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 Reversing a transfer did not cancel the CGT

The First-tier Tribunal has confirmed that a transaction cannot be unwound for tax purposes just because the taxpayer misunderstood its tax consequences.

Mr Mahmood transferred ten commercial properties to a company owned by his wife in 2016, believing that the tax-free transfer rules for spouses would apply, and the properties were transferred back to him in 2019. The tribunal held that a mistake about tax alone does not make a contract void, so the original disposal stood, although revised HMRC figures reduced the capital gains tax assessed from about £303,000 to about £36,000. A transfer to a company is taxed at market value even if your spouse owns it, so please take advice before moving assets between family members and companies. Please note that the Upper Tribunal refused Mr Mahmood permission to appeal in January 2025, so the decision stands.

Mahmood v HMRC [2024] UKFTT 114 (TC)

1.2 HMRC letters on undeclared share sales

HMRC has begun writing to individuals who it believes sold shares without reporting the disposal on their tax return.

The letters ask recipients to check their position and, within 60 days, either correct their return, give HMRC the figures so that it can assess any tax, or explain why nothing is due. HMRC now receives a great deal of third-party information, and more of it arrives automatically each year. A separate campaign is targeting shareholders of companies whose reserves have fallen (see 3.2 below). If you receive one of these letters, please do not ignore it: we can review your position and deal with HMRC for you.

1.3 Allowances halve again from 6 April

The capital gains tax annual exempt amount falls from £6,000 to £3,000, and the dividend allowance from £1,000 to £500, on 6 April 2024.

These reductions were announced in November 2022 and follow the cuts made in April 2023. Anyone with investments should consider whether to realise gains or take dividends before the tax year ends on 5 April, and whether to use this year’s £20,000 ISA allowance. Married couples and civil partners can often share assets so that both sets of allowances are used, and our personal tax planning team can help with the timing.

2. PAYE and employment

2.1 £6 million settlement was a taxable termination payment

The Upper Tribunal has agreed that a £6 million payment settling a former banker’s discrimination and whistleblowing claims was taxable as a payment on termination of employment.

Ms Mathur was dismissed by a Deutsche Bank group company in 2015 and settled her employment tribunal claims in 2016. She argued that the payment related to treatment before her dismissal, but the tribunal found that the termination was the trigger for the claims and the settlement, so the sum was taxable above the £30,000 exemption, after limited deductions. Where a settlement covers several claims, the agreement and supporting evidence should show what each part is for, so please speak to us before signing.

Mathur v HMRC [2024] UKUT 38 (TCC)

2.2 Double cab pick-ups: an HMRC U-turn

HMRC announced on 12 February that double cab pick-ups would be taxed as cars, then withdrew the change a week later.

HMRC had planned to treat double cab pick-ups with a payload of one tonne or more as cars for benefit in kind and capital allowances from 1 July 2024, but after concerns from farmers and other businesses the government withdrew the change and said existing treatment would continue. The issue returned in the Autumn Budget on 30 October 2024, when the government announced that these vehicles would be treated as cars for capital allowances and benefits in kind from April 2025, with transitional protection until 5 April 2029 at the latest for vehicles bought, leased or ordered before then. Employers providing pick-ups should check how they are reported, and our payroll and benefits team can help.

2.3 IR35: credit for tax the worker has already paid

HMRC consulted until 22 February on rules that reduce a deemed employer’s IR35 bill by tax already paid by the worker and their company.

At present, a client or agency that gets the off-payroll rules wrong can be asked for the full PAYE even though the worker’s company has already paid tax on the same income, an issue we covered in November. Regulations that took effect on 6 April 2024 allow HMRC to deduct income tax and corporation tax already paid by the worker and their company from settlements and assessments made from that date, covering payments back to April 2017. Employer National Insurance is not reduced, so careful status decisions remain essential.

3. Business tax

3.1 Finance Act 2024 becomes law

The Autumn Statement 2023 measures became law when Finance Act 2024 received Royal Assent on 22 February.

