Tax Bites – February 2025

Welcome to the latest edition of RPC's Tax Bites – providing monthly bite-sized updates from the tax world.

News

HMRC has updated its Guidance on umbrella company compliance

HMRC has updated its Guidance (Guidance 1, Guidance 2, Guidance 3) for workers and employment businesses collaborating with umbrella companies.

The Guidance emphasises the necessity of issuing key information documents to workers upon registration and maintaining compliance with employment and tax laws. It also highlights the importance of selecting compliant umbrella companies to safeguard both the business and its workers.

Additionally, HMRC has introduced a tool to help workers and businesses estimate gross and net pay when using an umbrella company. This tool aims to ensure accurate deductions and transparency in pay calculations.

HMRC has introduced a voluntary disclosure service for businesses that have overclaimed R&D tax relief and updated tax relief claim procedures

HMRC has launched a voluntary disclosure service for companies that have inadvertently overclaimed Research and Development (R&D) tax relief and are now beyond the timeframe to amend their Corporation Tax returns. This initiative allows such companies to rectify their tax affairs by disclosing overclaims and settling any additional tax liabilities. It should be noted that this facility is not available to those who have deliberately submitted overclaims. Any such claims should be addressed through the Contractual Disclosure Facility.

Additionally, HMRC has updated the section of its Guidance for claiming R&D tax relief, which specifies what details of the project need to be included to ensure HMRC has sufficient details to assess the validity of claims.

HMRC has amended its Guidance on digital platform reporting rules and DAC 7 equivalence

HMRC has published updated its Guidance on digital platform reporting rules and updated its lists of partner jurisdictions and reportable jurisdictions (IEIM901810O, IEIM901820). Platform operators must meet due diligence and reporting obligations for sellers in reportable jurisdictions. Partner jurisdictions (Bulgaria, Canada, Ireland, Latvia, and New Zealand) offer some compliance relief.

HMRC also confirms in its Guidance (IEIM904430) that the UK's rules are equivalent to DAC 7, meaning platforms reporting to HMRC on sellers in EU partner jurisdictions need not report separately under DAC 7.

Further jurisdictions may be added as they confirm readiness to exchange information with the UK.

HMRC has updated its Guidance on taxation of cryptoasset disposals

HMRC has updated its Guidance on the taxation of cryptoasset disposals.

The Guidance notes that individuals may be liable for CGT when disposing of cryptoassets, including selling tokens, exchanging them for different cryptoassets, using them to pay for goods or services, or gifting them (excluding gifts to a spouse or civil partner).

To determine if CGT is payable, individuals must calculate the gain for each transaction, considering allowable costs and any applicable tax-free allowances. The Guidance explains when you should use the market value of the asset to calculate any gain. If the total taxable gain exceeds the annual allowance, it must be reported to HMRC.

Case reports

Loan Charge - Court strikes out taxpayers' Part 8 claims

In HMRC v Labeikis and others [2024] EWHC 2009 (KB), the High Court allowed HMRC's appeal, determining that the taxpayers' Part 8 claims were abusive for having been brought in the wrong forum and therefore should be struck out.

This decision reaffirms the longstanding principle of exclusivity, both under the Autologic principle in respect of tax appeals and for judicial review in respect of claims founded on public law grounds. The decision also emphasises the importance of ensuring that claims are pursued in the correct forum and the adverse consequences that can follow for taxpayers where an incorrect forum is chosen.

You can read our commentary on this decision here.

Upper Tribunal considers when a dividend is 'due and payable' for tax purposes

In HMRC v Gould [2024] UKUT 00285 (TCC), the Upper Tribunal (UT) dismissed HMRC's appeal and confirmed that an enforceable debt arises when a company pays an interim dividend to one shareholder but not another shareholder of the same class.

The key takeaway from this decision is that the first payment of an interim dividend to a shareholder will create an enforceable debt in favour of all other shareholders of the same class. The date of that first payment will therefore be treated as the date subsequent dividends are paid for tax purposes, unless the articles are varied or there is a binding agreement to the contrary, as was the case here. This should be factored in when companies are considering dividend payments which they wish to make in a tax-efficient manner.

You can read our commentary on this decision here.

Upper Tribunal allows taxpayers' appeals on 'deliberate' behaviour

In Anthony Outram and another v HMRC [2024] UKUT 203 (TCC), the UT overturned the First-tier Tribunal's (FTT) decision concluding that it erred in law when deciding that two brothers had deliberately filed an inaccurate return.

It is also worthy of note that the UT did not follow the UT's earlier decisions in Vital Nut Co Ltd v HMRC [2017] UKUT 192 (TCC) and JS v Secretary of State for Work and Pensions [2013] UKUT 100 (AAC), notwithstanding the approval of the guidance provided in those cases by the Court of Appeal in Point West GR Ltd v Bassi [2020] EWCA Civ 795. 

You can read our commentary on this decision here.

And finally...

The RPC Tax Investigations and Disputes team organises and hosts a regular R&D Forum meeting to discuss what's new in the R&D tax world. Our next meeting will be held at 2pm on Wednesday 12 March 2025.

If you would like to attend, please contact Adam Craggs or Alexis Armitage.