Every week, we take a look at what is trending in the accountancy and tax press and share items that we think will interest you. However, these are only outlines and where they relate to tax planning should not be acted upon without looking into them more completely, as everyone’s circumstances are particular to them. You need to take specific advice appropriate to your own circumstances.

While every effort is made to deliver accurate, informative and balanced articles, this content is general in nature and should not be used as the sole basis for making decisions.

 

 

Strawberries and Cream and VAT

Marks & Spencer have served up a strawberries and cream in a sandwich and become the next fascinating VAT conundrum.

The product in question is their Strawberry & Creme on Soft Sweetened Bread. It may look like a sandwich and smell like a sandwich, but is it?

The VAT legislation in this area is complex and hence the number of VAT cases that have been decided in the courts. Food and cakes are generally zero rates subject to exceptions but confectionery is standard rated.

Confectionery includes chocolates, sweets and biscuits; drained, glazed or crystallised fruits; and any item of sweetened prepared food which is normally eaten with the fingers. The words “sweetened prepared food normally eaten with the fingers” were added specifically to ensure that cereal bars would be standard rated as confectionery.

So is a sandwich, which is quite clearly sweetened, prepared and normally eaten with the fingers, can be considered an item of confectionery.

Looking at the VAT on the individual components:

• strawberries = zero rated
• cream/crème = zero rated
• bread = zero rated
• sweetened bread (eg brioche) = zero rated.

But this sort of logic or common sense rarely applies to VAT

Modern food is very often eaten with the fingers, and is almost always sweetened, so a literal interpretation could lead to the reclassification of many foodstuffs.

One thing is certain, though: if you create a new food or drink product that’s novel and hard to categorise for VAT purposes, you can practically guarantee a sell-out in the first few weeks as VAT practitioners fall over themselves to sample it.

 

 

More MTD for income tax

Once April 2026 arrives, everyone should be ready for the first quarterly update, which is due to be filed on 7 August 2026.

The 2026 tax returns will need to be filed during the period from 6 April 2026 to 31 January 2027. For some taxpayers, this will be the last self-assessment return they will complete.

Of course, VAT returns will continue to be due on the relevant quarters as before, so these will have to fit in with your schedule.

Whether you are within MTD or not yet, consider whether you want your VAT quarters to coincide with the calendar quarters and the MTD updates.

It would be wise to get your 2025/26 self-assessment return completed early so that it does not get in the way of the VAT and MTD submissions in January 2027.

MTD IT is the biggest change since self-assessment was introduced in the 1990s. It will prompt at least some degree of reorganisation with the imposition of significantly more deadlines and “penalty opportunities”.

 

 

Single worker status reform

The UK government is expected to launch a consultation on introducing a single worker status. This would be a major reform designed to simplify employment law and reduce the complexities surrounding worker classification.

A date has not been set yet, but it has been mentioned several times recently.

Currently, employment law distinguishes between three categories: employees, workers  and the self-employed. Each has different entitlements, leading to a certain amount of confusion.

The central aim of a single worker status is to provide clear and universal employment rights to all individuals providing labour, unless they are genuinely self-employed. This would effectively collapse the existing employee and worker categories into one, removing the ambiguity frequently exploited by some employers. It would ensure uniform basic rights, including minimum wage, holiday pay, statutory sick pay, unfair dismissal protections and redundancy entitlements, from the outset.

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A primary issue is defining who qualifies as genuinely self-employed. The consultation must consider clear statutory criteria, such as control over work, economic risk, client diversity and the right to substitute.

A significant area of uncertainty is how the new employment status would align with tax status. Currently, employment and tax status tests differ, leading to inconsistencies. For instance, someone can be taxed as self-employed yet receive worker protections. Conversely, IR35 off-payroll rules treat certain contractors as employees for tax but not for employment law purposes.

Employers may face significant new costs from expanded rights, including holiday pay and pensions for those previously classified as contractors. Companies heavily reliant on contractors or gig workers could face substantial restructuring or increased administrative burdens. Payroll and accounting professionals must anticipate changes and advise businesses accordingly.

 

Companies House P&L reporting

A week after confirmation that small and micros will have to file profit and loss, and balance sheets, with Companies House from April 2027, there are signs the government may be wavering on the plan, which has still not been put in statute as it requires a final statutory instrument.

Small companies will no longer be allowed to file abridged accounts from 2027, as set out under the current plans at Companies House, but there now seems to be some doubt about the commitment to the full P&L reporting.

There is still an intention that they will be required to provide a profit & loss statement, using the formats set out in Financial Reporting Standards and subject to forthcoming Regulations, but no commitment to timing and no current sign of the necessary legislation.

