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 Self Assessment: the 31 January deadline approaches

Online returns for 2023/24 must be filed, and the tax paid, by Friday 31 January 2025.

The same date is when the balancing payment for 2023/24 and the first payment on account for 2024/25 fall due, as shown in our key dates table below. Employees and pensioners who owe less than £3,000 can ask for the tax to be collected through their PAYE code instead, but only if the return is filed online by Monday 30 December 2024. A late return triggers an automatic £100 penalty, and unpaid tax carries late payment interest from 1 February, so it pays to file early rather than on deadline day. If you expect to struggle to pay in full, we can help you set up a Time to Pay arrangement with HMRC.

1.2 Scottish Budget: lower income tax thresholds rise for 2025/26

The Scottish Budget on 4 December 2024 kept Scottish income tax rates unchanged but raised the starter and basic rate thresholds from 6 April 2025.

For 2025/26 the 19% starter rate will apply to income up to £15,397 and the 20% basic rate up to £27,491, while the higher, advanced and top rate thresholds stay at £43,662, £75,000 and £125,140. The Scottish Government also said it intends to raise the two lowest thresholds at least in line with inflation for the rest of the parliament. Scottish taxpayers with income close to the higher rate threshold should review pension contributions and the timing of income before April.

1.3 Film scheme investors win on exit payments

The First-tier Tribunal has held that sums received by investors on leaving film leasing partnerships were not taxable under the special rules for film-related losses.

Three investors had joined film leasing LLPs between 2004 and 2006 and claimed tax relief, then in 2013 sold their capital accounts for cash and their remaining interests for a nominal sum. HMRC argued that the anti-avoidance rules aimed at exits from film schemes made the proceeds taxable, but the tribunal found that those rules only bite where the partnership carries on a trade, and these LLPs had made investments rather than trading. The decision turned closely on its facts, and other film partnership cases have had mixed results, so anyone still dealing with an open enquiry into an old scheme should take specialist advice before agreeing anything with HMRC.

Hoyle and others v HMRC [2024] UKFTT 1060 (TC)

1.4 Trust appointments undone after a tax mistake

The High Court has set aside appointments to employee benefit sub-trusts that had been made without realising they would cost the trusts their inheritance tax protection.

The trustees of two Henderson group employee trusts had appointed roughly £50 million into sub-trusts for individual employees and their families. Because the funds were no longer held for all or most of the employees, the trusts risked losing the relief in section 86 of the Inheritance Tax Act 1984, with a potential IHT bill of around £7 million. The court accepted that the trustees had made a serious mistake about the tax effect and rescinded the appointments. Rescission is a discretionary remedy and not a substitute for advice beforehand, and sub-trusts within employee benefit trusts remain a target for HMRC, so trustees and owners planning succession through an EBT should check the IHT position before making any appointment.

JTC Employer Solutions Trustee Ltd and others v Garnett and another [2024] EWHC 3128 (Ch)

2. PAYE and employment

2.1 Genuine EBT loan to a director was not earnings

The Upper Tribunal has ruled that an £800,000 loan from an employee benefit trust to a company’s director, and the company’s payment into the trust that funded it, were not taxable earnings.

In 2010 the company paid £800,000 into an EBT, which lent the money to its director so that he could buy shares from his wife. The loan was secured on the shares and had to be repaid, and the Upper Tribunal reversed the First-tier Tribunal, holding that a genuine loan with a real obligation to repay is not placed unreservedly at the borrower’s disposal and so is not earnings; the benefit of an interest-free loan is taxed under the separate loan benefit rules instead. Most loans of this kind are now caught by the disguised remuneration rules, so the decision is mainly relevant to older arrangements still under enquiry. Please note that the Court of Appeal dismissed HMRC’s further appeal in April 2026 and confirmed that the loan was not earnings, and HMRC has since applied to the Supreme Court for permission to appeal.

M R Currell Ltd v HMRC [2024] UKUT 00404 (TCC)

2.2 Payments to departing directors were not exempt termination payments

The First-tier Tribunal has held that £30,000 payments made to directors when they stood down were taxable earnings, not compensation for loss of office.

Two companies paid five departing directors £30,000 each, described as compensation for loss of office, without deducting tax or National Insurance. The directors drew no salary from the companies, kept their profit shares in a related LLP, had no termination agreements and lost nothing by stepping down, so the tribunal found the payments were rewards for past service. HMRC’s assessments, which went back more than four years because the companies had been careless, were upheld. Some termination payments are partly or wholly exempt, but the £30,000 exemption only applies where a payment genuinely compensates for the loss of the office, so employers should document the reasons for any termination payment and the loss it reflects.

Simrajsar Ltd and Achilles Products Ltd v HMRC [2024] UKFTT 1072 (TC)

2.3 Advisory fuel rates from 1 December 2024

HMRC published new advisory fuel rates for company car drivers, which apply from 1 December 2024.

