Ross Martin Tax: SME Tax Update 12 June 2025

Hello,

The Chancellor, Rachel Reeves, presented her Spending Review to Parliament on Wednesday. Investment of £1.7bn in HMRC over four years was confirmed, to fund an additional 5,500 compliance and 2,400 debt management staff. This is anticipated to raise £7.5bn a year in extra tax by 2029-30.

SME tax news 16

To make HMRC a digital-first organisation, £500m will be invested in HMRC’s digital services. It is intended that by 2029-30, a minimum of 90% of taxpayer interactions will be digital self-serve, up from around 70% in 2025.

HMRC will also eliminate all outbound post, with limited exceptions such as letters that generate revenue for the Exchequer. This is estimated to reduce the number of letters sent by 75%, saving £50 million a year by 2028‑29.

In other news, it was announced that state pensioners in England and Wales will benefit from a Winter Fuel Payment (WFP) this winter, but it will be recovered in full by HMRC where individual (not household) taxable incomes are over £35,000.

It is understood that WFP payments will be made automatically, subject to individuals opting out, with recovery either through Pay As You Earn (PAYE) or Self-Assessment.

An estimated two million pensioners will be subject to WFP recovery via the tax system, and the Government says that no one will need to register with HMRC or take any further action. Additional information on how WFP recovery will work in practice is awaited.

Finally, please be aware that there will be no SME Tax Update next week while we undertake team training. We will be back on 26 June, as normal, with a bumper edition!

More news, cases, and updates below.

The Ross Martin Tax Team

Online PRACTICAL tax resources for accountants and tax advisers BY accountants and tax advisers.

Quick News

Treasury's tax policy making principles
HM Treasury has published 'Tax Policy Making Principles'. This outlines the Government's approach to the delivery of tax policy changes via a single annual Budget. It details how the Government will engage with stakeholders as tax policy develops, and confirms 'Legislation Day' (L-Day) can be expected in the summer.

HMRC's handling of phishing incident 'unacceptable'
HMRC's chief executive, John-Paul Marks, has received a harshly worded letter from the Treasury Committee over the failure to inform it of the latest data breach before a meeting last week. It called into question HMRC's assertions that representative bodies had been informed of the incident.

Government feedback on taxation of carried interest
HMRC have published 'The tax treatment of Carried Interest - Government response and policy update (June 2025)'. This includes feedback to the consultation published in October 2024, which explored possible amendments to the qualifying conditions for carried interest. Two key proposals have been dropped.

Tax Cases

Failure to claim Multiple Dwellings Relief a 'mistake'
In L-L-O Contracting Ltd & Ors v HMRC [2025] UKUTT 00127, the Upper Tribunal (UT) agreed with a previous ruling that the failure to claim Multiple Dwellings Relief (MDR) by the statutory deadline was a 'mistake'.

Income from jointly owned property taxable on one owner
In Alison Moss v HMRC [2025] TC09535, the First Tier Tribunal (FTT) found that an individual was solely taxable on income from a property owned jointly between her and her estranged husband. The former husband was not in receipt of, or entitled to, the income.

Strictly Ballroom means standard-rated for VAT
In Rushby Dance and Fitness Centre & Ors v HMRC [2025] TC09534, the First Tier Tribunal (FTT) found that private tuition in various styles of dance was standard-rated for VAT because the tuition was not in a subject ordinarily taught in a school or university.

Editor's Choice

Cryptoasset Reporting Framework (CARF)
What is the Cryptoasset Reporting Framework (CARF)? When does reporting apply? What information will be collected and reported?

IHT: Pre-owned Asset Tax (POAT)
What is Pre-owned Asset Tax (POAT)? When does it apply? Are there any exclusions or exemptions?

Guides & Updates

Self-employed

Sole trader v. limited company: Tax differences & savings (2025/26)
Is it better from both a tax and legal point of view to run your business as a sole trader or as a company? Are there tax advantages in running a business as a company? What legal protections apply?

Compare software for Making Tax Digital for Income Tax
UPDATE: Five new software packages have been added to HMRC's list this month. What software is available for MTD for Income Tax? What's the most suitable software I can use? What to consider before choosing software?

Directors & Companies

BEPS & Diverted Profits Tax (for SME owners)
What is Base Erosion and Profit Shifting? What is the Multilateral Instrument? When did it come into force? What are the Pillar 1 and 2 projects? What is the Undertaxed Profits Rule? What is the Income Inclusion Rule? What is the Domestic Minimum Tax? Will either of these affect me or my SME clients?

Employers

Assets made available without transfer
Special rules apply to calculate the taxable Benefit In Kind (BIK) when an asset is made available to a director or employee without transferring ownership to them.

Private Client & Estate Planning

How to set up a UK trust
What are the tax implications of setting up a trust? What do I need to do as a settlor? What do the trustees need to do?

Divorce & Separation: Toolkit
A summary of the tax implications which can arise on divorce and separation.

Penalties & Compliance

Tax debts and insolvency
This guide summarises the treatment of tax debts to HMRC in insolvency cases.

Named tax avoidance schemes, promoters, enablers
UPDATE: HMRC have updated their published list of named tax avoidance schemes, promoters, enablers and suppliers. It is not recommended that taxpayers use any of these schemes, as HMRC do not consider that they work and you may end up with a significant tax liability if you engage with the scheme suppliers.

VAT

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

Bad debts: VAT recovery
When can you recover VAT on a bad debt? How much VAT is payable to HMRC or recoverable from HMRC when only part of an invoice is paid?

Tax Tools & Calculators

Tax tools & calculators
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
This is a freeview 'At a glance' rolling calendar of common recurring tax deadlines, new tax measures and other tax-significant events.

CPD

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Missed the Last Tax Update?

Ross Martin Tax: SME Tax News 5 June 2025

New guidance on MTD and professional standards
Unauthorised access of HMRC online accounts
One-to-many letters: Tracker
No trade, no Entrepreneurs’ Relief
Capital reduction not exempt from TiS rules
Supercar driving experiences qualified for VAT reduced rating
Walkers ‘Sensations Poppadoms’ standard rated for VAT
Estates: Income Tax and Capital Gains Tax
R&D: Claim Notification UPDATE
Special Relief ...More

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