 

 

Directors and Salary Sacrifice

Salary sacrifice is the agreement between an employer and employee where the employee gives up part of their gross salary in exchange for a non-cash benefit. This reduces their taxable income and means that both parties pay less in income tax and national insurance contributions (NICs).

Salary sacrifice benefits include pension contributions, electric car leasing, cycle to work schemes or a technology loan where the employer lends an employee money to purchase IT equipment like laptops, spreading the costs through payroll deductions.

If an employee sacrifices £1,000 of salary into their pension:

• the employee pays no income tax or NIC on the sacrificed amount;
• the employer saves 15% in employer NICs, which amounts to £150 in savings for the business;
• the employer can reinvest these savings or offer them back to employees as an added incentive.

For business owners and directors, especially those drawing a mix of salary and dividends, the pension salary sacrifice model remains one of the most efficient ways to extract profit while preparing for the future.

If a director is already drawing a relatively low salary (eg, £12,570–£20,000) and topping up income through dividends, it’s likely they have already minimised any NICs.

 

However, if not, then, for example, if a director earning £60,000 sacrifices £6,000 per year into a pension, the savings would be:

• employee saves £1,200 in income tax
• employee saves £120 in NICs
• total employee saving = £1,320
• employer saves 15% NIC on £6,000 = £900
• the full £6,000 goes into the pension gross (pre-tax and NIC)

Employees should carefully assess their potential impact on their income – salary sacrifice reduces their gross salary, impacting things like loan or mortgage applications as lenders use gross salary as a measure of income. It can also affect benefits like statutory maternity pay, bonuses, or overtime pay, as these are often calculated based on actual salary.

 

 

Day One Right to Sick Pay From April 2026

The government has set out firm dates for the introduction of sweeping changes to employment rights. The key dates for new measures include:

April 2026

• Day 1 paternity leave and unpaid parental leave;
• Statutory sick pay – remove the lower earnings limit and waiting period;
• Whistleblowing protections;
• Collective redundancy protective award – doubling the maximum period of the protective award; and
• Fair Work Agency body established to oversee compliance.

October 2026

• Fire and rehire;
• Employment tribunal time limits;
• Various measures related to trade unions, including a duty to inform workers of their right to join a union, new rights for union reps, strengthening trade unions’ right of access and extending protections against detriments for taking industrial action.

2027 [dates to be confirmed]

• Day 1 right – protection from unfair dismissal;
• Flexible working;
• Bereavement leave;
• Regulation of umbrella companies;
• Rights for pregnant workers;
• Gender pay gap and menopause action plans (introduced on a voluntary basis in April 2026);
• End exploitative use of zero hours contracts (ZHC) and applying ZHC measures to agency workers;
• Collective redundancy – collective consultation threshold.

Implementing Employment Rights Bill roadmap UK Government guidance [Issued 1 Jul 2025]

 

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Key dates for new measures

April 2026

• Day 1 paternity leave and unpaid parental leave;
• Statutory sick pay – remove the lower earnings limit and waiting period;
• Whistleblowing protections;
• Collective redundancy protective award – doubling the maximum period of the protective award; and
• Fair Work Agency body established to oversee compliance.

October 2026

• Fire and rehire;
• Employment tribunal time limits;
• Various measures related to trade unions, including a duty to inform workers of their right to join a union, new rights for union reps, strengthening trade unions’ right of access and extending protections against detriments for taking industrial action.

2027 [dates to be confirmed]

• Day 1 right – protection from unfair dismissal;
• Flexible working;
• Bereavement leave;
• Regulation of umbrella companies;
• Rights for pregnant workers;
• Gender pay gap and menopause action plans (introduced on a voluntary basis in April 2026);
• End exploitative use of zero hours contracts (ZHC) and applying ZHC measures to agency workers;
• Collective redundancy – collective consultation threshold.

 

 

National minimum wage breaches

Three common mistakes

• reductions or deductions that take pay below the legal minimum. This might include charges for uniforms, meals, training costs, travel, or lost equipment. For example, Halfords admitted that certain work-related costs should have been covered by the company, not staff, resulting in inadvertent underpayment.
• unpaid working time. Staff must be paid for all hours worked, including pre- and post-shift time, mandatory training, and travel between work locations. Capita was the worst offender on this list, failing to pay £1.5 million to over 5,500 workers, partly because call centre staff were required to log in 25 minutes early for shifts, unpaid.
• incorrect pay for apprentices. Apprentices have different pay entitlements depending on their age and stage of training—an area where errors are frequent.

 

 

 

 

Questions?

If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at alan.long@thelongpartnership.co.uk.