21st August 2026 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend. 

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

Free ICO training helps SMEs strengthen data protection
The Information Commissioner's Office (ICO), the UK's data protection regulator, has launched a free online training programme called ‘Data Protection Essentials’, aimed at small and medium-sized organisations and sole traders across the UK.

The course is designed to help organisations and their staff understand data protection requirements and apply them confidently in day-to-day operations. It includes real-world examples tailored to different sectors and addresses common activities such as sharing information, managing records securely, marketing and customer engagement, and reducing the risk of data breaches.

According to the regulator, the programme was developed in response to research showing many smaller organisations want more clarity on what data protection means in practice and how to apply it day-to-day, especially where there's no dedicated data protection expertise.

Key benefits for businesses taking part include:

• Improving how they manage and protect people's information.
• Using personal data confidently while reducing risk.
• Involving colleagues to build shared knowledge across the organisation.
• Understanding legal responsibilities more clearly.
• Demonstrating a commitment to protecting personal information and building trust.

Individuals completing the training receive a digital certificate that they can share publicly. Organisations can also undertake a short self-assessment and once completed, also earn a certificate and the option to be listed on a public Data Protection Essentials register.

Faye Spencer, the ICO's Head of Business Services, said the programme was designed “to be flexible, self-paced and easy to fit around busy working days. It breaks data protection into achievable steps that help build confidence over time. Our aim is to give organisations the confidence to use personal information responsibly and effectively, helping them build trust, reduce risk and achieve their goals”.

If your business handles personal data but does not have dedicated compliance expertise, this free training could be a cost-effective way to improve staff awareness and reduce risk. The ICO’s Data Protection Essentials page can be found here.
 
Making Tax Digital for Income Tax first quarter statistics published
Under Making Tax Digital (MTD) for Income Tax, sole traders and landlords with income of more than £50,000 have been required to keep digital records and send quarterly updates to HMRC since 6 April 2026.

The first quarterly submission deadline, covering the first three months of the 2026-27 tax year, passed on 7 August 2026. HMRC have since issued a press release confirming that 436,000 taxpayers filed their first quarterly tax update by the deadline and reminding those who have not submitted their update to do so using HMRC-recognised software.

Slow uptake
HMRC’s press release reveals that as of 12 August 2026, over 570,000 taxpayers had signed up for MTD for Income Tax.
In August 2025, based on 2023-24 figures, HMRC estimated that some 864,000 taxpayers would need to sign up from April 2026, meaning that around one third of taxpayers who should have registered for MTD for Income Tax from April 2026 had not signed up.

HMRC’s response
From September, HMRC will sign up taxpayers who are required to use MTD for Income Tax for 2026-27, but who have not yet registered for the service themselves. 

• Taxpayers can avoid being signed up by HMRC by signing themselves up now, ensuring their MTD details are correct at the outset.
• HMRC will publish guidance in late August to explain what taxpayers need to do if they receive a letter from HMRC about being signed up.

MTD for Income Tax should not be ignored, with HMRC reminding taxpayers that it is a legal requirement for sole traders and landlords earning more than £50,000 from self-employment and property to comply, unless exempt (e.g. due to digital exclusion). 

Taxpayers are also reminded that from April 2027, those earning more than £30,000 from self-employment and property will be required to comply.

Penalties
While HMRC have confirmed that there will be no penalty points for late quarterly updates in 2026-27, penalties will still apply for late tax returns and late payments.

Quarterly updates do not replace the Self Assessment tax return. Those within scope of MTD for Income Tax must submit their quarterly updates in order to file their tax returns by 31 January.

A points-based penalty system will be introduced from 6 April 2027. Taxpayers will receive one point for each missed quarterly deadline and a £200 fixed penalty once four points have accumulated.

If you have not yet registered for MTD for Income Tax and are concerned that it may apply to you, contact us as soon as possible so we can help you assess your obligations.

See 436,000 sole traders and landlords make their tax digital - GOV.UK
 
UK vacancies fall to lowest level since 2014 as hiring slows
The UK jobs market showed fresh signs of strain in the latest labour market figures, published by the Office for National Statistics on 18 August 2026.

Job vacancies fell to an estimated 707,000 in the three months to July, down 6,000 (0.8%) on the previous quarter. Outside the pandemic period, that's the lowest vacancy count since September to November 2014. The ONS said feedback from its Vacancy Survey pointed to smaller firms holding back on recruitment because of rising labour and operating costs.

Despite the weaker hiring picture, the headline unemployment rate held at 4.9% for people aged 16 and over in the April to June quarter, up 0.2 percentage points on the year, but down 0.1 points on the previous quarter. The employment rate for 16- to 64-year-olds stood at 75.1%, while economic inactivity was largely unchanged at 20.9%.

On pay, annual growth in regular earnings (excluding bonuses) in Great Britain was 3.5% in April to June, with total earnings (including bonuses) up 4.1%. The gap between sectors was stark: public sector regular pay grew 6.1%, reflecting the timing of NHS pay awards, while private sector growth slowed to 2.8%. Adjusted for inflation using the Consumer Prices Index including owner occupiers' housing costs (CPIH), regular pay rose just 0.5% in real terms.

