News & Insights

The latest tax developments and VAT round-up for the month.

Our monthly tax update covers the developments most likely to affect individuals, trusts, estates and businesses. If you would like to discuss anything here in more detail, please get in touch with your usual contact.

1. Private client

1.1 Finance Act 2026 receives Royal Assent

Finance Act 2026 received Royal Assent on 19 March, putting into law the measures announced at Budget 2025.

They include the changes to agricultural and business property relief from 6 April 2026, the 2 percentage point rise in the basic and higher dividend rates, and the legislation bringing unused pension funds into inheritance tax from April 2027. With the start of the new tax year close, clients should review their dividend planning, use any remaining ISA and pension allowances for 2025/26, and revisit their estate plans.

1.2 Donations to campaign groups were not IHT-exempt

The FTT has held that donations to organisations campaigning for the UK to leave the EU were not exempt from inheritance tax, either as normal expenditure out of income or as political donations.

The exemption for gifts to political parties only covers parties that meet the statutory conditions. The tribunal also rejected the argument that the exemption should be read more widely to comply with human rights law. Donors making regular gifts who hope to rely on the normal expenditure out of income exemption should keep clear records showing that each gift fits the conditions.

Hosking v HMRC (FTT, March 2026)

1.3 Annex qualified as a separate dwelling for MDR

The FTT has allowed an appeal and held that a house with an annex qualified for multiple dwellings relief (MDR) on its purchase.

MDR was abolished for transactions completing from 1 June 2024, but claims and enquiries on earlier purchases are still reaching the tribunals, with mixed results. Each claim depends closely on the facts, including the annex’s own facilities, access and privacy.

Wood & Anor v HMRC (FTT, March 2026)

2. PAYE and employment

2.1 Pool car NICs: HMRC not bound by an earlier wrong agreement

The Upper Tribunal has held that HMRC could collect Class 1A NICs on pool cars, even though it had previously agreed with the employer, wrongly, that none was due.

Agreements with HMRC that conflict with the law do not necessarily prevent it from collecting the correct tax later. Employers relying on informal agreements with HMRC should check that the position is supported by the legislation and HMRC’s published guidance.

MWL International Ltd & Anor v HMRC (UT, February 2026)

2.2 Director liable for unpaid NICs through neglect

The FTT has upheld a personal liability notice making a director responsible for his company’s unpaid NICs, because the failure was due to his neglect.

Directors can be made personally liable for a company’s NICs where the failure to pay is due to their fraud or neglect. Directors of companies in financial difficulty should make sure PAYE and NICs are paid, or agree a Time to Pay arrangement with HMRC, rather than letting arrears build.

Jenkins-Yates v HMRC [2026] UKFTT 480 (TC)

2.3 Statutory sick pay changes from 6 April

From 6 April 2026, statutory sick pay is payable from the first day of sickness and the lower earnings limit no longer applies, under the Employment Rights Act 2025.

HMRC has issued guidance on sickness absences that start before 6 April and continue afterwards. Payroll teams should check that their software has been updated and that absence policies reflect the new rules.

3. Business tax

3.1 New reporting of payments to participators proposed

HMRC has launched a consultation on requiring close companies to report payments and other transactions with their participators.

The proposals cover transactions such as loans, distributions and other payments to shareholders and their associates. Owner-managed companies should make sure directors’ loan accounts and other shareholder transactions are properly recorded throughout the year, not just at the year end.

3.2 Deliberate inaccuracy does not require dishonesty

The Upper Tribunal has held that, for penalty purposes, a deliberate inaccuracy does not require HMRC to prove dishonesty.

It is enough that the person knowingly made an inaccurate statement. Deliberate penalties are much higher than careless ones and can lead to an extended time limit for assessments, so it is important to correct errors as soon as they are discovered.

New Claire Wine Ltd v HMRC [2026] UKUT 116 (TCC)

3.3 Connected party rules apply to corporate members of LLPs

The Court of Appeal has held that the connected party rules apply to companies that are members of an LLP.

The decision can affect how transactions between LLPs and their corporate members are taxed. Groups using LLPs should review whether the decision changes how their arrangements are taxed.

Muller UK & Ireland Group LLP v HMRC [2026] EWCA Civ 248

4. VAT and indirect taxes

4.1 Public EV charging can qualify for the 5% rate

The FTT has held that electricity supplied at public EV charge points can qualify for the reduced rate of VAT in some circumstances.

The tribunal accepted that supplies to identified customers not exceeding 1,000 kWh a month can fall within the de minimis rule for the reduced rate. HMRC is expected to appeal. Charge point operators should take advice on whether to make claims while the position is uncertain.

Charge My Street Ltd v HMRC [2026] UKFTT 318 (TC)

4.2 Court of Appeal rejects challenge to VAT on school fees

The Court of Appeal has rejected the legal challenge to the introduction of VAT on private school fees.

VAT has applied to private school fees since 1 January 2025. Parents and schools should assume the charge will stay, and schools should continue to review their VAT recovery on costs, including building projects.

4.3 Supplies of livestock accommodation were standard-rated

The FTT has held that providing “bed and breakfast” for cattle was a single standard-rated supply.

The tribunal treated the arrangement as one supply rather than separate elements taxed at different rates. Farms that supply livery or grazing services should check how they treat these supplies.

McFarland & McFarland v HMRC [2026] UKFTT 315 (TC)

5. Key dates

The 2025/26 tax year ends on 5 April, so allowances need to be used before then, and several major changes take effect on 6 April.

6. And finally

6.1 A tax on wallpaper

From 1712 until 1836, wallpaper was taxed, first by the yard and later by the square yard. Some householders bought plain paper and had it painted with patterns by hand to avoid the duty.

With Finance Act 2026 now law and a new tax year about to begin, clients have plenty of rules to keep track of. As ever, it is better to plan ahead than to paint over the cracks.