Mandatory payrolling of benefits in kind delayed
Mandatory payrolling of benefits in kind delayed The government has revised plans to introduce the mandatory payrolling of benefits in kind from 6 April 2027, which will now be limited to company cars, vans, fuel and medical benefits. What’s the full story? Ask Dunhams for more Help with Your Payroll Due to feedback, the government has announced that the mandatory payrolling of benefits in kind will be phased in over two years. Previously it was announced that all benefits in kind aside from employer-provided accommodation and loans would need to be reported through payroll from 6 April 2027. However, mandatory payrolling will now only apply to company cars, vans, fuel and medical benefits from 6 April 2027. Further technical guidance will be released in July 2026. From 6 April 2028, mandatory payrolling will apply to all other benefits in kind, apart from employer-provided accommodation and loans. Employer-provided accommodation and loans can be payrolled on a voluntary basis, although they are difficult to value in real time. Where a benefit in kind is payrolled, both the employer and employee pay tax on the benefit each month, instead of after the end of the tax year. It is hoped that a phased approach will make the transition easier for businesses, but this is still a major change for employers. Company cars and medical benefits are some of the most commonly provided benefits in kind so the burden on businesses to implement new processes, and the impact on cash flow remains significant ahead of 6 April 2027. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
Timetable for agent multi-factor authentication rollout published
Timetable for agent multi-factor authentication rollout published HMRC has published further details of its plans to introduce multi-factor authentication (MFA) for tax agents. The rollout is intended to strengthen security across HMRC’s online services and will be introduced in stages over the coming months. What do you need to know? Accounting Services for all your Business Support. HMRC has confirmed that MFA will be introduced in stages, beginning during summer 2026 and extending over the following months. Agents will be notified when their accounts are brought within the new regime, with the requirement eventually applying across HMRC’s online services. Once enrolled, users will need to provide a second form of authentication in addition to their password. This is expected to involve a code generated by an authentication app or sent to a registered device. The requirement will apply each time a user signs in to affected services. The phased rollout is intended to give firms time to adapt their processes and ensure staff have appropriate access to authentication devices. It may prove particularly challenging for practices that rely on shared credentials or centralised login arrangements. HMRC says MFA is being introduced to strengthen account security and reduce the risk of unauthorised access. Similar requirements are already common across banking and commercial software platforms, but this will be the first time many agents encounter them when accessing HMRC services. Firms should review how staff currently access HMRC systems and ensure contact details are up to date. Leaving preparations until the point HMRC activates MFA could result in avoidable disruption to client work and filing obligations. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
Recovering underclaimed input tax
Recovering underclaimed input tax Your business has incorrectly failed to claim input tax on a particular expense for five years. You know it can only be corrected for four years to comply with the legislation, but are you aware of a potential three-month extra claim in some cases? Get the Correct Tax Services Four different errors There are only four different categories of error that will be relevant to your business as far as part returns are concerned: output tax overpayments output tax underpayments input tax underclaims; and input tax overclaims. For the first three categories, you can only make corrections going back a maximum of four years, based on the final date of the VAT period; this window applies to both under and overpayments. Example. It is 2 February 2027 and you have identified output tax errors of £1,000 per quarter for the last five years, they are all underpayments. You only need to correct them for periods March 2023 and later if you submit calendar quarter returns. Periods up to and including December 2022 are out of time. The total VAT owed is £16,000, i.e. from March 2023 to December 2026 inclusive. As this amount exceeds £10,000, you must disclose it separately to HMRC online and not include it on your next return. If your quarterly sales in Box 6 of the next return will exceed £1.6m, i.e. the error of £16,000 is less than 1% of this figure, you can include it on the return because it is also less than £50,000. HMRC will charge interest when you submit the error correction notice. Interest is not a penalty and is classed as commercial restitution because the money has been in your bank account for too long rather than HMRC’s account. Input tax underclaims Sticking with the above example, what would happen if