Separately, payrolled employee numbers continued their two-year downward trend, falling 78,000 (0.3%) year-on-year to 30.3 million by June, with an early estimate suggesting a similar picture into July.

Taken together, the data points to a labour market that remains subdued rather than in freefall; steady unemployment but weakening demand for new hires and softer private sector wage growth.

See Labour market overview, UK - Office for National Statistics
 
 
What should your employment law reform priorities be?
Acas's Julie Dennis has set out how HR teams should approach the Employment Rights Act 2025, one of the most significant changes to UK employment law in recent years, which became law on 18 December 2025 and is being phased in through 2026–2027.

Several changes are already in force, including:

• Statutory sick pay from day one (with the lower earnings limit removed).
• Day-one paternity and unpaid parental leave rights.
• A new bereaved partner's paternity leave.
• Stronger whistleblowing protection for those reporting sexual harassment.

For these changes, employers should have already reviewed related policies, payroll, and manager guidance, and communicated with staff. It is important to be clear that day-one leave rights don't always mean day-one pay rights.

Further reforms are still to come, covering unfair dismissal, harassment, flexible working, and zero-hours contracts, meaning businesses need a staged plan rather than treating this as a single change with one start date. This should not be a single compliance project; regular policy reviews will be essential, and businesses should not wait for the remaining reforms to take effect.

The compliance environment is also tightening. The new Fair Work Agency will consolidate enforcement powers, and employers must keep compliance records for six years, including holiday pay and annual leave records.

Acas recommends businesses:

1. Know the timeline: separate what has already changed from what is expected later.
2. Prioritise policy and contract review, especially sickness, family leave, flexible working, harassment, dismissal and records.
3. Train line managers. They need to understand the processes they are expected to follow and feel confident having early, fair and consistent conversations.
4. Strengthen compliance systems. Review how decisions are recorded, how evidence is kept and how employees are told about their rights. 

Acas points readers to its dedicated Employment Rights Act 2025 hub and a free recorded webinar for further detail.
 
Cost of business crisis for British SMEs
UK businesses are facing a “cost of business crisis”, according to the British Chambers of Commerce (BCC). Its new cost-stack calculator shows government policy alone has pushed up an average firm's expenses by 70% over the past decade, adding roughly £827,000 a year in costs for a typical mid-sized business. About a quarter of the rise stems from the increase in employer National Insurance contributions, with the higher minimum wage and mandatory pension auto-enrolment also major contributors.

The BCC warns this cost burden is pushing firms into a “risk-aversion cycle”, denting SME investment and confidence. The 70% figure excludes tariffs, inflation, and Brexit effects, meaning real cost increases are likely higher.

While businesses cannot control policy costs, they can review pricing, supplier contracts and operating efficiencies. Benchmarking your position against similar businesses may also help identify where cost increases can be recovered or reduced.

You can use the BCC’s cost-stack calculator to see how your business compares and submit your figures anonymously to help demonstrate the true scale of cost pressures facing British businesses.

Contact us if you would like assistance with cashflow forecasting, margin and pricing review or client profitability analysis.

See Government policies push business costs up by 70 per cent in a decade and Cost Stack Calculator - British Chambers of Commerce

7th August 2026 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend. 

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

QUESTIONS OVER FUTURE TAX CHANGES UNDER NEW PRIME MINISTER ANDY BURNHAM
Since becoming Prime Minister, Andy Burnham has made cost-of-living support a key focus. One headline measure announced this month is the planned removal of VAT on household electricity from October 2026, which the Government estimates could reduce average household bills by around £45 a year. Household electricity is currently subject to VAT at 5%.

At the same time, attention is turning towards how future tax policy might develop. Economists and commentators are already speculating about whether further tax reform could feature in the Autumn Budget.

For business owners, landlords and investors, the key message is not to react to headlines. Many of the most talked-about measures remain informal proposals or speculation, rather than law. Changes to capital gains tax, property taxation and other wealth-related taxes have all been widely discussed, but little has been formally confirmed at this stage.

History shows that major tax changes are often signalled well before implementation. That means now is a good time to review long-term plans, particularly if you are considering property sales, business disposals or succession planning.

Our recommended approach:

• Avoid making rushed decisions based on speculation.
• Review your current tax position.
• Consider scenario planning ahead of the Autumn Budget.
• Seek advice before implementing major transactions.

The coming months are likely to bring further tax announcements, making regular reviews of your business and personal plans more important than ever. If you’d like to discuss any of the above issues, please get in touch with us - we’d be happy to help.

HMRC’S 2026 TAX UPDATE
Prior to Andy Burnham’s appointment as Prime Minister and the appointment of John Healey as Chancellor, HMRC published a raft of consultations and policy announcements on 23 June 2026.

The wide-ranging package of consultations and policy announcements was aimed at making the tax system simpler, more digital and, in HMRC's words, fairer. While many of the proposals are still at consultation stage, they give us an indication of the government's direction of travel over the next few years.

