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 HMRC interest rates fall for the first time since 2020

After the Bank of England cut base rate from 5.25% to 5% on 1 August, HMRC’s late payment interest rate fell to 7.5% and its repayment interest rate to 4%.

The new rates applied from 12 August for quarterly instalment payments of corporation tax and from 20 August for everything else, including Self Assessment. This reverses part of the run of increases since 2022, when late payment interest climbed steadily with base rate. At 7.5% the cost of owing HMRC is still high, so it remains worth paying on time or, if that is not possible, agreeing a Time to Pay arrangement early. Anyone who first received untaxed income in 2023/24 should also remember that the deadline to tell HMRC is 5 October 2024.

1.2 Compensation for mis-sold hedging products was taxable

The First-tier Tribunal has held that redress and interest paid by banks for mis-sold interest rate hedging products were taxable income in the hands of two property-letting brothers.

The brothers had bought hedging products from HSBC and RBS in 2006 to support borrowing for their rental business, and later received redress plus 8% interest after the regulator’s review of mis-selling. Because the payments to the banks had been deducted as expenses of the rental business, the tribunal held that compensation refunding them was a taxable receipt of that business, and that the 8% element was taxable as interest; HMRC’s amendments of around £219,000 each were upheld. Anyone who has received compensation or redress should take advice on how it is taxed before filing. Please note that the brothers appealed and the Upper Tribunal dismissed their appeal in January 2026, confirming the First-tier Tribunal’s decision.

Hackett & Anor v HMRC [2024] UKFTT 749 (TC)

1.3 HMRC writes to high earners who have not filed

HMRC began writing to people with income above £200,000 who appear not to have filed a 2021/22 Self Assessment return.

The letters went to three groups: people whose HMRC records were dormant, people who were sent a notice to file for 2021/22 but did not file, and people who have never registered for Self Assessment. Recipients are asked to check whether they need to file and, if so, to do so; otherwise HMRC may issue a formal notice to file, and late filing penalties can apply. If you receive one of these letters, please contact us before replying so that we can review your personal tax position and deal with any return that is due.

2. PAYE and employment

2.1 IR35: rugby commentator loses at the Upper Tribunal

The Upper Tribunal has overturned the First-tier Tribunal and held that IR35 applied to Stuart Barnes’s work for Sky through his personal service company.

Mr Barnes had won at the First-tier Tribunal, which found that he was in business on his own account. The Upper Tribunal held that the tribunal had gone wrong in law and, looking at the contract as a whole, including its fixed term, Sky’s exclusivity and first-call rights and the absence of financial risk, concluded that a direct contract would have been one of employment, with around £700,000 at stake. The case follows other high-profile presenter cases and shows how much turns on the written terms, so contractors should review their contracts regularly.

HMRC v S & L Barnes Ltd [2024] UKUT 262 (TCC)

2.2 Umbrella company loses on subsistence payments

The Upper Tribunal has held that an umbrella company could not pay temporary workers tax-free subsistence, because each assignment was a separate employment.

Mainpay argued that its workers had a single overarching employment, so each assignment was a temporary workplace and travel and subsistence could be reimbursed tax-free using benchmark scale rates. The tribunal agreed with HMRC that there was no overarching employment between assignments, that scale rates could not be used without an HMRC dispensation, and that the company had been careless, echoing earlier umbrella company decisions. Agencies and end clients should check how their umbrella providers treat expenses, particularly in light of the new rules for umbrella companies. Please note that Mainpay appealed again and the Court of Appeal dismissed the appeal on 10 October 2025.

Mainpay Ltd v HMRC [2024] UKUT 233 (TCC)

2.3 Reporting of employees’ hours delayed

HMRC told software developers on 16 August that employers would not have to report more detailed hours data through RTI from April 2025, and not before April 2026 at the earliest.

The previous government had planned to require employers to report actual hours worked on each payroll submission. HMRC blamed the general election and the lead-in time software needed, and said final decisions would rest with the new government. In January 2025 HMRC confirmed that the plans had been dropped altogether, so no change to payroll reporting is needed for this.

3. Business tax

3.1 Company careless for using a scheme without advice

The First-tier Tribunal has held that a one-person company was careless when it used an offshore employee benefit trust scheme without taking independent tax advice.

Janet Bray Ltd, a pharmaceutical consultancy, paid into an arrangement that was meant to give a corporation tax deduction while the director received funds as loans free of PAYE and National Insurance. The tribunal found that relying on the promoter, with no independent advice despite clear warning signs, was careless, so HMRC could use the extended time limit for careless behaviour and the penalties stood. Directors looking at ways of extracting profits should take independent advice before signing up to anything that looks too good to be true.

Janet Bray Ltd v HMRC [2024] UKFTT 787 (TC)

3.2 Gold bullion bonus scheme fails

The Upper Tribunal has refused permission to appeal in a case where directors were rewarded with gold bullion through an employee benefit trust.

The company bought £300,000 of gold for two directors through the trust, and the gold was sold at once with the proceeds credited to their loan accounts. The First-tier Tribunal had held that the directors received taxable earnings, that the gold was a readily convertible asset for PAYE, and that the company could not deduct the cost because a tax-saving purpose sat alongside the business one; the Upper Tribunal found no arguable error. Like the loan charge cases, this shows that disguised remuneration arrangements rarely work, and anyone who used one should talk to us about settling with HMRC.

Wired Orthodontics Ltd & Ors v HMRC [2024] UKUT 266 (TCC)

4. VAT and indirect taxes

4.1 London sightseeing passes were multi-purpose vouchers

The First-tier Tribunal has held that Go City’s attraction passes were multi-purpose vouchers, so no VAT was due when they were sold.

Go City sells passes giving entry to a range of London attractions, and HMRC argued that VAT was due on the full price when each pass was sold, including on credits that customers never used. The tribunal decided that the passes were multi-purpose vouchers, so VAT arises only when they are redeemed at an attraction, and that two of HMRC’s assessments were invalid because no officer had actually formed a view that the returns were wrong before issuing them. Businesses selling vouchers, gift cards or prepaid credits should check how they account for VAT, and we can help with challenging an HMRC assessment.

Go City Ltd v HMRC [2024] UKFTT 745 (TC)

4.2 Barn with two units qualified for multiple dwellings relief

The First-tier Tribunal has allowed a buyer’s claim to SDLT multiple dwellings relief on a converted barn containing two self-contained units.

The barn cost £1.8 million and was laid out as two units, each with its own entrance, kitchen, bathroom and living space, although they shared a boiler, a postal address and a council tax account. The tribunal held that the physical layout and separate facilities mattered most, so both units were dwellings and £59,750 of SDLT was repaid, in line with later annex cases. Multiple dwellings relief was abolished for purchases completing on or after 1 June 2024, so the case matters mainly for earlier purchases, and buyers should take advice on property purchases before exchange.

Winfield v HMRC [2024] UKFTT 734 (TC)

5. Key dates

The main deadlines and events for August to October 2024 are set out below.

6. And finally

6.1 The August tax cut that beat the tea smugglers

On 20 August 1784 the Commutation Act received Royal Assent. Promoted by William Pitt the Younger on the advice of the tea merchant Richard Twining, it cut the duty on tea from 119% to 12.5%, because duty that high had made smuggling more profitable than honest trade.

To make up the lost revenue, Pitt sharply increased the window tax, which survived until 1851. With legal tea suddenly cheap, much of the smuggling trade collapsed, an early example of a lower rate bringing activity back into the tax net.