Terry Harris

Is your VAT control system strong enough?

Sep 3, 2026 by Terry Harris 0 Comments

A strong VAT control system should clearly identify who is responsible for VAT, document the processes involved and regularly check that controls are working. HMRC also recommends keeping procedures up to date when the business, its systems or the VAT rules change.

Businesses should also review how VAT data moves through their systems. This includes checking tax codes, customer and supplier information, VAT reporting and the use of manual adjustments. For larger businesses, HMRC recommends a VAT risk register to record risks, controls and how their effectiveness is tested.

It is also important to check that controls are working as intended. This could include reviewing a sample of transactions, checking VAT calculations and reconciliations, and investigating any unusual or unexpected results. Any errors or weaknesses identified should be recorded and followed up to reduce the risk of the same problem happening again.

The guidance also covers Making Tax Digital, including ensuring that VAT records are complete and accurate and that digital links between systems work correctly.

While the guidance is aimed particularly at larger and more complex businesses, it provides useful points for any VAT-registered business to consider when reviewing their VAT control system.

Source: HM Revenue & Customs | 31-08-2026

HMRC notices

Could company distribution rules change?

Sep 3, 2026 by Terry Harris 0 Comments

The tax rules concerning what constitutes a distribution for tax purposes have remained largely unchanged since Corporation Tax was introduced in 1965. HMRC has recently published a consultation looking at possible changes to bring the rules more closely into line with modern commercial practices.

The consultation considers seven areas where the existing rules may create differences in tax treatment or uncertainty. The aim is to make the rules clearer and more consistent, while reducing unintended differences in tax treatment and the risk of errors and non-compliance.

The areas being considered include reductions of share capital, demergers, distributions from non-UK companies, loans to participators, purchases of own shares and the Transactions in Securities rules.

The consultation is mainly focused on shareholders within the charge to Income Tax, including individuals and trusts. The proposals are not intended to affect corporate shareholders directly.

HMRC also wants to ensure that genuine commercial activities and legitimate company reorganisations are not adversely affected and that the wider implications for growth and investment are taken into account.

For companies and their shareholders, the proposals are worth watching. They could ultimately affect the tax treatment of a number of transactions between companies and their owners, including capital reductions, company purchases of own shares and some company reorganisations.

At this stage these are proposals for consultation rather than confirmed changes to the tax rules.

The consultation closes on 14 September 2026. The government will then consider the responses and publish a summary. Further consultation may take place before any changes are introduced.

Source: HM Revenue & Customs | 31-08-2026

Business Support

Predevelopment costs on major developments

Sep 3, 2026 by Terry Harris 0 Comments

Businesses planning major infrastructure and development projects should be aware of a new government consultation on the tax treatment of predevelopment costs.

The consultation follows the conclusion of recent litigation at the Supreme Court. The Court found that certain early-stage surveys and studies for offshore wind farms did not qualify for plant and machinery capital allowances because they were not sufficiently closely connected to the provision of the plant.

This could affect businesses incurring significant costs before construction begins and mean that some predevelopment costs are not deductible from business profits. This could include surveys, environmental assessments, feasibility work and other studies needed to decide whether and how a project should proceed.

The consultation is particularly focused on understanding the predevelopment costs businesses incur, how well businesses understand the tax treatment following the Supreme Court judgment and whether the tax treatment of these costs affects business and investment decisions.

The government says it is not currently minded to change the tax treatment of these costs, but the consultation could lead to changes if the evidence shows that the current treatment creates significant problems for investment or the UK’s competitiveness.

Businesses with major projects should therefore consider how their early-stage costs are being treated and keep clear records of what the costs relate to. The consultation closes on 21 September 2026.

Source: HM Treasury | 31-08-2026

Employment & Payroll

UK employers with overseas employees

Sep 3, 2026 by Terry Harris 0 Comments

UK employers with employees who normally work overseas may have PAYE and National Insurance obligations when those employees come to the UK to carry out their duties in the UK on a short-term basis.

Employers should consider the position whenever an overseas employee visits the UK to work. The fact that the employee remains employed and paid by an overseas company does not, by itself, mean that there is no UK PAYE obligation. In some circumstances, the UK company hosting the employee may be responsible for operating PAYE.