ACCELERATED, MORE FREQUENT, TAX PAYMENTS
Perhaps the most significant proposal is a consultation on "Timely Payments" for Self Assessment taxpayers.

The government is exploring ways to collect more tax during the year rather than relying on large payments due each January and July. For taxpayers who have both PAYE income and Self Assessment income, the proposal could require more of their tax liability to be collected through PAYE from April 2029.

HMRC is also considering wider reforms to the Payments on Account regime for other Self Assessment taxpayers. These reforms would require taxpayers to pay all of their forecast tax liability during the tax year, with a balancing payment/repayment being due when their tax position is finalised on the 31 January following the end of the tax year.
 
For many sole traders and landlords, spreading payments throughout the year could help with budgeting and reduce the shock of large tax bills. However, it may also accelerate when tax is paid, affecting cash flow planning.

REVIEW OF BENCHMARK SCALE RATES
Employers should note that HMRC is reviewing its Benchmark Scale Rates (BSRs) and Overseas Scale Rates (OSRs).

These are the flat-rate allowances businesses can use to reimburse employees for meals, accommodation and travel expenses without checking every receipt. The government says the review will consider whether current rates still reflect actual costs and whether the system can be simplified.

For growing businesses with travelling staff, any simplification could reduce administrative work and improve consistency in expense claims.

ELECTRONIC INVOICING
HMRC's Tax Update included an important announcement about the future of electronic invoicing (e-invoicing) in the UK. The government confirmed that the ‘Peppol’ framework will be the core network used to support the UK's planned e-invoicing system.

Electronic invoicing is not simply emailing a PDF invoice. Instead, invoices are created in a standard digital format and sent directly between accounting systems. This reduces manual data entry, improves accuracy and can speed up payment processing. Peppol is an international framework that enables different accounting and finance systems to exchange invoice data securely and consistently.

The government is working towards a mandatory e-invoicing regime from 2029, primarily covering VAT invoices for business-to-business and business-to-government transactions. HMRC has confirmed that businesses will exchange invoices through software providers rather than through a central government platform.

For small businesses, now is not the time to panic. However, it is a good opportunity to review bookkeeping and invoicing systems.

Businesses already using modern cloud accounting software are likely to find the transition easier than those relying on manual processes.

The full implementation roadmap is expected later in 2026.

PROPOSED CHANGE TO THE CGT HOLDOVER RELIEF CALCULATION
The government has published draft legislation to correct an anomaly in the Capital Gains Tax (CGT) holdover relief rules for gifts of business assets, which allow a capital gain on a gift to be deferred until the recipient disposes of the asset. The proposed change would amend the formula used to calculate relief on certain share transfers, helping ensure the relief operates as intended.

The measure is not yet law, but it could improve the tax position for some business owners transferring shares as part of succession planning, family ownership arrangements or business restructures.

If you are considering a transaction that may be affected, it may be worth discussing whether it can be delayed until the legislation is enacted. Waiting could result in a more favourable outcome, although professional advice should be sought before making any decisions.

MODERNISING HOW COMPANY PAYMENTS TO SHAREHOLDERS ARE TAXED
The government has also launched a consultation on modernising the rules that determine how some payments from companies to shareholders are taxed.

Many of these rules date back decades and have become increasingly complex. The review covers areas such as distributions, returns of capital, company reorganisations and interactions with the loans to participators rules.

For owner-managed businesses, this is unlikely to lead to immediate changes, but it signals potential reform of an area that affects dividends, company restructures and extraction of profits.
 
FURTHER DIGITAL COMPLIANCE AND ANTI-FRAUD MEASURES
Several consultations focus on tackling tax evasion and improving compliance.

These include proposals to extend VAT liability rules for online marketplaces, introduce software standards to combat electronic sales suppression systems, and create a new offence for making reckless untrue statements in direct tax matters.

For compliant businesses, these measures are largely aimed at creating a level playing field by targeting those who deliberately understate sales or avoid tax obligations.

WHAT HAPPENS NEXT?
Most of the measures announced on 23 June are consultations rather than immediate law changes. However, they provide an early warning of where tax administration is heading:

• Greater use of digital systems.
• More real-time tax reporting and payment.
• Increased focus on compliance and data.
• Simplification of some long-standing tax rules.

For now, the best approach is to keep good records, maintain robust bookkeeping systems and monitor consultations that could affect your business. Many of today's consultations have the potential to become tomorrow's tax rules.

To read the Tax Update, see here.

HMRC TARGETS SIDE HUSTLE INCOME
HMRC has launched a fresh summer campaign reminding people with "side hustles" that extra income may need to be reported for tax purposes. The announcement specifically highlights people earning income from wedding services, online selling, content creation, freelancing and similar activities.

The key figure remains the £1,000 trading allowance. If total income from side activities exceeds £1,000 during the tax year, there may be an obligation to register for Self Assessment and declare the income to HMRC.

This is particularly relevant because HMRC now receives increasing amounts of information from digital platforms. Data from marketplaces and gig economy platforms can be matched against tax returns, making it easier for HMRC to identify undeclared income.

