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 deadline: 1.1 million returns late

HMRC received a record 11.5 million 2022/23 tax returns by the 31 January 2024 deadline, but around 1.1 million people missed it.

Of the 12.2 million returns HMRC expected, more than 778,000 were filed on deadline day itself. Anyone who filed late faces an automatic £100 penalty, with daily penalties after three months and further penalties at six and twelve months. Tax still unpaid for 2022/23 attracts late payment interest, currently 7.75%, and a 5% penalty if it remains outstanding after 30 days. If you have not yet filed or cannot pay in full, please contact us straight away so that we can file and, where needed, help you agree a Time to Pay arrangement with HMRC.

1.2 HMRC writes to landlords about repair costs

HMRC has been writing to landlords who claimed repair and maintenance costs on their 2021/22 returns, asking them to check that no capital costs were included.

The letters, sent since December 2023, explain the difference between revenue repairs, which are deductible against rental income, and capital improvements, which are not. Recipients were asked to make any corrections by 31 January 2024. A letter does not mean that a claim is wrong, but it does show that HMRC’s data analysis has flagged the return. If you have received one, please let us review your claim before you reply.

1.3 Trustees denied business asset disposal relief

The First-tier Tribunal has held that trustees could not claim entrepreneurs’ relief (now business asset disposal relief) on selling a company share, because the life tenant did not hold shares in the company personally.

The Peter Buckley Settlement held a single share in a family company and sold it in 2015. Mr Buckley, the life tenant, was also a trustee and a director of the company, but he did not own any shares in his own name. The tribunal held that the qualifying beneficiary must hold at least 5% of the company personally, and that shares held as a trustee do not count, so capital gains tax of about £251,000 remained due. Trustees planning a sale should check well in advance whether a beneficiary meets the conditions for relief.

Trustees of the Peter Buckley Settlement v HMRC [2024] UKFTT 29 (TC)

2. PAYE and employment

2.1 Employee National Insurance falls to 10%

From 6 January 2024 the main rate of employee Class 1 National Insurance fell from 12% to 10%.

Employers should check that payroll applied the new rate from the first pay day on or after 6 January. Directors on an annual earnings period have their contributions worked out on a blended basis for 2023/24. Employer contributions are unchanged at 13.8%. For the self-employed, the main rate of Class 4 contributions falls from 9% to 8% from 6 April 2024, and Class 2 contributions will no longer need to be paid from the same date.

2.2 IR35: Kaye Adams wins her long-running case

The First-tier Tribunal has decided that broadcaster Kaye Adams would not have been an employee of the BBC if she had contracted with it directly, so IR35 did not apply.

The dispute concerned 2015/16 and 2016/17, with around £124,000 of income tax and NIC at stake, and had already been through several earlier hearings. The tribunal gave weight to her substantial work for other clients, including ITV and newspaper columns, and found that the hypothetical contracts with the BBC were contracts for services. HMRC did not appeal further, bringing the case to an end after almost nine years.

Atholl House Productions Ltd v HMRC [2024] UKFTT 37 (TC)

2.3 IR35: football pundit loses

In a contrasting decision, the tribunal held that former Liverpool player Phil Thompson would have been Sky’s employee for his Soccer Saturday work.

His company was assessed for about £294,000 of PAYE and NIC for 2013 to 2018. The tribunal found that Sky had sufficient control over when, where and what services were provided, even though Mr Thompson had freedom over the opinions he gave on air. The two decisions show how fact-specific IR35 is, and why each engagement needs its own assessment. Please note that the company’s further appeal was dismissed by the Upper Tribunal in 2025.

Separately, HMRC published a consultation in January on draft rules allowing tax already paid by a worker to be offset against an off-payroll working liability when HMRC finds that the rules were not applied correctly. The consultation closes on 22 February 2024.

PD & MJ Ltd v HMRC [2024] UKFTT 38 (TC)

2.4 Umbrella company workers’ travel was not tax-free

The Upper Tribunal has upheld HMRC’s view that travel expenses paid by an umbrella company to construction workers were taxable.