you had underclaimed input tax by £1,000 per quarter for the last five years? In this situation, the four-year time clock is not based on the end of the accounting period but the due date of the return. If you submit online returns, this is one month and seven calendar days after the end of the period. Example. It is 2 February 2027 and you have identified past input tax underclaims of £1,000 per quarter going back five years. You can submit an error correction notice to HMRC for £17,000 because the return for December 2022 is still in time as the relevant date is 7 February 2023, i.e. the due submission date of the return. You have gained an extra three-month windfall compared to other error categories. You must submit your online correction to HMRC by 7 February 2027 otherwise the December 2022 period will be time barred. A limited number of businesses still submit paper returns and do not benefit from the extra seven-day window. The time deadline for input tax underclaims will be one month after the end of the accounting period, i.e. 31 January 2023 in the above example. Annual accounting scheme (AAS) If your business uses the AAS, the deadline for submitting a return is two months after the end of the annual period, i.e. 28 February in the case of an annual return ending on the previous 31 December. This extra time window could enable your business to claim input tax for an extra twelve months if the dates are kind. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
HMRC clarifies treatment of averaging relief under MTD IT
HMRC clarifies treatment of averaging relief under MTD IT HMRC has updated its guidance to explain how averaging relief claims will operate under Making Tax Digital for Income Tax (MTD IT). The clarification addresses concerns about how farmers and creators will claim relief once quarterly reporting becomes mandatory. What has changed? Get more Help with your Tax Relief Averaging relief is available to farmers, market gardeners and certain creative artists whose profits fluctuate significantly from year to year. The relief works by averaging profits over two or five years, helping to smooth income and reduce the impact of higher tax rates in particularly profitable years. Under MTD IT, taxpayers are required to submit quarterly updates throughout the year. This led to uncertainty over how averaging relief would fit into the new reporting framework, as entitlement to relief can only be determined once profits for multiple years are known. HMRC’s updated guidance confirms that averaging relief will not be reflected in quarterly updates. Instead, claims will be made as part of the end-of-year process, once the final profit figures for the relevant years are available. Quarterly submissions will therefore continue to report profits before any averaging adjustment is taken into account. The clarification should provide reassurance to taxpayers who rely on averaging relief. It means that the introduction of quarterly reporting does not alter the underlying entitlement to relief or require complex calculations during the tax year. For those affected, the key point is that averaging relief remains available under MTD IT, but the claim will be made through the year-end process rather than through quarterly updates. Accurate record keeping throughout the year will remain essential to support the final calculation. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
Judge criticises use of fabricated AI-generated cases in HMRC appeal
Judge criticises use of fabricated AI-generated cases in HMRC appeal A tax tribunal judge has criticised the use of apparently fabricated case references generated by artificial intelligence in an appeal against HMRC. The incident highlights growing concerns over the use of AI tools in legal and tax proceedings. What happened? Get more Help with Your Business Tax The case involved an appellant who cited authorities that could not be traced by the tribunal or HMRC. During the proceedings, it became apparent that several of the referenced cases did not exist and appeared to have been generated using AI tools. The judge expressed concern that material had been submitted without proper verification, noting that the tribunal process depends on parties accurately presenting legal authorities and supporting evidence. While AI tools are increasingly used in professional and advisory work, the judgment underlined that responsibility for checking accuracy remains with the individual relying on the material. The incident reflects a wider issue emerging across legal and professional services, where generative AI systems can produce convincing but entirely fictional citations or references. In a tax context, this creates particular risks where submissions involve technical legislation, tribunal authorities or procedural arguments. For advisers and businesses using AI tools in tax work, the practical message is straightforward: outputs must be checked carefully before being relied upon or submitted formally. The tribunal’s criticism makes clear that inaccurate or fabricated authorities will not be treated lightly, even where AI was involved in producing them. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
MONTHLY FOCUS: TAX PLANNING FOR MARRIED COUPLES (NON BUSINESS INCOME)