Importantly, not everyone selling online has a tax problem. Selling unwanted personal possessions is generally not taxable. However, regularly buying or making goods to sell, or providing services for payment, is likely to be treated as trading.

If you have a side hustle, you should:

• Review any additional income streams.
• Check whether total trading income exceeds £1,000.
• Register for Self Assessment if required.
• Keep proper records from the outset rather than trying to reconstruct them later.

Early disclosure is almost always easier and cheaper than dealing with an HMRC enquiry. 

31st July 2026 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend. 

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

Andy Burnham’s new government, a balancing act
Andy Burnham’s first days as Prime Minister have been marked by a flurry of announcements designed to show that his government intends to move quickly. Presenting himself as a leader focused on easing pressure on households and rebuilding trust in politics, Burnham has begun reshaping government while signalling the priorities that will define his administration.

His first major moves were aimed directly at the cost-of-living crisis, announcing a reduction in VAT on household energy bills, followed by a single bus fare policy across England that will be capped at £2 for a year from January 2027.

Mr Burnham described affordable public transport as an essential service and argued that no one should be excluded from opportunities because they cannot afford to travel.

The Prime Minister has also promised a 20% reduction in business rates for pubs, clubs and live music venues for 2027-28. This is in addition to the 15% relief for 2026-27 with bills being frozen in real terms for a further two years. The new 20% discount will not be available to the very largest live music venues. Further details will be set out at the Budget.

However, questions are already being raised about how these promises will be funded as the government plans to divert hundreds of millions of pounds from other budgets, including money previously earmarked for international climate finance projects.

The government has said that the business rates reduction will be paid by reviewing reliefs for businesses that are not considered to make a positive contribution to local communities, such as vape shops. Businesses that sell through online marketplaces but do not comply with their tax obligations will also be targeted. A consultation on how this may be achieved was published in June 2026.

Mr Burnham has also started to build his ministerial team, with the surprise announcement being the appointment of John Healey as Chancellor. The former defence secretary, who resigned from Sir Keir Starmer’s cabinet over spending plans, will be seen as an advocate for boosting defence spending. Companies such as BAE Systems and Babcock saw their share prices rise after his appointment.

Mr Healey is regarded as experienced and fiscally responsible.

The government insists that fiscal discipline remains a priority, but speculation continues about whether future spending plans will require higher taxes or additional borrowing.

Taken together, the first week of Burnham's government paints a picture of an administration trying to balance competing priorities, wanting to reduce living costs while maintaining fiscal credibility.
 
Deadline for first Making Tax Digital quarterly update fast approaching
Sole traders and landlords that are required to use Making Tax Digital (MTD) to report their earnings are due to send their first quarterly update by 7 August 2026.

The quarterly update involves sending income and expenses for the first three months of the tax year to HMRC.

After an update is made, it is possible to see an estimated tax bill based on the figures provided. How accurate the estimate is will depend on earnings for the rest of the tax year, but it may help with budgeting for payments.

Quarterly updates do not replace the need to complete a tax return at the end of the year, and there is no change to the dates when tax payments need to be made.

If you have any questions about MTD or need help filing your quarterly update, please get in touch. We’re here to help!
 
Self-drive start-up fishes for cash
Earlier this month, British autonomous vehicle company Wayve became the first large company to trade its shares on the London Stock Exchange Group’s new private markets platform.

So far, it was the largest deal under the new Private Intermittent Securities and Capital Exchange System (PISCES) legislated in Finance Bill 2025-26.

A PISCES platform, which requires FCA permission, can only operate as a secondary market for the trading of existing shares and not a way to raise capital through the issue of new shares (though participating companies may be more attractive to primary investors as a result of greater liquidity). It gives new investors easier access to growth companies pre-IPO and allows early-stage investors and other shareholders, including employees, to realise their investments.

The Cambridge company raised over $1.2 billion in a fundraising exercise in February from investors that included Mercedes-Benz, Stellantis and Nissan and a later $60 million from AMD, Arm and Qualcomm. Those investment rounds valued the company at $8.6 billion.

The idea creates a Private Securities Market (PSM) that is especially beneficial to employees or management.

Share options have been around for some time, especially for tech startups that find it difficult to pay Silicon Valley salaries in their early years. Recipients of the options will not get any cash until there is an Initial Public Offering, which may never happen.

So far this year, only seven companies have listed in London, outstripped by private takeovers of British companies, with the Financial Times reporting that the value of bids for London-listed companies has outstripped new entrants’ value by 27 to one.

Small companies should pay attention, too. The new market offers a way for existing company share schemes to benefit as well as helping the businesses grow.

Why companies should be aware
Joining the PISCES system comes with enhanced governance requirements and may mean updating a business's Articles of Association and being aware of changes in tax circumstances for both employees and the company.

Under the Employment-Related Securities (ERS) regime, if, at the time of an acquisition of shares by an employee, arrangements exist for the shares to be traded on a PISCES platform, they will be viewed as Readily Convertible Assets (RCAs). 

