Ross Martin Tax: SME Tax Update 13 February 2025

Hello,

Highlights this week include the latest report of the National Audit Office, increased thresholds for Off-Payroll Working, an update on in-year returns for trusts and estates and a VAT case exploring the Kittel principle.

SME tax news 6

The National Audit Office’s (NAO’s) report on the administrative cost of the tax system makes for interesting reading. Observations such as the tax system having become more complex over time will not surprise many.

The NAO notes that HMRC could greatly reduce costs for itself and taxpayers by reducing interactions that result from ‘failure demand’; calls caused by HMRC’s process failures or delays, customers chasing progress, and customers’ errors. This accounted for 72% of customer calls to HMRC in 2023-24.

Clearly, ‘failure demand’ places considerable pressure on resources, something which might currently be exacerbated by the industrial action affecting the Employer and Construction Industry Scheme (CIS) Helplines. HMRC have now advised that this action has been extended by a month to 14 March 2025.

In other news, it has been confirmed that the increased company size thresholds applying from 6 April 2025 under the Companies Act, will also apply to the Off-Payroll Working rules. Those who may be affected by a shift in obligations in determining employment status should pay close attention to their compliance procedures over the coming months.

Thank you for sending in your MTD for ITSA software recommendations: please do keep sending.

More news, cases and updates below.

Nichola and the team

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Quick News

Off-Payroll Working threshold increase
HMRC has confirmed that the increased company size thresholds applying from April 2025 under the Companies Act will also apply to the Off-Payroll Working rules.

ATED one-to-many letters
HMRC's most recent one-to-many letter campaign focuses on companies owning UK residential property valued at over £500,000 that have either not filed an Annual Tax on Enveloped Dwellings (ATED) return, or have potentially claimed ATED relief incorrectly.

HMRC's interest rate decreases
Following the Bank of England’s announcement on 6 February 2025 that the base rate would decrease to 4.5%, HMRC's interest rates are also decreasing by 0.25%, to 7.00% for late payment interest and 3.50% for repayment interest, from 25 February 2025.

£15.4 billion annual cost of business tax compliance
The National Audit Office (NAO) has published a report on 'The administrative cost of the tax system'. It found that an increasingly complex tax system burdens government and businesses with billions in administration costs.

Tax Cases

HMRC's Schedule 36 notice was valid
In Binoy Joseph v HMRC [2025] TC09424, the First Tier Tribunal (FTT) found that a Schedule 36 Information Notice, issued to an individual who HMRC had ‘reason to suspect’ was using a disguised remuneration scheme, was lawfully issued.

Editor's Choice

Overpayment Relief
What is Overpayment Relief? When can you claim Overpayment Relief? What are the conditions for a claim for Overpayment Relief? What are the time limits for a claim for Overpayment Relief?

CGT: Rollover Relief
What is Rollover Relief? When a capital gain is made on the disposal of a business asset, it is possible to defer the gain by rolling it over against the cost of acquiring a replacement business asset. What are the conditions for the relief? What is a business asset?

We're hiring: you looking? Tax Adviser/Consultant
We are recruiting for a Tax Adviser to come and join our friendly team at 20:20 Innovation and work in the Virtual Tax Partner (VtaxP) advisory service and on rossmartin.co.uk.

What's in your 2025 training program?

20:20 Innovation Tax Product Review (CPD)
Join Sharon Cooke and Nichola Ross Martin for a webinar in which we look at ways in which accountants can obtain timely and relevant tax knowledge, resources and support from the 20:20 Innovation portfolio of products and services. When? February 27th 2025 ...More

Guides & Updates

Self-employed

Losses, trade losses and sideways relief
How can trade losses be utilised? What are the restrictions?

Losses (sideways): Restriction for uncommercial trades
What is sideways loss relief? What restrictions apply? When do they apply? What is an uncommercial trade?

Incorporation

Capital allowances: On incorporation
UPDATE: What is the capital allowance position when an existing business is incorporated? What elections can be made?

Sale of occupational income: Anti-avoidance
What are the tax effects of the anti-avoidance sale of occupational income provisions? How do you tax a capital sum received on the sale of an individual's earnings?

Directors & Companies

Employee Ownership Trusts: An exit route for owner-managers
What is an Employee Ownership Trust (EOT)? Are EOTs a good exit route for owner-managers? What are the tax benefits? What are the tax reliefs available? What clearances should be sought? What are the requirements for relief?

Research & Development Tax Reliefs
What is R&D Relief? How does it work? Why does the size of the company matter? What is sub-contracted R&D? How do I write an R&D Report?

Employers

Electric Vehicles: Update 2025
With the increased focus on achieving Net Zero, the government is planning to ban new petrol and diesel car sales by 2030. We review some of the tax issues that businesses and their employees may consider when acquiring or providing an electric vehicle.

Private Client & Estate Planning

Trusts & Estates: What’s New 2024/25
UPDATE: HMRC have shared a message requesting that, following the changes to CGT rates for non-residential disposals on 30 October 2024, trusts and estates which need to pay the new rates of CGT do not file 2024-25 returns until after 5 April 2025.

National Insurance: What's the maximum payable?
How are National Insurance Contributions (NICs) limited? What is the maximum payable? What different rules apply to employment and self-employment income?

IHT: Normal Expenditure Out of Income (gifts)
When is normal expenditure out of income exempt for Inheritance Tax (IHT)? How do you claim the exemption?

VAT News & Cases

Kittel test not met for VAT fraud
In Cheema Constructions Services Ltd & Anor v HMRC [2025] TC09418, the First Tier Tribunal (FTT) found that the Kittel Principle did not apply, meaning the company was entitled reclaim input VAT.

Deposit Return Scheme: Drink containers
The Deposit Return Scheme (DRS) is an environmentally ambitious scheme for single-use drink containers. It will now not be introduced until October 2027. How will it operate for VAT purposes?

Groups (VAT)
What are the conditions for forming a VAT group? What rules apply once a VAT group is in place?

Tax Tools & Calculators

Tax tools & calculators
UPDATE: 2024/25 versions available now. We have a suite of useful tax tools that help agents, business owners and sole traders calculate their taxes.

Calendar of tax deadlines and new tax measures
UPDATE: This is a freeview 'At a glance' rolling calendar of common recurring tax deadlines, new tax measures and other tax-significant events.

CPD

CPD for lunch: Byte-sized chunks of lunchtime CPD (free for our Subscribers)

CPD: Pay as you go:

NEW: Family Investment Companies & succession planning
How to run the most tax-efficient business 2024/25.
Purchase of Own Shares: all the details.
Anti-money Laundering Update and Firm-Wide Risk Assessment ...More...

Tax Queries?

UK Agent for registration of Overseas Entities
Do you require assistance in the registration and verification of an overseas entity that owns UK land or property?

Virtual Tax Partner© Support
Have a tax query? Need a second option? Open a ticket and ask a question. A team of tax experts with a wide range of expertise: covering direct and indirect tax, as well as accounting, R&D claims, reorganisations and much more.

Missed the Last Tax Update?

Ross Martin Tax: SME Tax News 6 February 2025

MTD for Income Tax pilot expanded from April 2025
MTD ITSA guidance, tread carefully
Late filing penalty easement for 2023-24
Welsh Taxes: What's new 2025?
HMRC's operational activity during loan charge review
COVID 19 working from home allowance not allowed
Compare software for Making Tax Digital for Income Tax UPDATE
MTD: Income Tax Pilot Tool UPDATE
Non-Domicile: Rules from 5 April 2025 UPDATE
Partnerships: What's new 2024/25 ...More

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