News & Insights

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

Silverthrone tax digest 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 Non-dom regime to be replaced by a residence-based system

The new government confirmed on 29 July that the remittance basis for non-UK domiciled individuals will be abolished from 6 April 2025 and replaced with a residence-based regime.

People arriving in the UK who have not been resident in the previous ten years will be able to claim full relief on foreign income and gains for their first four years of residence, and the previous government’s planned 50% reduction in taxable foreign income for the first year has been dropped. Inheritance tax will move to a residence-based test, excluded property trusts will no longer keep assets outside the scope of IHT, and a temporary repatriation facility will allow earlier foreign income and gains to be brought to the UK at a reduced rate. Domicile has long been a source of dispute with HMRC, and the new rules take it out of the tax system altogether. If you are not UK domiciled or have an offshore trust, please talk to us about your position before April 2025; the changes were later enacted in the Finance Act 2025.

1.2 Furnished holiday lettings regime to end in April 2025

The government confirmed on 29 July that the special tax regime for furnished holiday lettings will be abolished from April 2025.

Qualifying holiday lets have been taxed more like a trade than other lettings, with full relief for mortgage interest, capital allowances on furnishings, pension contributions based on letting profits and access to capital gains tax reliefs such as business asset disposal relief. Draft legislation with transitional rules was published alongside the announcement, and the changes apply from 6 April 2025 for income tax and 1 April 2025 for corporation tax. If you own a holiday let, we can work out how the change affects you and help you plan for it.

1.3 Estate loses on the reduced IHT rate and business property relief

The First-tier Tribunal held that an estate could not claim the reduced 36% inheritance tax rate for charitable giving, nor business property relief on a flat used for holiday lettings.

Samuel Marks left a quarter of his estate to pass to a charitable foundation after his widow’s lifetime, but the trustees used their powers to appoint around £300,000 to grandchildren before she died, leaving only about £29,000 for the charity. The tribunal held that the charitable share had to be measured on what was actually left, which fell below the 10% needed for the 36% rate. It also found that the holiday letting business, although actively run, was still mainly the holding of an investment, a view tribunals have since taken of other property-based businesses. If your will includes gifts to charity or you own let property, please ask us to review your estate plans.

David Marks (Executor of Hilda Marks) v HMRC [2024] UKFTT 706 (TC)

1.4 Automated penalty notices are valid, says Court of Appeal

The Court of Appeal confirmed that HMRC’s computer-generated notices and late filing penalties are valid without proof that an individual officer was involved.

Mr Marano did not file his 2012/13 return on time and was later charged a discovery assessment of about £5.7 million and late filing penalties of around £574,000. He argued that notices produced by HMRC’s automated systems were invalid because no officer had made the decisions, but the court held that section 103 of the Finance Act 2020 allows HMRC itself to do anything an officer could do, with retrospective effect. Challenges of this kind are now very unlikely to succeed, so if you are disputing a penalty, please talk to us about the grounds that can work, such as a reasonable excuse. Remember too that the second payment on account for 2023/24 is due by 31 July.

Marano v HMRC [2024] EWCA Civ 876

2. PAYE and employment

2.1 HMRC warns employers about workplace nursery schemes

HMRC’s July agent update warned that some commercially marketed workplace nursery schemes do not meet the conditions for the tax exemption.

The exemption applies only where the employer is wholly or partly responsible for financing and managing the childcare, which HMRC says means taking on real financial risk and having a significant say in how the care is provided. It gave examples of arrangements that fall short, such as a fixed monthly payment per place to an existing commercial nursery with little involvement beyond occasional updates. Employers using such a scheme should review it, and we can check your benefits and payroll reporting and help with a disclosure if one is needed.

2.2 Self Assessment no longer needed just for high PAYE income

HMRC confirmed that people taxed only through PAYE need to file a 2023/24 return only if their income is over £150,000, and that from 2024/25 the income threshold is removed altogether.

Until now, anyone with income over £100,000 had to complete a tax return even if all their tax was collected through PAYE. Many people will still need to file for other reasons, for example if they have untaxed income, rental profits or capital gains, or are liable to the high income child benefit charge. If you are not sure whether you still need to file, please ask us well before the 31 January deadline.

2.3 Company director could not keep self-employment grants

The First-tier Tribunal held that a sole director who had incorporated her business could not keep SEISS grants by arguing that she would have qualified for furlough instead.