Provided that Enterprise Management Incentive (EMI) options are granted for commercial purposes to recruit and retain employees, it will be acceptable for a PISCES trading event to be a specified occasion, allowing employees to exercise their options. 

Company Share Option Plans (CSOPs) are subject to the requirement to hold options for three years from grant, but a PISCES trading event can be a specified event to allow employees to exercise their options. Existing option agreements can be amended to include a sale on a PISCES platform as a specified exercise event.

Share buybacks will not be permitted at the outset because of the associated complexity.

Background
The first company to be listed on the new PISCES market for private companies was QPlay, a board game maker. JP Jenkins pipped the London Stock Exchange (LSE) to list the first company under the scheme. JP Jenkins is a British company that has long facilitated the trading of shares in unlisted companies through its regulated platform and attained its approved status for PISCES three months after the LSE. 

The LSE had announced that shares in Oxford Science Enterprises, an early-stage Venture Capital fund best known for investing in quantum computing firm Oxford Ionics, would be the first to trade on its Private Securities Market (PSM), but it was pipped by QPlay.
 
External examiners mark HMRC’s performance as ‘Poor’
The latest annual report from the Charter Stakeholder Group remains highly critical of HMRC's service performance, with scores either stagnant or deteriorating across most standards. Alongside poor scores for responsiveness and ease of use, the report highlights overwhelmingly negative feedback on Making Tax Digital (MTD).

The Charter Stakeholder Group monitors HMRC's performance against the HMRC Charter, a set of service standards. The 2025-26 assessment was based on a survey of 719 taxpayers and agents who were asked to rate HMRC's performance against each standard on a scale of one to 10.

Of the seven charter standards assessed, only one recorded an improved score compared with 2025.

The poor score is a blow to the government that set out a plan to replace a paper-heavy agency with a ‘world-class’ digital-first organisation. Around £7 billion was committed to modernising HMRC’s old computer systems and infrastructure. This would reduce the headcount in customer contact functions and increase compliance team numbers to bring in more revenue. The technology would be able to respond to customers faster and more accurately, reduce the tax gap of about £59 billion and deter fraud.

Unfortunately, the latest report shows HMRC failing on all levels.

Key findings

Being responsive
Being responsive was HMRC's lowest-scoring charter standard for the third year in a row, with an average score of 2.8 out of 10, down from 3.0 the previous year.

Tax agents were more critical than taxpayers generally, giving HMRC a score of 2.6. The respondents highlighted persistent postal delays, poor first-time resolution, limited helpline expertise, no effective case tracking or escalation and slow complaints handling.

In particular, there was a feeling that there was one rule for HMRC and another for taxpayers, with an imbalance between HMRC’s response times and the deadlines it imposes on taxpayers.

Making things easy
This category scored 3.25, making it HMRC's second-worst performing standard. Nearly two-thirds of respondents rated HMRC at three or below and more than a quarter gave a score of one.

Tax agents were particularly critical of HMRC's continued push towards online tools while their agent-dedicated phone line was staffed with people with insufficient technical knowledge and a lack of understanding of how agents work.
 
Getting things right
Getting things right scored 3.97, down from 4.1 in 2025. Almost one-fifth of all respondents gave a score of one. Respondents said HMRC staff often lacked sufficient training and expertise and that helpline services provided inconsistent guidance.

A recurring observation was that correcting HMRC errors often requires multiple contacts and lengthy delays.

Accountability
Nearly 82% of respondents felt HMRC were not sufficiently accountable for meeting the Charter requirements, noting that they would be more likely to address declining customer service if they were properly accountable under the Charter. HMRC face no penalties for failing to meet standards.

Digitalisation and transformation plans
Nearly 89% of respondents felt HMRC had not done enough to keep Charter standards central to its Transformation Roadmap and that digitalisation was being prioritised over fairness, accuracy and support.

Making Tax Digital
Probably unsurprising to anyone in business, the feedback on Making Tax Digital (MTD) was overwhelmingly negative. Respondents described it as, at best, poorly designed and generally not fit for purpose.

In complete contrast to HMRC’s ongoing trope, the common concerns included its extra cost and administration, software dependence, quarterly reporting burdens and a lack of confidence in HMRC's ability to cope with the demands of MTD.

The general feeling was that MTD was uncommercial, offered little practical value and failed to reflect or support the realities of small businesses and agents.

The other charter standards
Other charter standards scored slightly higher, although most ratings still fell slightly compared with the previous year. The scores were:

• Keeping your data secure: 6.86 (7.03 in 2025).
• Recognising that someone can represent you: 6.31 (6.01 in 2025).
• Mutual respect: 5.89 (5.98 in 2025).
• Treating you fairly: 5.25 (5.34 in 2025).

If you have any tax concerns, problems implementing MTD or dealing with HMRC, please get in contact. We’d be happy to help.
 
Insolvency Service has a busy year
The Insolvency Service has released its annual report showing stronger enforcement activity while improving support for people in debt.