There are arrangements that can help employers with the normal PAYE requirements for qualifying short-term business visitors. For example, an EP Appendix 4 arrangement may allow a UK host employer not to operate PAYE where the relevant conditions are met, including where a double taxation agreement applies and no UK Income Tax liability ultimately arises. National Insurance needs to be considered separately, as an Appendix 4 arrangement does not cover NICs.

Where PAYE is required but it is impractical to operate it in the normal way, an EP Appendix 8 arrangement may be available for certain short-term business visitors. This allows the employer to report and pay the relevant tax after the end of the tax year, subject to the conditions of the arrangement.

If you have overseas staff working in the UK, we can help you make sure your payroll processes are correct.

Source: HM Revenue & Customs | 31-08-2026

Income Tax

Received a P800 from HMRC?

Sep 3, 2026 by Terry Harris 0 Comments

HMRC is currently carrying out its annual reconciliation of PAYE for the 2025-26 tax year. Between June and November, HMRC calculates the Income Tax paid by individuals and checks whether the correct amount has been collected. Where HMRC identifies a difference, it may issue a tax calculation letter, known as a P800.

If you receive a P800, do not automatically accept that HMRC’s calculation is correct. You should check the figures against your own records, including your employment and pension income, tax deducted and any other relevant income or tax reliefs. Errors or missing information can affect the calculation and could result in either too much or too little tax being shown as due.

HMRC provides an online service that allows taxpayers to check how much Income Tax they paid for the year ended 5 April 2026. The calculation can also be checked through the HMRC app.

A P800 may show that you have overpaid tax and are due a refund, or that you have underpaid and need to pay additional tax. In some cases, the P800 will allow you to claim a refund or pay the tax owed online.

If you are unsure whether the figures or tax calculation are correct, we can review your P800 and advise whether any action is needed.

Source: HM Revenue & Customs | 31-08-2026

Value Added Tax

Summer VAT relief has ended

Sep 3, 2026 by Terry Harris 0 Comments

The temporary 5% reduced rate of VAT introduced for certain children’s meals, tickets and family attractions ended on 1 September 2026. The relief applied from 25 June 2026 and was intended to reduce the cost of selected activities and services for families during the summer holidays.

The relief covered qualifying children’s meals supplied by restaurants, cafés and similar establishments for consumption on the premises, as well as children’s tickets for cinemas, theatres, shows, concerts and exhibitions. It also applied to admission charges for certain family attractions, including theme parks, amusement parks, zoos, museums, soft play centres and observation attractions.

Businesses should now ensure that any relevant supplies made from 2 September 2026 are treated under the normal VAT rules. Tickets purchased during the relief period for admission on or after 2 September are subject to the standard 20% rate. Businesses should also review advance payments and ensure that VAT has been accounted for correctly based on the relevant time-of-supply rules.

The relief did not apply to all family-related purchases. For example, takeaway meals, sports activities and separately supplied goods or services remained subject to their normal VAT treatment. Businesses should therefore retain appropriate records and continue to use the existing VAT guidance when determining the correct liability for their supplies.

Source: HM Treasury | 31-08-2026

Employment Law

When a discretionary bonus becomes enforceable

Sep 2, 2026 by Terry Harris 0 Comments

Where an employee is promised a discretionary bonus as an incentive, an employer may be held liable for the full figure if the preconditions have been met and the chain of authorisation is fully satisfied. Indeed, a recent ruling by a tribunal has made it clear that employers cannot unilaterally alter the preconditions or quantum of a bonus once the agreed terms have been met and approved.

The contention arose after a global cloud hosting platform introduced a bonus incentive scheme, which, according to the presentation slide deck, offered sales staff a discretionary bonus of "up to 1%" of revenues derived from invoicing any new client over the first twelve months of the contract, subject to the approval of the Sector Lead Head (SLH). Soon after this offer was made, the claimant secured a major contract with a prominent retailer, whereupon the line manager formally emailed the SLH to recommend the full 1% commission. The SLH duly authorised the bonus in a recorded ‘memo’. However, the senior management baulked at the prospective payout of £516,082 and sought to retroactively apply a £150,000 bonus cap. While the initial claim for the unlawful deduction of wages was dismissed on the ground that no legal entitlement had crystallised, this was overturned on appeal, as the objective terms of the bonus scheme had been clearly outlined, met, and approved by the designated authority.