The Act makes full expensing permanent for companies’ qualifying plant and machinery, merges the two R&D relief schemes for accounting periods starting on or after 1 April 2024, and makes the cash basis the default for sole traders and partnerships from 2024/25. It also completes the abolition of the pension lifetime allowance from 6 April 2024 and extends the EIS and VCT schemes to 2035. Growing businesses planning investment, and anyone reviewing their pension planning, should consider how these changes apply to them.

3.2 HMRC letters when company reserves fall

From 5 February HMRC has written to shareholders of companies whose accounts show a large fall in reserves, suggesting an undeclared dividend.

Recipients have 30 days to declare any missing dividend income or tell HMRC why nothing is due, and HMRC warns that it may otherwise open a compliance check and charge higher penalties. Reserves can fall for other reasons, such as trading losses, so the accounts should be checked before replying. Directors should make sure that every payment from their company is correctly documented as salary, dividend or loan, and we can advise on profit extraction.

3.3 LLP ‘capital interests’ taxed as income

The First-tier Tribunal has decided that payments for ‘capital interests’ received by senior members of Boston Consulting Group’s UK LLP were taxable as income, not as capital gains.

The amounts were linked to the growth in value of the wider group, but the tribunal found that they were in substance deferred rewards for the members’ work rather than proceeds from selling a share of the LLP’s capital, an approach similar to the BlueCrest decision. Please note that the Upper Tribunal upheld the finding that the payments were income in January 2026. Partnerships and LLPs with capital or incentive arrangements should review them.

The Boston Consulting Group UK LLP v HMRC [2024] UKFTT 84 (TC)

4. VAT and indirect taxes

4.1 Protein flapjacks and brownies are standard-rated

The First-tier Tribunal has decided that sports nutrition twin packs, each pairing a flapjack with a cake slice or brownie, are standard-rated confectionery.

DuelFuel argued that the products were zero-rated cakes, but the tribunal found that their high protein content, gym-focused marketing and use before and after exercise meant that an ordinary person would not see them as cakes. They were sweetened food normally eaten with the fingers, and so confectionery, much like the poppadoms in our January update. Food businesses should confirm the VAT liability of new products before they launch.

DuelFuel Nutrition Ltd v HMRC [2024] UKFTT 104 (TC)

4.2 Export evidence must be in place within three months

A scrap metal dealer has lost its claim to zero-rate copper sold to a Belgian customer, with about £1.18 million of VAT at stake.

H Ripley & Co treated 72 sales made in 2016 as zero-rated exports, but its transport documents were incomplete and much of its other evidence, such as ferry boarding cards, was obtained long after the three-month time limit. The tribunal confirmed that the question is whether the business held proper evidence of removal in time, not whether the goods actually left the UK. Please note that the Upper Tribunal dismissed the company’s further appeal in June 2025. Exporters should gather and check the evidence for every shipment as it happens.

H Ripley & Co Ltd v HMRC [2024] UKFTT 125 (TC)

4.3 SDLT scheme fails in the Court of Appeal

The Court of Appeal has confirmed that a couple who bought their home through a company owed SDLT on the £955,000 price.

In 2007 Mr and Mrs Brown subscribed for shares in an unlimited company, which bought the house and immediately passed it to them through a reduction of capital, and no SDLT return was filed. The court held that the couple had indirectly provided the purchase price through a company connected with them, so the £38,200 of SDLT assessed by HMRC was due. Schemes like this rarely succeed, as earlier SDLT cases show, and buyers should take advice on SDLT before exchanging contracts.

Brown and another v HMRC [2024] EWCA Civ 92

5. Key dates

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

6. And finally

6.1 A February budget that scrapped the glass duty

On 14 February 1845, Sir Robert Peel told the House of Commons that he would abolish the excise duty on glass. The duty had been charged since 1746, at first by the weight of the glass, and Peel argued that it held back British manufacturers when their competitors in France, Belgium and Bohemia paid nothing; he expected the Exchequer to lose around £642,000 a year.

In the same statement Peel asked Parliament to renew income tax for a further three years, hoping that lower duties would boost trade enough for it to be dropped afterwards. Income tax is still with us, while the separate tax on windows lasted until 1851.