Two key takeaways from the report were the increasing use of Artificial Intelligence to tackle abusive phoenixism and continued tackling of COVID-19 fraud.

Overall, the Insolvency Service returned £42.7 million to creditors and the wider economy in 2025-26. It handled 11,668 insolvency cases, processed 70,633 redundancy payments and approved 48,344 Debt Relief Orders.

Enforcement activity also increased with 1,153 directors disqualified for misconduct, an increase of 11%. There are 185 live company investigations, up 39% on the previous year, with 163 criminal prosecutions completed. 

The report showed that the Insolvency Service continued to modernise its services, including progress on a new digital Debt Relief Order service, investment in artificial intelligence and automation to improve the customer experience and the rollout of a new case management system to help investigators work more efficiently. 

The problem with COVID
In May 2025, the agency was tasked with taking over the recovery of funds lost to COVID-19 fraud. It reported that 65% of its civil and criminal enforcement outcomes related to it. The Insolvency Service admitted that it anticipated a decline in case volumes as the schemes receded, but activity has remained consistent with previous years, “… reflecting sustained investigative effort and a continuing pipeline of complex cases”.

During 2025 to 2026, there were 773 Section 6 director disqualification outcomes and 55 bankruptcy restrictions and debt relief restrictions linked to COVID-19 financial support scheme misconduct. In the same period, there were 31 criminal convictions resulting in 25 custodial sentences.

Unfortunately, only £4.5 million was recovered.

Abusive phoenixism
The agency also indicated that it had plans to do more to tackle the issue of abusive phoenixism - where directors repeatedly abuse the dissolution or insolvency process to avoid paying creditors or for fraud. This causes significant harm to creditors, honest businesses and public finances.

With an increased technology budget and a quickening rollout of Artificial Intelligence systems throughout the service, phoenixism is firmly within its sights.

It planned to spend an additional £25 million to fund 50 more staff with tech backup dedicated to director misconduct. Cross-government work includes strengthened data-sharing with HMRC and Companies House, using a combined threat assessment to catch dodgy directors.

In 2025-2026, it completed 148 civil investigations into companies where abusive phoenixism was identified and civil or criminal investigations were ongoing into a further 64 companies.

As a result of the abusive phoenix investigations, 18 companies were shut down for trading against the public interest, 87 directors were disqualified and five directors were convicted of criminal offences.

Key achievements in numbers 

• £42.7 million returned to the economy through distributions to creditors and debtors. 
• 1,153 directors disqualified for financial misconduct. 
• 70,633 redundancy payments processed for employees affected by employer insolvency.
• 48,344 Debt Relief Orders approved, helping vulnerable people access debt relief. 
• 80,542 Breathing Space protections granted to people struggling with debt. 
• A £25 million government investment announced to strengthen action against abusive phoenixism and director misconduct.
• The Insolvency Service’s full report can be found here:

https://www.gov.uk/government/publications/insolvency-service-annual-report-and-accounts-2025-to-2026/insolvency-service-annual-report-and-accounts-2025-2026
 
New settlement terms for disguised remuneration loan charge
HMRC have released new guidance for individuals who wish to settle their disguised remuneration loan charge liability under new settlement terms. HMRC will write to those who are eligible to settle under the new terms.

The disguised remuneration loan charge is a UK tax measure that applies to outstanding loans made on or after 9 December 2010 as part of tax-avoidance schemes, when income was paid as a non-repayable loan to avoid Income Tax and National Insurance contributions.

After years of rancorous litigation and political debate, an independent review was undertaken last year, with the response published in conjunction with the Autumn Budget 2025 and legislation included in Finance Act 2026.

Nine recommendations were made by Ray McCann, who led the review. Of these, HMRC accepted all but one of them.
 
New terms
The new settlement scheme applies to those who have a disguised remuneration loan charge liability that has not yet been paid in full. This includes any settlements agreed after 1 June 2021.  

The new terms include a maximum reduction of the settlement fee of £70,000 with another reduction for the scheme’s promoters' fees. All loan charge liabilities will have an automatic deduction of £5,000, with late payment interest and penalties not included in the final liability. 

Additionally, Inheritance Tax will not be collected on disguised remuneration schemes where trusts were used. 

Employers and employees
Where an employer was responsible for deducting PAYE from the loan payments, HMRC will attempt to settle the liability with them if they still exist.

HMRC will also write and make an offer directly to the employee which they can accept or refuse if the amount they owe is £0 or they wish to settle now to avoid waiting for HMRC to try to deal with the employer. If the employee does not accept the offer, they will still have the opportunity to settle under the new terms at a later date should HMRC be unable to retrieve PAYE tax from the employer. 
HMRC have already issued letters to those they believe are affected and a further letter will be issued with an offer to settle under the new terms. It will include the amount due for settlement, loan details and any other income used to calculate the settlement offer. 

Options
A caseworker will be allocated to each individual and who will discuss settlement options and payment plans before any offer is accepted. Once an offer is accepted, an acceptance form must be completed and signed, which will be legally binding. Any open enquiries will be closed thereafter. 

