tax year after the relevant claim year. The FUG relief lasts for a maximum of 4 consecutive years starting from when a person first became a UK tax resident. Claims can be made selectively in any of the four years, but any unused years cannot be rolled over.

The types of foreign income which are eligible for relief includes:

• profits of a trade carried on wholly outside the UK
• profits of an overseas property business
• dividends from non-UK resident companies
• interest, such as interest paid on a foreign bank account

An individual’s ability to qualify for the 4-year FIG regime will be determined by whether they are UK resident under the Statutory Residence Test (SRT).

The tax legislation requires the deduction of tax from yearly interest that arises in the UK. This typically refers to interest that is subject to Income Tax or Corporation Tax.

The legislation requires the deduction of tax from yearly interest, if:

• paid by a company, a local authority, a firm in which a company is a partner, or
• paid by any person to another person whose usual ‘place of abode’ is outside the UK.

The tax must be deducted by the person or entity making the payment at the savings rate in force for the tax year in which the payment is made. In practice, the main circumstances where tax is deducted are where a company makes a payment of interest to an individual or other non-corporate person, or where interest is paid by a person (individual, trustee or corporate) to another person whose usual place of abode is outside the UK.

However, some exclusions apply. For example, interest paid by deposit takers, interest paid to a bank or building society, interest paid from UK public revenues or under the former Mortgage Interest Relief At Source (MIRAS) scheme. Companies, local authorities and ‘qualifying firms’ (a firm which includes a company or local authority as a partner) are also exempt from the requirement to deduct tax from interest paid to certain recipients.

It is important to note that statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998, is not classified as yearly interest and does not fall under these rules.

The Enterprise Investment Scheme (EIS) is designed to help smaller, higher-risk trading companies raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies.

This scheme aims to encourage investment in early-stage businesses by providing substantial tax benefits to investors. However, in order to claim EIS tax reliefs, the issuing company must meet a set of strict criteria regarding its size, the amount of money it can raise, and the purpose and timing of the funds raised.

For individual investors, the tax benefits include 30% Income Tax relief on investments, with a maximum annual investment limit of £1 million, or £2 million if at least £1 million is invested in knowledge-intensive companies. The generous tax allowances are intended to offset the higher risk of investing in these smaller companies. It is important for investors to be cautious and only invest money they are prepared to lose, as these companies can be particularly volatile.

The tax advantages of the EIS go beyond just Income Tax relief. Investors can also benefit from Capital Gains Tax (CGT) deferral for the life of their investment and tax relief for any losses incurred on the shares. However, it’s worth noting that Income Tax relief is capped at an amount that reduces the investor’s Income Tax liability to nil for the year, meaning it can’t exceed the individual’s tax due. These tax benefits make the EIS an attractive option for those looking to support high-growth companies while taking advantage of potential tax savings.

Not all casual payments are tax-free; HMRC’s miscellaneous income rules may apply depending on the circumstances.

The special miscellaneous income rules sweep-up provisions that seek to charge tax on certain income. This unusual provision, which is broad in scope, catches income that would not otherwise be charged under specific provisions to Income Tax or Corporation Tax.

A casual payment may be considered taxable miscellaneous income when it is received as a reward for a service that was performed under some form of agreement, arrangement, or common understanding that payment would be made.

This is different from a genuine gift or token of appreciation given voluntarily after a service, where there was no agreement, arrangement or common expectation for such a reward. These gifts are not taxable under the same provisions.

The distinction can be difficult to define. For example, in Brocklesby v Merricks (1934), the court highlighted the importance of an arrangement or entitlement to a share of earnings to make a receipt taxable. As a result, it is essential to review the specific circumstances of each case to determine whether a payment qualifies as taxable income or a non-taxable gift.

If your business operates in a sector covered by the Money Laundering Regulations, you must be monitored by a supervisory authority to ensure compliance. This article outlines who needs to register with HMRC for anti-money laundering (AML) supervision.

Your business must be registered with a supervisory authority if it operates in a sector covered by the Money Laundering Regulations. Some businesses are already supervised through authorisation by bodies like the Financial Conduct Authority (FCA) or professional associations such as the Law Society.

If your business is not already supervised and falls under one of the regulated sectors, you must register with HMRC.