Crucially, once the SLH had authorised the bonus, the claimant's entitlement to 1% of the first year’s revenues had legally materialised, and the employer had no legal right to cap the bonus or insist upon additional management sign-offs. Thus, discretionary bonus schemes do not automatically grant employers unrestricted authority to alter payment terms at their whim, as, once an employer has established a discretionary bonus framework, communicates its specific terms to an employee, and subsequently exercises its discretion to approve the award, a binding legal obligation has been formed. As a consequence of this landmark ruling, employers should review all bonus incentive schemes to ensure that they do not inadvertently create any unanticipated obligations.

Source: Other | 01-09-2026

Corporate Governance & Regulation

Company accounts are going fully digital

Sep 1, 2026 by Terry Harris 0 Comments

An important change is coming to the way companies file their annual accounts.

From 1 April 2028, all UK-registered companies will be required to file their annual accounts with Companies House using commercial software. The existing web and paper filing routes for company accounts will close.

The change will affect companies that prepare and file their own accounts as well as accountants filing on behalf of clients.

There are other changes on the way too.

Small companies and micro-entities will be required to file a profit and loss account with Companies House. However, they will have the option of preventing this information from being published on the public register. Details of how this opt-out will operate are still to be confirmed.

The option to file abridged accounts will also disappear, and companies claiming exemption from audit will face strengthened eligibility statement requirements.

Although April 2028 may seem some distance away, businesses that currently prepare their own accounts using the Companies House online service should be particularly aware of the change.

They will eventually need suitable commercial software or will need to arrange for an accountant or other professional to file the accounts for them.

Companies already using accounting software should also check whether their existing package will support the new filing requirements.

There is no need for businesses to make immediate changes, but this is one of those developments worth knowing about well in advance.

Source: Other | 31-08-2026

Business Support

How Is Your Business Performing?

Sep 1, 2026 by Terry Harris 0 Comments

The latest figures from the Office for National Statistics suggest that conditions remain challenging for many UK businesses.

In July 2026, 15% of trading businesses reported an increase in turnover compared with the previous month. However, 22% reported that turnover had fallen.

Economic uncertainty remains an important concern, while businesses employing ten or more people were particularly likely to identify labour costs as a challenge. Energy costs are also moving back up the agenda, with 61% of businesses expressing some degree of concern about energy prices in early August.

These national figures are interesting, but the more useful question is how your own business compares.

Has turnover increased during the past year? More importantly, has profit kept pace?

Are higher wages, energy bills and other costs gradually reducing your margins?

And if costs are increasing, have your selling prices been reviewed recently?

It is easy to become accustomed to gradual changes in business performance. A small reduction in margin or steady increase in overheads may not appear significant from month to month, but the cumulative effect can be considerable.

Which makes this a good time to review your latest management figures and compare them with the same period last year.

Look particularly at turnover, gross profit margin, payroll costs and overheads.

If something has changed significantly, understanding why it has changed is the first step towards deciding what to do about it.

Source: Other | 31-08-2026

Income Tax

Evidence required to support business expense claims

Aug 27, 2026 by Terry Harris 0 Comments

Self-employed individuals can deduct allowable business expenses from their income when calculating taxable profits. However, businesses must keep accurate records and evidence to support the costs being claimed.

HMRC requires taxpayers to keep proof of business expenses, although evidence does not usually need to be submitted with a self-assessment tax return. Records should be retained and made available if HMRC requests them as part of a compliance check.

Evidence should show the nature of the expense, the amount paid and that the cost relates to the business. This may include receipts, invoices, bank statements, contracts or other supporting documents. Where an expense has both business and private use, records should also demonstrate how the business proportion has been calculated.

Allowable expenses can include costs such as office expenses, travel, insurance, marketing, professional fees, staff costs and business premises costs. However, personal expenses cannot be claimed, and only the business element of mixed-use costs can be deducted.

Businesses should also ensure they use the correct treatment for larger purchases. Under traditional accounting, equipment, machinery and vehicles may need to be claimed through capital allowances rather than as day-to-day expenses. Under the cash basis, most equipment and machinery can be deducted as an expense, although cars are generally dealt with through capital allowances.

Source: HM Revenue & Customs | 23-08-2026

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