MONTHLY FOCUS: TAX PLANNING FOR MARRIED COUPLES (NON BUSINESS INCOME) In this further look at tax-saving strategies for married couples, we turn our attention to non-business income, and how tax allowances and reliefs can be used to reduce the overall tax bill. Page Content: UNEARNED INCOME ALLOWANCES AND TAX RELIEFS Get more help with your Personal Tax UNEARNED INCOME What types of unearned income can be split and how should it be done? Any type of income can be split as long as the asset that produces the income goes with it. We’ve already explained in Part 1 that a gift of income from one spouse/civil partner to the other is caught by anti-avoidance rules, known as the “settlements legislation”, unless the asset which produces the income is also transferred. Example Harry, who is a higher rate taxpayer, owns 10,000 shares in BigCo Plc. In 2026/27 he receives dividends from BigCo of £30,000 a year. Sally, his wife, only has income from a part-time job which pays her £13,000 per year. Harry’s tax liability on the dividends from BigCo is £10,725 (£30,000 x 35.75%). He transfers the right to the dividends to Sally so that she will be taxed on them. He works out her tax bill on the dividends will be just £3,010 (£2,000 at 0% + £28,000 at 10.75%) and so between himself and Sally they save tax of £7,715. Harry will be disappointed that the settlements rules mean that because the gift to Sally is for income only the dividends are treated as being his for income tax purposes. If Harry had done his homework or consulted a tax advisor, he could have saved himself the time and effort of making a tax-ineffective transfer. If Harry transfers the dividend-producing shares to his wife, he can achieve his goal of shifting the income to her for tax purposes. What’s the special rule for taxing joint income for married couples and civil partners? One of the oddities of independent taxation is that for tax purposes the rules attribute income from a jointly owned asset as belonging 50% to each spouse/civil partner even if they own the asset in unequal shares. In effect, this rule can partly override (with exceptions) the tax treatment explained above. Example Jamal owns three high-street properties which he lets. His annual taxable income, i.e. net of tax-deductible expenses, from the properties is £20,000. He also has income from employment of £100,000 per year, which means he’s a higher rate taxpayer. Jamal’s wife Latika has income from her employment of £40,000 per year and is therefore a basic rate taxpayer. Both are entitled to personal allowances but no other tax reliefs. The properties have been in Jamal’s family for generations and so he’s torn between transferring a share of them to Latika to save tax and keeping sole ownership. On advice from his accountant, he opts for a compromise. He transfers 5% of each property to Latika. As a result, from the date of transfer she becomes entitled to 5% of the annual income, £1,000, but is taxable on 50%, £10,000. The example uses income tax rates and bands applicable to English, Welsh and Northern Irish taxpayers. Slightly different rates apply for Scottish taxpayers, but the principles are the same. Before transfer of property Jamal (£) £ Latika (£) £ Joint tax liability (£) Salary 100,000 40,000 Rental income 20,000 Total taxable income 120,000 40,000 Less: personal allowances 2,570* 12,570 Taxable 117,430 27,430 Tax at 20% on 37,700 7,540 27,430 5,486 Tax at 40% on 79,730 31,892 Total tax 39,432 5,486 44,918 The position after the transfer is much better: After transfer of property Jamal (£) £ Latika (£) £ Joint tax liability (£) Salary 100,000 40,000 Rental income 10,000 10,000 Total taxable income 110,000 50,000 Less: personal allowances 7,570* 12,570 Taxable 102,430 32,430 Tax at 20% on 37,700 7,540 32,430 6,486 Tax at 40% on 64,730 25,892 Total tax 33,432 6,486 39,918 An analysis of the calculations shows that: transferring a small share of the ownership, say 5% of an asset, to a spouse/civil partner can make a disproportionately larger change to their overall tax liability. In Example 15 a £10,000 shift in income reduces the joint tax bill by £5,000 (£44,918 – £39,918) *the rate of saving in Example 15 is greater than the highest rate of tax paid by either spouse/civil partner because not only does it reduce the income on which higher rate tax is paid, but it increases the entitlement to personal allowances (because it reduces the income in excess of £100,000). Does the 50% rule apply in every situation? The 50% rule can be overridden if the couple elect to be taxed on their respective share of the income from an asset proportionate to their share of the ownership. If such an election were made in the example above, Jamal would be taxed on 95% of the income from the properties and Latika, 5%. That would considerably reduce the tax saving made by the small transfer of ownership. If the incomes were reversed so that Latika was the higher rate taxpayer, but the property is still owned by Jamal and the 5% transfer made, an election to be taxed on their beneficial entitlement to income would be advantageous. Warning. Once an election is made it cannot be revoked and so it can become a tax-inefficient arrangement if there is a change in the total amount of taxable income of one or both spouses/civil partners. Taxpayers must make the election in a prescribed format. The most convenient way is to use HMRC’s Form 17. How is a Form 17 election made? Before considering the practicalities of making an election on Form 17, the couple need to be aware that they cannot make an election for some types of jointly