Exchequer Solutions argued that its workers had an overarching contract of employment, so that each site was a temporary workplace and travel there was deductible. The tribunal agreed with the First-tier Tribunal that there was no mutuality of obligation between assignments, so each assignment was a separate employment and each site a permanent workplace. The reimbursements were therefore subject to PAYE and NIC. Businesses using umbrella arrangements should review how travel is treated.

Exchequer Solutions Ltd v HMRC [2024] UKUT 25 (TCC)

3. Business tax

3.1 Offshore accommodation use was not incidental

The Court of Appeal has held that a drilling rig used to house offshore workers was subject to the cap on deductions for leasing costs.

Dolphin Drilling hired the rig from an associated company and used it to support an oil platform, including providing accommodation for workers. Relief for the hire costs was restricted unless the accommodation use was incidental to its other uses. The court held that incidental means a use that arises from or serves another use, not simply one that is less important. Because housing workers was an independent purpose in its own right, the cap applied. Please note that the Supreme Court dismissed the company’s further appeal in 2025.

HMRC v Dolphin Drilling Ltd [2024] EWCA Civ 1

3.2 R&D claim failed for lack of a computation

The Court of Session has upheld HMRC’s refusal of an R&D tax credit claim because the supporting computation was not provided until after the deadline.

Bureau Workspace amended its corporation tax return to claim R&D relief before the time limit, but the computation showing how the claim was calculated followed later. The court held that the computation was part of a valid claim, so the claim was out of time. R&D claims are now subject to additional information and advance notification requirements, so companies should allow plenty of time and make sure everything is submitted together.

Bureau Workspace Ltd v HMRC [2024] CSOH 1

3.3 Online platforms now report sellers’ income to HMRC

Since 1 January 2024, digital platforms have had to collect information about people selling goods and services through them, and report it to HMRC.

The rules cover sellers on online marketplaces and platforms for services such as rentals, transport and freelance work. The first reports, covering 2024, are due by 31 January 2025, and HMRC will use the data to identify income that has not been declared. Anyone with an online side business or rental income through a platform should make sure it is reported correctly on their tax return.

4. VAT and indirect taxes

4.1 Walkers Sensations Poppadoms are standard-rated

The First-tier Tribunal has held that Walkers’ Sensations Poppadoms are similar to potato crisps, so VAT is due at the standard rate.

Most food is zero-rated, but potato crisps and similar products made from potato are excluded. Walkers argued that its poppadoms, which contain about 40% potato-based ingredients, were a different product. The tribunal looked at their packaging, appearance, texture and where they are sold, and decided they were similar to crisps. Food businesses should check the VAT treatment of new products carefully before launch. Please note that the Upper Tribunal dismissed Walkers’ further appeal in 2025.

Walkers Snack Foods Ltd v HMRC [2024] UKFTT 31 (TC)

4.2 Casino’s partial exemption method rejected

The Upper Tribunal has reversed a decision that allowed a casino to use a floorspace-based method to recover VAT on its overheads.

The Hippodrome Casino makes taxable supplies of food, drink and entertainment as well as exempt gaming. The First-tier Tribunal had accepted that the standard turnover-based method did not fairly reflect the use of its costs. The Upper Tribunal found that the bars, restaurants and entertainment also served to attract customers to the gaming floors, so the standard method was not shown to be unfair. Please note that the casino’s further appeal was dismissed by the Court of Appeal in 2025.

HMRC v Hippodrome Casino Ltd [2024] UKUT 27 (TCC)

5. Key dates

The main deadlines and events for January to March 2024 are set out below.

6. And finally

6.1 The first 31 January deadline

The 31 January deadline is younger than many people think. Self Assessment was introduced for the 1996/97 tax year, and the first Self Assessment returns were due on 31 January 1998. Before then, HMRC’s predecessor, the Inland Revenue, calculated most people’s tax for them from the information on their returns.

Over a quarter of a century later, the date is firmly fixed in the calendar. This year a record 11.5 million returns arrived in time, and more than 30,000 people filed in the final hour before midnight.