Even if there is nothing to pay, it is likely that HMRC will still require a formal signed acceptance of the offer and the form to be returned to them. For those who do not accept the offer, the full loan charge liability will be due.  

If an individual believes they are affected but does not yet have a caseworker, HMRC can be contacted at:  CAGetHelpOutOfTaxAvoidance@hmrc.gov.uk. 

Should you have concerns about the disguised remuneration loan charge or communicating with HMRC, please get in contact. We’ll be happy to help you.
 
Reminder for Self Assessment payments
For those sole traders and directors that have self-assessment tax commitments, the second payment on account is due by 31 July 2026.

It will be important to check what’s due and pay the bill online by the deadline. If there are problems with paying the full amount, there may be the option of using HMRC’s Time to Pay arrangement.

Payments on account are advance payments towards the next tax bill, typically 50% of the previous year's tax bill, excluding Capital Gains Tax (CGT) and student loan repayments. These are usually due in two instalments on 31 January and 31 July.

If your income has fallen, there may be scope for reducing your payments on account to avoid overpaying.

If your tax bill was under £1,000 or more than 80% was collected at source, HMRC may not need to take payments on account. 

If you need any help with payments on account, applying for a Time to Pay arrangement or applying to reduce payment on accounts correctly, please let us know as we’d be happy to help.
 
HMRC launch Advance Tax Certainty Service for major investment projects
A first-of-its-kind service for the UK has been launched to provide tax certainty to businesses planning to invest in major projects.
HMRC have launched the Advance Tax Certainty Service to provide clarity on how UK tax rules will apply to major investment projects before project commitment. Businesses planning to invest £1 billion or more in qualifying UK expenditure over a project's lifetime will now be eligible to apply for certainty on key tax issues.

The government hopes that this assurance will help companies to invest with confidence in the UK. The service covers the following
UK taxes and schemes:

• Corporation Tax.
• VAT.
• Stamp Duty Land Tax.
• Income Tax.
• PAYE regulations.
• Construction Industry Scheme.

24th July 2026 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend. 

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

How safe is your LLP tax position?
The Supreme Court has put companies with Limited Liability Partnership (LLP) structures on notice that their business arrangements must comply with strict tax legislation.

Under LLP rules, members are generally treated as self-employed for income tax and national insurance contribution purposes.

However, the salaried member rules, introduced in 2014, mean that members need to meet certain conditions to be able to benefit from this tax treatment.

In a notable recent court case, HMRC v BlueCrest Capital Management (UK) LLP, the Supreme Court upheld the Court of Appeal's decision that in assessing these conditions, only ‘influence’ deriving from legally enforceable rights and duties should be taken into account and not ‘de facto’ influence arising from other arrangements. This is a narrower interpretation of the rules than had previously been understood to be the case. 

BlueCrest Capital Management, a hedge fund, had been challenging HMRC’s attempts to tax dozens of its partners as employees but lost in the Supreme Court, and may owe some £200 million.

The decision could have repercussions for many professional services and investment firms that use the LLP business structure.

Now is the time for LLPs to review their member agreements and governance frameworks.

How does the salaried member rules work?
The case hinged on one of three conditions that must be met for the salaried member rules to apply, that of ‘influence’.

The three conditions that must all be met for the rules to apply are:

• Condition A: Broadly, at least 80% of the members' reward is ‘disguised salary’, i.e. fixed or variable, without regard to the overall profits of the LLP.
• Condition B: The mutual rights and duties of the members of the LLP do not give them 'significant influence' over the affairs of the LLP. 
• Condition C: The member's capital contribution is less than 25% of their disguised salary.

While HMRC failed in two earlier tax tribunal cases, the Court of Appeal (CoA) set aside those decisions, finding the tribunals had erred in law in accepting the wider construction of ‘influence’ set out in HMRC’s published guidance. In assessing Condition B, only 'influence' deriving from legally enforceable rights and duties of members should be taken into account and not 'de facto' influence arising from other arrangements.

The Supreme Court says
The Supreme Court agreed with the lower courts that the BlueCrest members met Condition A, pointing out that the purpose of the condition is to distinguish between what is typical remuneration for a partner and a typical remuneration for an employee. Most of the BlueCrest partners' remuneration was 'disguised salary'. It did not reflect a share in the profits and losses of the partnership as a whole; it was referenced to the profits generated by the partners themselves or by their team.

Condition B – significant influence
The Supreme Court agreed that the Court of Appeal's narrower interpretation of Condition B was correct, and 'significant influence' concerned legally enforceable rights and duties of members under the LLP agreement. The court found that informal influence derived from members’ strong performance, personal qualities or relationships is not relevant.
Significant influence over the affairs of the LLP requires influence, not control. ‘Significant’ means a degree of influence that has commercial substance in the conduct of the LLP’s affairs and must be exercised over the partnership's business as a whole, not parts of it.

This suggests that a person could only have such influence if they have a voice in the management of the LLP's affairs, such as participating in or influencing high-level or strategic decisions. Day-to-day decision-making at a purely operational level is less likely to qualify, especially if that is only in relation to part of the business.