Ms Lorenzo ran a beauty business through her own company and claimed self-employment support grants of about £4,100, although as an employee of the company she was not eligible for them. The tribunal found that the company would not have qualified under the job retention scheme either, because it paid her no wages, there was no written furlough agreement and she had not stopped all work, so the grants had to be repaid. Furlough claims have failed before where the conditions were not met, and HMRC is still checking pandemic support payments.

Lorenzo v HMRC [2024] UKFTT 588 (TC)

3. Business tax

3.1 Supreme Court rules that disposal fees were capital

The Supreme Court held that £2.5 million of professional fees incurred by an investment holding company on selling a subsidiary were capital and could not be deducted as management expenses.

Centrica Overseas Holdings paid bankers, accountants and lawyers to advise on selling its loss-making Dutch business, Oxxio. The court held that the exclusion of capital expenses from management expenses has the same meaning as the capital test for trading companies, and that money spent to achieve the disposal of a capital asset is normally capital. Groups planning the sale of a subsidiary or business should not assume that deal costs will reduce taxable profits, although some costs may instead be taken into account in working out a chargeable gain.

Centrica Overseas Holdings Ltd v HMRC [2024] UKSC 25

3.2 LLP members taxed on deferred profit awards

The Court of Appeal held that amounts released to individual LLP members under a profit deferral plan were taxable on them as miscellaneous income.

HFFX LLP allocated part of its profits to a corporate member, which paid corporation tax and invested the money before releasing it to individual members as special capital in later years. Following its earlier decision in a similar case, the court rejected HMRC’s argument that the corporate member’s share should be taxed as the individuals’ own profits, but agreed with the Upper Tribunal’s view that the later awards were taxable income. Please note that the Supreme Court dismissed both HMRC’s appeal and the members’ appeal in June 2026, confirming this outcome. If your firm has a corporate member or defers partners’ profits, please ask us to review the arrangements.

HMRC v HFFX LLP [2024] EWCA Civ 813

3.3 Budget date set for 30 October

On 29 July the Chancellor announced that the new government’s first Budget would be on 30 October 2024, alongside a review of how carried interest is taxed.

The Budget will come with full forecasts from the Office for Budget Responsibility, and a call for evidence on carried interest, the share of profits paid to private equity fund managers, was published as the first step towards changing its tax treatment. Business owners considering a sale or restructuring may wish to review their plans with us before the Budget. At the Budget itself, the main rates of capital gains tax rose to 18% and 24% with immediate effect.

4. VAT and indirect taxes

4.1 VAT on private school fees from January 2025

The government confirmed on 29 July that private school fees will be subject to VAT at 20% from 1 January 2025, with fees paid from 29 July 2024 for later terms also caught.

Paying fees in advance for terms starting in January 2025 or later will not avoid the charge, and private schools in England will also lose charitable relief from business rates from April 2025. Draft legislation and a technical consultation were published alongside the announcement. Please note that the change took effect as planned, the High Court rejected a legal challenge in June 2025 and the Court of Appeal dismissed a further appeal in early 2026, although the Supreme Court has since given permission for a final appeal. Families reviewing how they pay for school fees are welcome to talk to us.

4.2 Collagen drink is not zero-rated food

The First-tier Tribunal held that Skinade, a collagen drink sold through aesthetic clinics as part of a skincare routine, was a standard-rated beauty product rather than zero-rated food.

Although the drink contained protein, vitamins and minerals, the tribunal gave weight to its clinical packaging, its marketing as an anti-ageing product and its sale through clinics rather than food retailers. Like the poppadoms case earlier this year, it shows how fine the line between zero-rated and standard-rated food can be. Please note that in September 2025 the Upper Tribunal gave the company permission to appeal, and at the time of writing the outcome of that appeal is still awaited.

Bottled Science Ltd v HMRC [2024] UKFTT 592 (TC)

5. Key dates

The main deadlines and events for July to September 2024 are set out below.

6. And finally

6.1 A summer statement and a half-price meal

Four years ago this month, on 8 July 2020, the Chancellor presented a Summer Statement to support the economy as the first coronavirus lockdown eased. With immediate effect, the stamp duty land tax nil-rate band for homes in England and Northern Ireland rose from £125,000 to £500,000 until 31 March 2021, and from 15 July 2020 a temporary 5% VAT rate applied to hospitality, holiday accommodation and admission to attractions.

The statement also launched Eat Out to Help Out, under which the government paid half the bill, up to £10 a head, for food and soft drinks in participating restaurants from Monday to Wednesday throughout August 2020. Like many temporary measures, the reduced VAT rate lasted longer than planned: it rose to 12.5% in October 2021, and the standard 20% rate did not return until 1 April 2022.