Business Sectors Supervised by HMRC

HMRC is responsible for supervising businesses in the following sectors (where not already regulated by the FCA or a professional body):

• Money Service Businesses not regulated by the FCA
• High Value Dealers handling cash payments of €10,000 or more (in a single transaction or linked transactions)
• Trust or Company Service Providers not supervised by the FCA or a professional body
• Accountancy Service Providers not supervised by a professional body
• Estate Agency Businesses
• Bill Payment Service Providers not regulated by the FCA
• Telecommunications, digital, and IT payment service providers not regulated by the FCA
• Art Market Participants involved in buying or selling works of art valued at €10,000 or more (including linked transactions)
• Letting Agency Businesses managing property or land with a monthly rental value equivalent to €10,000 or more

If your business conducts these activities by way of business and is not already supervised, you must register with HMRC.

Money Service Businesses and Trust or Company Service Providers are not allowed to trade until their AML registration with HMRC is confirmed. Other businesses may continue operating while their registration is being processed.

Trading while not registered is a criminal offence and may result in a penalty or prosecution.

Bereaved spouses who lost service pensions before 2015 have until 15 October 2025 to claim a one-off £87,500 recognition payment.

This scheme was launched in October 2023 to help war widows and widowers who lost their service-attributable pensions due to remarriage or entering new relationships before 2015. Since the scheme was launched, over £21 million has been paid out to more than 240 eligible individuals who had previously received no financial recognition for their sacrifice.

The scheme provides a one-off, tax-free payment of £87,500 to those who forfeited their service-attributable pensions prior to 2015 due to remarriage or cohabitation under the old pension rules and were in receipt of no other payments to recognise the loss of their partner.

The scheme applies to widow(er)s, including civil partners and unmarried cohabiting partners, of regular and reservist members of the Army, Navy or Royal Air Force.

The Minister for Veterans said,

‘The War Widows Recognition Payment Scheme has provided vital redress to those who have sacrificed so much for our country. With the scheme closing on 15 October, I urge anyone who believes they may be eligible to apply.’

Applications have slowed recently, but the Ministry of Defence believes there may still be eligible individuals who have not yet applied, and no extensions are planned.

Full details, eligibility criteria, and application forms are available at War Widow(er)s Recognition Payment – GOV.UK

Not sure if a business cost is deductible? HMRC’s ‘wholly and exclusively’ rule is the key test.

When deciding whether an expense is deductible or not it is important to bear in mind that the expenditure must be incurred wholly and exclusively for the purposes of your trade or employment. This is a difficult starting point as there is often a fine line to thread between deciding whether an expense meets this ‘wholly and exclusively’ rule.

In general, HMRC takes a slightly more relaxed view that a strict reading of the legislation would suggest. HMRC’s own internal manuals offers advice to HMRC inspectors to exercise care when applying the ‘wholly and exclusively’ test. The advice states that where there is an incidental benefit that does not, of itself, mean that the expenditure is disallowed.

The following example helps clarify this point. A self-employed consulting engineer may travel to exotic locations to advise on projects. The travel and the exotic locations may be benefits but where there was no private purpose they are incidental to the carrying on of the profession and the cost is allowable.

It is also possible to apportion part of an expense where necessary. For example, when considering the running costs of a car used partly for the purposes of the trade and partly for other purposes. HMRC’s position is that the costs associated with the business use of the car would be deductible.

Businesses can reclaim duties on qualifying goods moved to or through Northern Ireland since 2021

The Northern Ireland Duty Reimbursement Scheme allows businesses to reclaim import duties paid on goods moved into Northern Ireland, provided specific conditions are met. It applies retrospectively, covering eligible goods moved from 1 January 2021 onward.

A claim can be made by importers of ‘at risk’ goods into Northern Ireland. Additionally, agents or representatives authorised to act on behalf of an importer can also make a claim. If you are not UK-based, you must appoint a UK-established agent to submit the claim.

You can claim for duty paid or deferred if:

• The goods were sold, consumed or permanently installed in Northern Ireland.
• They were moved from Northern Ireland to Great Britain.
• They were exported outside the UK or EU.
• You have sufficient evidence that the goods meet the qualifying conditions.

Claims may be made for full or partial consignments. For example, if 50 out of 100 ‘at risk’ goods meet the criteria you can reclaim duty on those 50.

There are deadlines for making a claim which are as follows:

• By 30 June 2026 for goods moved between 1 January 2021 and 30 June 2023.
• Within 3 years of duty notification for goods moved after 30 June 2023.