The rates for petrol cars are 12p, 14p and 23p per mile for engines of up to 1,400cc, 1,401cc to 2,000cc and over 2,000cc, and for diesel cars 11p, 13p and 17p per mile for up to 1,600cc, 1,601cc to 2,000cc and over 2,000cc. The advisory electricity rate for fully electric cars is 7p per mile. Employers can use these rates to reimburse business mileage in company cars, or to recover the cost of private fuel, without any taxable benefit arising, and HMRC reviews them every quarter. If you would like us to keep your expenses policy and payroll up to date, please let us know.

3. Business tax

3.1 Overlap relief: request your figures by 31 December

Sole traders and partners who need HMRC’s record of their overlap profits for their 2023/24 return must ask for it by 31 December 2024.

Under basis period reform, 2023/24 is the transition year in which unincorporated businesses move to taxing the profits of the tax year, and any overlap profits carried forward from earlier years are set against the transition profits. HMRC has set 31 December 2024 as the last date for requests through its online service for overlap figures, and it has warned that demand meant replies were taking longer. If you run a business as a sole trader or partner and do not yet have your overlap figure, please contact us now so that we can work it out from your earlier accounts and returns.

3.2 Interest deductions denied under the unallowable purpose rule

The First-tier Tribunal has held that a UK company could not deduct interest on an intra-group loan because a main purpose of the borrowing was to obtain a UK tax advantage.

Syngenta Holdings borrowed from a Dutch group company to buy shares in other group companies, and the interest was used to reduce the taxable profits of other UK group companies. The tribunal looked at the tax position of the group as a whole, including its internal planning documents, and found that securing the UK deduction was a main purpose, so the interest was disallowed under the unallowable purpose rule in the Corporation Tax Act 2009. This follows other decisions on the same rule, and groups should keep clear evidence of the commercial reasons for any intra-group borrowing. Please note that in October 2025 the Upper Tribunal gave Syngenta permission to appeal on a limited number of grounds, and at the time of writing we have not seen a final decision.

Syngenta Holdings Ltd v HMRC [2024] UKFTT 998 (TC)

4. VAT and indirect taxes

4.1 Clear aligners: VAT dispute heads to a full hearing

The First-tier Tribunal has allowed a dispute over whether clear dental aligners are exempt from VAT to go ahead, even though HMRC had withdrawn its assessments.

Align Technology treated its Invisalign aligners as exempt dental prostheses, while HMRC said they were standard rated and raised assessments of about £25.7 million, which it later withdrew. The tribunal struck out the part of the appeal about the assessments but kept the underlying question of the VAT liability alive, because HMRC had not withdrawn its decision that VAT was due. Please note that the First-tier Tribunal found in April 2025 that the aligners were exempt, but the Upper Tribunal reversed that decision in July 2026, holding that dental prostheses are items that replace missing or damaged teeth, so aligners are standard rated. Dental practices and laboratories supplying aligners should ask us to review their VAT position.

Align Technology Switzerland GmbH and another v HMRC [2024] UKFTT 1100 (TC)

4.2 Scotland: additional dwelling supplement rises to 8%

The LBTT additional dwelling supplement on second homes and buy-to-let purchases in Scotland rose from 6% to 8% on 5 December 2024.

The increase was announced in the Scottish Budget and took effect the next day. Transactions where missives were concluded on or before 4 December 2024 stay at the old 6% rate, even if they complete later. Anyone buying an additional residential property in Scotland should build the higher charge into their budget.

4.3 Historic house used as offices was still residential for LBTT

The First-tier Tax Tribunal for Scotland has held that a listed Edinburgh house, used as offices for about 40 years, was residential property when it was bought.

The buyers paid LBTT at non-residential rates on Baberton House, a Grade A listed building dating from 1622 that had been used as offices from 1980 until 2020. Permission to change its use back to a home had been granted shortly before the purchase, and the tribunal found that the building was suitable for use as a dwelling, so a further £50,350 of LBTT was due. The tribunal also confirmed that Revenue Scotland’s guidance is its view of the law rather than the law itself, so buyers of mixed-use or formerly commercial properties should not rely on guidance alone when choosing the rates.

Ball and Torokoff v Revenue Scotland [2024] FTSTC 6

5. Key dates

The main deadlines and events for December 2024 to February 2025 are set out below.

6. And finally

6.1 A Christmas VAT cut

On 1 December 2008, at the height of the financial crisis, the standard rate of VAT fell from 17.5% to 15%. Alistair Darling had announced the cut in his Pre-Budget Report only a week earlier, on 24 November, leaving retailers a few days to reprice their stock before the Christmas shopping season, and the Government estimated that it would put around £12.4 billion back into the economy over the following 16 months.

The cut was always meant to be temporary. The rate returned to 17.5% on 1 January 2010 and then rose to 20% on 4 January 2011, where it has stayed ever since. Temporary sales tax breaks are still used today: in December 2024 Canada suspended its goods and services tax on items such as children’s toys and Christmas trees from 14 December until 15 February.