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.

 

 

MTD – What are you submitting

What data is actually exchanged and stored by HMRC throughout the new MTD process?

At the moment, in order to get a tax calculation from HMRC, you must first have submitted your return. However, with MTD, you submit what information you have, and that is before anyone has confirmed the final submission.

So, periodically, you will submit what you have, which means that HMRC has data gathered over time, which, in theory, it can use.

Data collected periodically may therefore be used by HMRC to ensure it meets its obligations and support achievement of its strategic objectives, in accordance with relevant policies and legislation.

At the moment, such data exchange only happens at the end of the process, when you’re confident the figures are complete and accurate. But if data exchange occurs at other points, you could be unintentionally feeding data into HMRC’s systems, which is misleading because it is incomplete or in need of correction.

 

 

VAT Threshold

The pre-budget rumour mill is working overtime. One of the hot topics is that the Chancellor may change the VAT threshold. Some years ago, rumours circulated that it was to be reduced to £30,000, but in the end it was raised.

The UK has a particularly high VAT registration threshold. At £90,000, it is higher than any EU member state and the joint highest threshold (along with Switzerland) in the Organisation for Economic Co-operation and Development (OECD).

We have come across many businesses that restrict growth in order to stay just under the threshold.

Others avoid declaring anything above it. Many years ago, I met with a team who were proposing to buy a guest house that was not VAT registered. Later in the conversation, I asked for the latest turnover. It was well over the VAT registration limit. I said that they should have been VAT registered. The team then said that they needed an accountant to show them how not to declare the excess over the threshold, so that they could avoid registering for VAT. Needless to say, we never acted for them.

The Office for Budget Responsibility (OBR) has indicated that this bunching of businesses just below the VAT threshold is getting worse, and could lead to lost income of up to £350m in 2025/26.

There is speculation that the VAT threshold could be reduced in line with that for MTD, £50,000 in 2026/27, then £30000 and eventually £20000. This would effectively mean that any small business run on a commercial basis finds itself having to register.

Reducing the threshold could also pose potential challenges. One result of reducing the threshold would be to bring more small businesses into VAT, increasing admin burdens and compliance costs. If the threshold were to be set very low, this could discourage people from starting new businesses, particularly small-scale businesses and side hustles.

Another consequence could be increased prices for consumers. Businesses selling to the general public that are brought into the VAT regime would have to either put their prices up or reduce what could already be very tight profit margins. Any increase in costs for consumers would be politically unpopular and could have an inflationary effect.

 

 

NI Calculations

HMRC is advising directors and employers to check the National Insurance contributions due at the end of the tax year to identify any errors, as NICs rates changed twice in 2024, straddling two tax years. There were cuts on 6 January 2024 and then a second on 6 April 2024, creating potential issues with calculations, which did not take this into account.

This will particularly affect directors using the annual basis of calculation.

HMRC said it has particular concerns where there are changes in the year to the NIC rates, for example, the 2022/23 year.

Employers need to review their submissions for 2022/23 onwards to make sure that no further NICs are due. If any underpayments are identified, HMRC recommends that the issue is self-corrected through PAYE where possible.

 

 

Companies House Upgrade

Companies House plans to update legacy IT systems. Outdated infrastructure and platforms are costly to run, make it more difficult to deliver effective and reliable services, and are unable to support modern ways of working. Older and unsupported technology is also less secure, increasing the risks of fraud and error, and of cyber-attack.

Modernised infrastructure will allow Companies House to exploit new opportunities, improve performance and efficiency, and enable better integration with cross-government digital services.

Companies House will implement automated security solutions to identify and mitigate against vulnerabilities, improve resilience to cyber threats, and develop business-led and ethical use of AI tools.

The Economic Crime and Corporate Transparency Act 2023 had a profound impact on Companies House, introducing new powers to disrupt economic crime and reforms to drive greater transparency and accountability through the UK’s corporate registers.

Companies House will expand its intelligence capability by using ‘advanced data techniques, analytics, and innovative technologies’ to analyse company behaviours and detect suspicious activities. It will also conduct risk assessments of companies and transactions to detect non-compliance, which will shape the design of future services and support enforcement activity.

 

 

Student Promoting VAT Fraud on Instagram

Habeeb Ajaga, 21, from Plumstead, London, used two Instagram accounts to encourage criminal attacks on VAT systems.

Ajaga posted images on Instagram promoting fraud against HMRC and sought personal data from members of the public to be used to perpetrate fraud. On the posts, he encouraged Instagram users to provide tax identifiers or other personally identifiable information. This was accompanied by screenshots from financial institutions claiming to show large tax rebates from HMRC.

Cybercrime investigators at HMRC’s Fraud Investigation Service worked with the social media company to shut down one of his accounts in 2022, but he opened a second account the following year. But HMRC traced the second account to Ajaga, and this was also closed down.

Ajaga was interviewed under caution in September 2024.

The 21-year-old pleaded guilty to two counts of encouraging fraud in August 2025.

He was sentenced to 16 months in prison, suspended for two years, during a hearing at Southwark Crown Court last week. If he commits any offence during the two-year suspended sentence, he will have to serve the time.

 

 

CGT Crackdown on Second Home Sales

It is reported that HMRC netted £256m from underpaid capital gains tax (CGT) last tax year, up 41%from £182m in 2023-24, as more than 10,000 capital gains tax (CGT) compliance checks were conducted, the highest number in at least five years.

The checks generally relate to tax returns filed in earlier periods, with HMRC focusing on property owners who have avoided CGT.

The total number of CGT compliance checks jumped from 7,769 in 2023-24 to 10,063 in 2024-25, up by nearly a third in just one year. More funding for HMRC has resulted in a sharp increase in the number of compliance officers, which is beginning to generate sizeable returns, spurred by HMRC’s intensified focus on CGT compliance as part of its broader strategy to close the £47bn tax gap and increase revenue.

HMRC is increasingly leveraging third-party data to identify discrepancies and prompt compliance checks. This includes information from financial institutions, investment platforms, and share registrars, as well as data obtained from overseas tax authorities under the automatic exchange of information rules.

 

 

HMRC’s Wooley Guidance

Members of the House of Lords Finance Bill Sub-Committee questioned leading tax and business experts about government plans to tighten up the rules on promoters of tax avoidance by adding a criminal offence to the disclosure of tax avoidance schemes (DOTAS).

The committee wanted to assess what HMRC could do to stop tax avoidance, what the repercussions would be if the government were to criminalise it and if the fears of a wider impact on the accountancy sector were ‘legitimate’.

Comments included that HMRC should look to update some of their own guidance and keep it up to date. It is quite often either too woolly, too specific, too generic, or anything in between, and it’s quite helpful if it’s updated in line with case law, which is something that often does not happen.

HMRC should be focusing on stopping non-compliance at the source, recommending that they work more closely with the Advertising Standards Authority, which can also get involved, by applying advertising standards policy codes to tax avoidance schemes. If it is not legal, decent, honest and truthful, are the promoters mis-selling products?

Also, professional bodies should take a more robust position on members involved in promoting tax avoidance.

However, criminalisation was not favoured.

 

 

 

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.