HMRC loses employment status case involving football referees
HMRC loses employment status case involving football referees HMRC has lost another employment status case, this time involving football referees engaged by Professional Game Match Officials Ltd (PGMOL). The tribunal rejected HMRC’s argument that the referees should be treated as employees for tax purposes. Why does the decision matter? Get more help with your Personal Tax requirements The case concerned referees operating in the National Group who officiated matches in the English Football League. HMRC argued that the referees were employees and that PAYE and National Insurance should therefore have been operated on their match fees. The tribunal disagreed. It concluded that the level of control exercised over the referees was insufficient to create an employment relationship and that there was no overarching obligation requiring referees to accept work or PGMOL to provide it. These factors pointed away from employment status. The decision is another reminder of the difficulty HMRC continues to face in employment status disputes, particularly where individuals work on a flexible or assignment-by-assignment basis. While HMRC has had success in some recent IR35 and status cases, tribunals continue to place significant weight on the overall contractual relationship rather than operational oversight alone. For businesses engaging contractors or freelance workers, the case underlines the importance of reviewing working arrangements carefully rather than relying solely on labels in contracts. Control, mutuality of obligation and the practical reality of the relationship remain central to determining employment status for tax purposes. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
HMRC writes to non-domiciled taxpayers following rule changes
HMRC writes to non-domiciled taxpayers following rule changes HMRC has begun issuing “one-to-many” letters to individuals affected by recent changes to the tax rules for non-UK domiciled taxpayers. The letters prompt recipients to review their tax position under the new regime. What does this mean if you receive one? Get more help with Personal Tax The letters are being sent to taxpayers who HMRC believes may be impacted by the changes to how foreign income and gains are taxed. With the revised rules now in force, affected individuals may need to reassess how their overseas income is reported and taxed. Recipients are encouraged to consider how the new regime applies to their circumstances and to take action where necessary. This may include reviewing existing arrangements or seeking advice to ensure compliance under the updated rules. Although the letters do not constitute a formal enquiry, they indicate that HMRC is actively identifying individuals within scope of the changes. As with other “one-to-many” communications, they are intended to prompt voluntary review and early action. For affected individuals, the key point is to treat the letter as a prompt to reassess their position under the new rules rather than ignore it. Addressing any issues early can help avoid complications or penalties later. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
ATED filing deadline approaching for 2026/27
ATED filing deadline approaching for 2026/27 Companies holding high-value UK residential property need to ensure their annual tax on enveloped dwellings (ATED) returns are filed by the end of April. With the deadline approaching, what do you need to do? For more help see our Accounting Services The ATED applies to companies that own UK residential property valued above £500,000. Returns must be submitted annually, even where no tax is due, for example because reliefs apply. The filing deadline for the 2026/27 ATED return is 30 April 2026, covering the chargeable period from 1 April 2026 to 31 March 2027. Any tax due must also be paid by this date. The current rates can be viewed here. Common errors include failing to submit a return where a relief is available, or overlooking properties that fall within the regime due to changes in valuation or ownership structure. Late filing can result in automatic penalties, even where no tax is payable. Companies within scope should review their property holdings and confirm whether an ATED return is required. Where reliefs apply, these must still be claimed through the return to avoid unnecessary charges. Submitting on time avoids penalties and keeps compliance obligations up to date. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
MONTHLY FOCUS: USING YOUR COMPANY TO DIVERT INCOME TO FAMILY MEMBERS