The full amount of duty can be claimed for goods moved from Great Britain (England, Scotland and Wales) to Northern Ireland. The difference between EU and UK duty rates (where the EU duty was higher than the UK duty) can be claimed for imports into Northern Ireland from outside the UK or EU countries.

This scheme guidance has been updated as the new arrangements set out in the Windsor Framework have now been implemented.

HMRC’s new Q&A tool guides you through each step of a compliance check.

The free interactive online tool is designed to help individuals and businesses better understand what happens during a tax compliance check. Available on GOV.UK, the Interactive Compliance Guidance tool brings together key guidance and video content in one place, making it easier to navigate the process.

The tool explains:

• What an HMRC compliance check is.
• Why certain information or documents are requested.
• How to get extra support due to personal or health issues.
• How to appoint someone to act on your behalf.
• What to do if you disagree with HMRC’s decision.
• How to pay a tax assessment or penalty.

It uses a simple question and answer format with clear guidance videos, step-by-step explanations and links to other relevant guidance. The tool was developed with input from stakeholders like the Low Incomes Tax Reform Group to ensure it meets the needs of unrepresented and vulnerable taxpayers.

This guidance supports the government’s Plan for Change, aiming to improve taxpayer confidence, simplify access to information, and promote economic growth. The guidance and interactive tools are intended solely for informational purposes. Using them does not result in tax registration and HMRC does not collect or store any user information.

Making Tax Digital for Income Tax will become mandatory in phases from April 2026. If you are self-employed or a landlord earning over £50,000 you need to start preparing to submit quarterly updates, keeping digital records and a new penalty system will apply.

Initially, MTD for IT will apply to businesses, self-employed individuals, and landlords with an annual income exceeding £50,000. From 6 April 2027, the rules will extend to those with an income between £30,000 and £50,000. A new system of penalties for late filing and late payment of tax will also be introduced.

From April 2028, sole traders and landlords with income over £20,000 will need to follow MTD rules. The government is also exploring ways to bring those earning under £20,000 within the MTD framework at a future date.

To help ensure taxpayers pay on time, HMRC increased the late payment penalties with effect from 1 April 2025. This applies to VAT-registered businesses as well as early adopters of Making Tax Digital for Income Tax.

The updated penalty rates are as follows:

• 15 days late: increased from 2% to 3%
• 30 days late: increased from 2% to 3%
• From day 31 onwards: a 10% annual penalty now applies, up from 4%, with daily interest added from this point

Taxpayers that remain with self-assessment face a separate set of penalty rules.

Is your child starting school this September? Tax-Free Childcare could save you up to £2,000 a year. Check your eligibility now and start planning ahead.

Working families whose children are starting school for the first time September 2025 could save up to £2,000 a year per child on their childcare bills, thanks to the government’s Tax-Free Childcare (TFC) scheme.

Designed to ease the financial burden of childcare, the TFC scheme offers eligible working families valuable support through a wide network of registered childcare providers. This includes childminders, breakfast and after-school clubs, and approved UK play schemes. Families can also build up their TFC account throughout the year, allowing them to save for higher childcare costs during school holidays.

The scheme is available for children up to the age of 11, with eligibility ending on 1 September following the child's 11th birthday. For children with certain disabilities, the scheme extends eligibility until 1 September after their 16th birthday.

Under the TFC scheme, for every £8 a parent contributes, the government adds £2, effectively topping up childcare savings by 25%. This support is capped at a maximum of £10,000 in contributions per child each year, meaning parents could receive up to £2,000 annually per child, or £4,000 for children with disabilities.

TFC is open to a wide range of working families, including the self-employed and those earning the National Minimum or Living Wage. Parents on paid sick leave, maternity, paternity, or adoption leave (both paid and unpaid) are also eligible. To qualify, each parent must work at least 16 hours per week and meet minimum income thresholds. However, households where either parent earns more than £100,000 a year, or those receiving Universal Credit or employer-provided childcare vouchers, are not eligible for the scheme.

Commenting on the scheme, HMRC’s Director General for Customer Services said:

“Starting school can be an expensive time – there’s a lot to buy and organise. Now that you know where your child will be going to school, it’s a good time to start planning your childcare arrangements. Tax-Free Childcare can help make those costs more manageable. Sign up today on GOV.UK and start saving.”

With school starting in just a few months, now is the perfect time for parents to check their eligibility and take advantage of the savings available through the scheme.