Tax update May 2024: Finance Act, EIS relief and DLAs
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 Finance Act passed as the general election is called
The Prime Minister called a general election for 4 July 2024, and the Spring Budget measures were rushed into law two days later in the Finance (No. 2) Act 2024.
The Act received Royal Assent on 24 May 2024 after its remaining stages were completed in a single day during the pre-election wash-up. It confirms the cut in the higher rate of capital gains tax on residential property from 28% to 24% from 6 April 2024, the higher thresholds for the High Income Child Benefit Charge, and the abolition of stamp duty land tax multiple dwellings relief for purchases completing on or after 1 June 2024, unless contracts were exchanged by 6 March 2024. The abolition of the furnished holiday lettings regime and the non-dom reforms were left out, so anyone affected should review their plans with us rather than wait for the outcome of the election. Please note that both measures were later enacted in the Finance Act 2025, which received Royal Assent on 20 March 2025 and took effect from April 2025.
1.2 No EIS disposal relief without a valid income tax claim
The First-tier Tribunal has struck out an appeal by an investor who claimed EIS capital gains relief but had never made a timely claim for EIS income tax relief on the same shares.
Mr Kalay bought shares in 2013, sold them in 2019 and claimed in his 2019/20 return that the gain was exempt under the Enterprise Investment Scheme. The income tax relief claim, which is a condition of the capital gains exemption, was not made until 2022, two years after the deadline, and HMRC’s closure notice raised his liability to about £1.65 million. The tribunal held that it has no power to admit a late claim, which is a matter for HMRC alone, so the appeal had no realistic prospect of success. If you hold EIS or SEIS shares and are unsure whether every claim was made in time, please ask us to check before you sell.
Kalay v HMRC [2024] UKFTT 366 (TC)
1.3 Director’s loan account cost a non-dom his business investment relief
A remittance basis user lost business investment relief on £1.5 million invested in his own company because he ran personal spending through an interest-free director’s loan account.
Mr D’Angelin brought £1.5 million of foreign income into the UK in 2016 to invest in a new UK company and claimed business investment relief so that the remittance would not be taxed. Over the following year the company paid about £71,500 of his personal costs, including private flights and family holidays, through a director’s loan account that carried no interest. The tribunal held that this was an extraction of value on non-commercial terms, so the whole investment lost relief and around £675,000 of tax became due. Anyone with funds invested under the relief should keep every dealing with the company on arm’s length terms and take advice before drawing anything from it. Please note that the Upper Tribunal dismissed Mr D’Angelin’s appeal on 30 June 2025 ([2025] UKUT 212 (TCC)).
D’Angelin v HMRC [2024] UKFTT 462 (TC)
1.4 Confusing HMRC letter leads to penalties being cancelled
The First-tier Tribunal has cancelled late payment penalties because HMRC’s own notice told the taxpayer he had three months from the date of the letter to file and pay.
Mr Bezant received a notice to file his 2021/22 return in June 2023, well after the normal payment date, and he filed and paid within the three months the letter allowed. HMRC still charged late payment penalties of £248, but the tribunal found that the wording of the letter was a special circumstance that HMRC had failed to consider and reduced the penalties to nil. The statutory dates still apply in most cases, so please keep to the 31 July deadline for the second payment on account, pay HMRC on time, and keep any letter that tells you something different in case you need to appeal a penalty.
Bezant v HMRC [2024] UKFTT 400 (TC)
2. PAYE and employment
2.1 Child benefit charge: employee with a company car loses his appeal
A PAYE employee whose income, including a company car benefit, exceeded £50,000 has been held liable to the High Income Child Benefit Charge and to penalties for failing to notify HMRC.
Mr Thompson’s wife claimed child benefit for four years while his adjusted net income was above the threshold, and HMRC assessed charges of about £5,200 and penalties of about £900. Because HMRC had sent him reminder letters in 2019 about the charge, the tribunal found he had no reasonable excuse for not registering, echoing our earlier advice to act promptly once HMRC writes. From 6 April 2024 the charge starts at £60,000 and only recovers the full benefit at £80,000, so fewer families will pay it. Employees should remember that benefits in kind count towards the limit, while pension contributions and Gift Aid can bring income back below it.
Thompson v HMRC [2024] UKFTT 375 (TC)
2.2 HMRC pays costs in a case on shifting PAYE to an employee
The First-tier Tribunal has ordered HMRC to pay £12,500 of costs for unreasonable conduct in a dispute over whether an employee should bear PAYE and National Insurance his employer failed to deduct.
Mr Witton was paid by his employer between 2007 and 2011 without payslips or deductions, and HMRC sought to collect about £425,000 from him on the basis that he knew the employer was wilfully failing to operate PAYE. At this preliminary stage the tribunal let HMRC’s case continue and admitted its late evidence, but criticised HMRC for contradicting its own pleadings on the burden of proof. Employers should make sure payroll is run correctly for every worker, because HMRC will look to employees as well as the business when tax goes unpaid. Please note that at the full hearing, in a decision dated 19 February 2026, the tribunal set aside HMRC’s directions and assessments because HMRC had not proved that Mr Witton knew of any wilful failure ([2026] UKFTT 267 (TC)).