MONTHLY FOCUS: USING YOUR COMPANY TO DIVERT INCOME TO FAMILY MEMBERS Operating a business through a limited company is less tax-efficient than it used to be. However, it can still be a very useful way of diverting income to other family members. In this Monthly Focus, we look at the methods, and associated considerations, involved in doing this. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo. EMPLOYING YOUR FAMILY As a general rule, you can save income tax if income can be diverted from you to other members of your family to make use of their annual personal allowances and benefit from their lower marginal rates of tax. Warning! If you employ family members, their salaries will tend to come under scrutiny during the course of an enquiry by HMRC into your company’s accounts. HMRC will be looking to see whether the salaries exceed a commercial rate for the work performed. Where the amount paid clearly exceeds the commercial rate, HMRC will seek to disallow the excess on the grounds that it has not been incurred wholly and exclusively for the purposes of the company’s trade. An identical rule applies to unincorporated businesses. The “wholly and exclusively” point was considered in the First-tier Tribunal (FTT) case of McAdam v HMRC 2017 where a plumber claimed a deduction for £90 per week to his wife for writing up his books, taking phone calls, processing orders, etc. HMRC accepted that the taxpayer’s wife had done some work, but calculated that an appropriate wage would be £1,344 per annum (about £26 per week), at an hourly rate of £8. The FTT agreed with HMRC and refused the deduction. It said the payment was excessive compared to the going rate for the type of work, plus the plumber’s business records were poor and there was nothing really to show how much work his spouse did or that she was employed at all. To avoid this trap, make it clear what the family member is doing. To help, use a Family Member’s Job Description to set out the duties they will carry out. Just using the job description doesn’t guarantee that you can deduct any salary payments. You will also need to keep records to demonstrate the work done by your family member. This could be achieved by getting them to complete a timesheet if an hourly rate is being paid. Ensure the amounts paid are equivalent to what you would have to pay for a third party to perform the same duties. For example, don’t be tempted to pay your son £15,000 for cleaning the windows once a month. If you are employing someone, then you should ensure that you are at least paying the national minimum wage or national living wage rates, depending on their age. If HMRC challenges the remuneration for a family member, try to get it to agree an “allowable” amount so that you don’t lose the entire tax deduction. Provided the “excess” element is formally waived and paid back to the company, HMRC will generally restrict the income tax charge to the tax allowable part of the remuneration. When is it beneficial to employ your spouse? Each spouse (or unmarried partner) has their own personal allowance and personal basic rate tax bands. So it’s generally beneficial to pay them a salary if the following conditions are met: the salary will be taxable at a lower rate of tax than it would be if it was paid to you the income tax saving is not less than the additional NI liability your company is able to obtain a tax deduction for the salary, i.e. it is not excessive. Note. Civil partners have the same legal status as spouses for tax purposes. References to “spouse” should be read as “spouse or civil partner”. You should actually pay the salary amounts to your spouse rather than the salary being merely an accounting entry. When paying them, it’s preferable to pay the salary into a bank account in your spouse’s sole name rather than a joint account. In Moshi v Kelly 1952, tax relief for a wife’s wages was denied as they were charged to the owner’s own drawings account. Any amounts paid to your spouse must not be lower than the national living wage (NLW). Therefore, the amount you can pay your spouse (providing they are 21 or over) must not be less than £12.71 per hour for the 2026/27 tax year. If you make your spouse a director, then the NLW may not apply providing they don’t have an employment contract and are effectively receiving a salary for their role as an office holder. What’s the optimal salary to pay your spouse? You need to weigh up the income tax savings against the additional NI costs. For 2026/27, your spouse can earn up to £242 per week without paying any employees’ NI. Above this level they’ll pay 8% employees’ NI on earnings between £242 and £967 per week (£12,570 to £50,270 on an annual basis for 2026/27) and 2% on earnings above £967 per week. For 2026/27, the company will pay 15% employers’ NI on earnings over £97 per week (£5,000 on an annual basis) – although, depending on the number of other employees the company has, it may be possible to offset the employers’ NI cost using the £10,500 NI employment allowance. Assuming your spouse has no other income, for the 2026/27 tax year you can pay them a salary of £1,048 a month (£12,570 a year) without them incurring any income tax or NI liability. If the employment allowance has been fully utilised by the company’s other employees, the company will need to pay employers’ NI of £1,136 (15% of (£12,570 – £5,000)) but this cost will be more than offset by the 25% (or 19% if taxable profits are below £50,000) corporation tax saving. Just make sure that the amount paid is commercially justifiable for the actual