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 Transactions in securities: assessments out of time

The FTT has decided a valuation question in a capital reduction case but found that HMRC’s assessments were made too late.

The case concerned counteraction notices under the transactions in securities rules, which can tax as income amounts that shareholders receive as capital. The case is a reminder to check whether HMRC is within the statutory time limits before engaging with the substance of an enquiry or assessment.

Oscroft & Ors v HMRC (FTT, February 2026)

1.2 High Income Child Benefit Charge: tribunal urges HMRC to use its discretion

The FTT has upheld HMRC’s assessments for the High Income Child Benefit Charge (HICBC), but recommended that HMRC use its discretion to cancel the charges.

The tribunal found the assessments were validly made but considered the outcome unfair in the circumstances. Parents with income over £60,000 who receive Child Benefit should check whether the charge applies to them. It can now be paid through PAYE rather than a Self Assessment return.

Milburn v HMRC (FTT, February 2026)

1.3 Late payment penalties for 2024/25 Self Assessment

Self Assessment tax for 2024/25 that was due on 31 January and is still unpaid by 3 March 2026 will attract a 5% late payment penalty.

Further penalties apply after six and twelve months, on top of interest. Anyone who cannot pay in full should contact HMRC about a Time to Pay arrangement before 3 March, which can prevent the penalty.

2. PAYE and employment

2.1 UK and India sign social security agreement

The UK and India have signed a Double Contributions Convention, so that employees sent temporarily from one country to the other pay social security contributions in only one country.

Once in force, it will allow UK employees posted to India to keep paying UK National Insurance for a limited period, without also paying into the Indian scheme. Employers with staff moving between the two countries should review their arrangements ahead of the agreement taking effect.

2.2 Class 1A NICs on benefits: updated guidance

HMRC has updated its CWG5 guidance on Class 1A NICs on benefits in kind, and published its further guide to PAYE and NICs for 2026/27.

Employers should use the updated guidance when preparing for the 2026/27 tax year and the 2025/26 P11D returns, which are due by 6 July 2026. With mandatory payrolling of some benefits due to start in April 2027, now is a good time to review which benefits are provided and how they are reported.

HMRC Employer Bulletin, February 2026

2.3 Loan charge: HMRC sets out its approach after the independent review

HMRC has published an issue briefing on its operational approach following the new independent review of the loan charge.

People affected by the loan charge should watch for further announcements on settlement terms. Anyone who used disguised remuneration schemes and has not yet settled should take advice on their options.

3. Business tax

3.1 Loan relationship debits: Upper Tribunal partly reverses the FTT

The Upper Tribunal has partly reversed an FTT decision on the timing of loan relationship debits.

The decision turns on when costs on corporate debt are recognised for tax purposes. Groups with complex funding arrangements should check that the timing of their interest deductions follows their accounts and the loan relationship rules.

UK Care No. 1 Ltd v HMRC [2026] UKUT 90 (TCC)

3.2 HMRC guidance on sharing group structures

HMRC has published best practice guidance on sharing group structure information with it.

Clear structure charts help HMRC understand a group, which can reduce the time spent on routine queries. Larger groups should make sure their structure charts are kept up to date.

3.3 MTD for income tax: payments on account issue in the trial

HMRC has warned participants in the Making Tax Digital for income tax trial about an issue affecting payments on account.

Taxpayers in the trial should check their payments on account carefully. With MTD for income tax becoming mandatory from 6 April 2026 for those with qualifying income over £50,000, affected clients should be choosing their software now.

4. VAT and indirect taxes

4.1 Option to tax: no taxable supply, no option

The FTT has held that a company buying a property for use as a nursery could not rely on an option to tax.

The tribunal found that the property acquisition was not a taxable supply, so the option to tax was not available. Before relying on an option to tax, businesses should check the VAT status of the transaction and their own planned use of the building.

Nissi N Nissi Ltd v HMRC [2026] UKFTT 234 (TC)

4.2 Overseas staff supply: reverse charge applied

The FTT has held that a supply of staff from Slovakia to a UK care provider was subject to the reverse charge.

Under the reverse charge, the UK business accounts for the VAT itself. Businesses that are not able to recover all their VAT, such as care providers, can face a real cost. Care and other partly exempt businesses using overseas staffing providers should check whether the reverse charge applies.

Genuine Care Homecare Services Ltd v HMRC [2026] UKFTT 235 (TC)

4.3 Late payment penalties upheld

The FTT has upheld late payment penalties under the new VAT penalty regime, finding no reasonable excuse or special circumstances.

VAT paid late now attracts penalties that increase with time, as well as interest. Businesses with cash flow pressures should contact HMRC about a Time to Pay arrangement before the payment falls due.

Splend SPV (UK) Ltd v HMRC [2026] UKFTT 232 (TC)

5. Key dates

Unpaid 2024/25 Self Assessment tax attracts a 5% penalty from 3 March, and the new tax year begins on 6 April.

6. And finally

6.1 Hats off

From 1784 to 1811, men’s hats were taxed, and each hat had to carry a revenue stamp inside the lining. Hatters tried calling their products something other than hats to escape the duty, so the law was widened to cover any form of headwear.

Two centuries on, HMRC’s appetite for clear definitions is as strong as ever. As this month’s VAT cases show, what something is called matters much less than what it actually is.