Witton v HMRC [2024] UKFTT 489 (TC)
3. Business tax
3.1 EIS share buyback caught by the transactions in securities rules
The First-tier Tribunal has upheld income tax of about £6 million on two shareholders whose company bought back their EIS shares for £20 million.
Mr Osmond and Mr Allen had held EIS shares in an investment company since the 1990s, and in 2015 the company bought back part of their holdings for £11 million and £9 million, which they treated as exempt capital gains. The tribunal held that securing the exemption meant they had a main purpose of obtaining an income tax advantage, so HMRC could tax the payments as if they were dividends. The case is a reminder that share buybacks and other ways for owner-managers to take value out of a company need care, as shown again in our recent item on a capital reduction taxed as income. Please note that the Upper Tribunal allowed the taxpayers’ appeal on 13 June 2025, holding that the tax advantage was an effect of the buyback rather than its main purpose ([2025] UKUT 183 (TCC)).
Osmond & Allen v HMRC [2024] UKFTT 378 (TC)
3.2 Higher interest on group loans had an unallowable purpose
The Court of Appeal has agreed that Kwik-Fit could not deduct extra interest on intra-group loans that was introduced so that a group company could use up its stranded losses.
In 2013 the group increased the interest rate on existing internal loans and created new ones, so that a holding company with non-trading deficits it could not otherwise surrender would receive more interest income. Even though the new rate was at arm’s length, the court found that the only reason for paying the extra interest was the tax benefit, so the additional deductions were denied under the unallowable purpose rule. Groups planning a refinancing or restructuring should record the commercial reasons for any change to loan terms. Please note that the Supreme Court later refused Kwik-Fit permission to appeal, so this decision is final.
Kwik-Fit Group Ltd & Ors v HMRC [2024] EWCA Civ 434
4. VAT and indirect taxes
4.1 No VAT recovery on the costs of selling a subsidiary
The Court of Appeal has reversed the earlier decisions and held that a company cannot reclaim VAT on professional fees for selling a subsidiary, even though the money was raised for its taxable business.
Hotel La Tour sold its hotel subsidiary to fund a new hotel and reclaimed about £77,000 of VAT on adviser fees of around £383,000. The court held that the fees were directly linked to the exempt share sale itself rather than to the company’s general business, which overturns the Upper Tribunal ruling we reported under VAT on share sale costs recoverable where proceeds fund the business. Owners selling part of a group should budget for the VAT on deal costs as an irrecoverable cost. Please note that the Supreme Court dismissed the company’s appeal on 17 December 2025 ([2025] UKSC 46), confirming that the VAT cannot be recovered.
HMRC v Hotel La Tour Ltd [2024] EWCA Civ 564
4.2 VAT assessment time limit: the burden is on the taxpayer
The Upper Tribunal has upheld a VAT assessment of about £346,000 on Nottingham Forest Football Club, because the club could not prove that HMRC had issued it too late.
HMRC may assess VAT within one year of having enough evidence to justify doing so, and the club argued that the clock started when it handed over its first set of accounting data. HMRC received a second set of data a few weeks later, and because the club could not show which information the officer had relied on, it failed to prove the assessment was out of time. Businesses should keep a clear record of what they give HMRC and when, and our specialist reviews can help you check your VAT position before HMRC does.
Nottingham Forest Football Club Ltd v HMRC [2024] UKUT 145 (TCC)
5. Key dates
The main deadlines and events for May to July 2024 are set out below.
| Date | Deadline or event | Who it affects |
|---|---|---|
| 22 May | PAYE, NIC and CIS electronic payment for the month to 5 May | Employers → |
| 31 May | Deadline for giving employees their P60s for 2023/24 | Employers → |
| 1 Jun | Corporation tax due for years ended 31 August 2023 (a Saturday, so pay by Friday 31 May unless you use Faster Payments) | Companies → |
| 1 Jun | Multiple dwellings relief abolished for SDLT on purchases completing from today, unless contracts were exchanged by 6 March 2024 | Landlords → |
| 22 Jun | PAYE, NIC and CIS electronic payment for the month to 5 June (a Saturday, so cleared funds are needed by Friday 21 June) | Employers → |
| 4 Jul | General election | All → |
| 6 Jul | Deadline for submitting P11D and P11D(b) forms for 2023/24 and giving employees copies of their P11D information (a Saturday) | Employers → |
| 22 Jul | PAYE, NIC and CIS electronic payment for the month to 5 July, and Class 1A NIC for 2023/24 | Employers → |
| 31 Jul | Second payment on account of 2023/24 Self Assessment tax | Individuals → |
6. And finally
6.1 A May election and a summer Budget
This year’s election was called in May for a polling day in July. In 1979 it was a May election that brought a change of government and, within weeks, one of the biggest tax shake-ups of modern times. Margaret Thatcher’s Conservatives won the general election on 3 May 1979, and Sir Geoffrey Howe presented his first Budget only weeks later, on 12 June 1979.
That Budget cut the basic rate of income tax from 33% to 30% and the top rate from 83% to 60%. To help pay for it, the two VAT rates of 8% and 12.5% were replaced with a single standard rate of 15%, a clear shift from taxing income towards taxing spending.