Do you need to reassess your Partnership Agreements? If you are unsure of your LLP structure and tax position, contact us. We’d be happy to help.
 
Can you stay afloat? The impact of flooding on UK firms
The Bank of England has produced a working paper examining the impact of flooding on businesses, identifying it as the UK’s largest source of physical climate risk and costing the country an average of £2.2 billion annually.

Nearly one in ten UK business premises are located on floodplains, making them vulnerable to flood events that can damage assets, disrupt operations and strain local economies. As climate change increases the frequency and severity of extreme weather, understanding which firms are most exposed and how floods affect their performance is crucial for regional resilience and productivity.

Data and methodology
The Bank of England study used datasets linking business premises addresses in England and Wales to flood maps and firm-level financial records. The data spans the years 2011–2021 and covers 1.4 million firms and 1.7 million business premises.

The research identified which regions, sectors and types of firms are most exposed to flooding.

Concentrated exposure
Flood risk is not evenly distributed. Exposure is highest in specific regions (notably the North East and Cumbria) and in natural resource-intensive sectors such as Utilities and Agriculture. Larger business premises are significantly more likely to be located in medium to high-risk flood areas, often due to a search for cheaper land, which is frequently found in flood-prone zones.

Impact on company survival and performance
Flooding has severe consequences for UK firms:

• Small and Medium Enterprises (SMEs): Floods increase the likelihood of business termination by 32% for small firms and 43% for medium firms in the year of the event. Repeated flooding raises the risk even further for small firms.
• Surviving firms: Those that endure floods experience sharp declines in turnover, employment and total assets in the year of the event, with only partial recovery over the following three years. Large firms and those in natural resource sectors suffer the most significant losses.
• Liquidity and credit: For SMEs that survive, floods cause a modest but persistent deterioration in liquidity, mainly due to reduced inflows. There is limited use of credit for recovery, and collateralised borrowing drops about a year after the event, possibly due to tighter lending standards or reduced collateral values.

Aggregate economic impact
Direct flood effects have reduced annual UK corporate turnover by an average of 0.18% over the past 11 years, peaking at 0.9% in 2015. These figures likely underestimate the true economic cost, as they exclude second-round effects such as reduced consumption and investment.

Policy implications
Flood risk is heavily concentrated in regions and sectors critical to the UK economy. As climate change intensifies, the vulnerability of these areas could have broader implications for national productivity and resilience. Policymakers should prioritise targeted flood defences, support for SMEs, and strategies to mitigate the economic fallout from increasing flood events.

What can your company do?
As flooding poses a significant and growing threat to UK firms, especially SMEs and those in natural resource sectors, companies should assess the level of their risk.

1. Assess your specific risk: Identify your exact vulnerability by consulting local government tracking systems, such as checking postcode risk zones via the Environment Agency flood maps.
2. Register for early alerts: Companies and individuals can sign up for free for the government’s automated flood warning services.
3. Draft a business continuity plan: Outline actionable emergency procedures, including lists of critical suppliers, staff contact details and production and IT recovery workflows.
4. Examine your insurance coverage: Review your business and premises insurance for flood damage and prolonged business interruption.
5. Shift critical assets higher: If your business is in an area prone to flood risk, move electrical sockets, servers, vital company documents and high-value inventory at least one metre above floor level. Store important data in off-site cloud backups.
6. Install physical property defences: In some circumstances, it may be possible to deploy property-level protection by fitting purpose-built flood doors, air-brick covers, and removable, standalone perimeter barriers.
7. Implement site drainage improvements: Reduce water runoff around the property by utilising permeable paving for car parks, installing green roofs and regularly clearing surrounding storm drains.
8. Plan for post-flood recovery: Develop a detailed post-flood cleanup and repair checklist. This should include procedures for safely removing contaminated water and protocols for safe equipment power-up.

The Bank of England report can be found here: https://www.bankofengland.co.uk/working-paper/2026/staying-afloat-the-impact-of-flooding-on-uk-firms

To check Scottish flood maps, see: https://map.sepa.org.uk/floodmaps

To check Northern Ireland flood maps, see: https://www.nidirect.gov.uk/articles/check-risk-flooding-your-area

To check Welsh flood maps, see: https://naturalresources.wales/flooding/check-your-flood-risk-by-postcode/?lang=en

To check England's flood maps, see: https://flood-map-for-planning.service.gov.uk/
 
Early adopters of AI see rising headcounts
New research out of the United States contradicts predictions that the introduction of Artificial Intelligence (AI) will drive job losses.

The working paper found that companies that adopted generative AI grew their headcount by 10.2% over the two years following adoption. This is in stark contrast to comments from tech companies Oracle and Atlassian, which have cited AI investment when announcing layoffs. 

Companies making the largest AI investments saw entry-level headcounts growing 12% over the two years following adoption.

Yet the research has several stipulations; this increase in headcount only applied to companies defined as ‘high-intensity’ adopters.
Many of those companies that saw benefits were high-growth firms, usually larger, more engineering-intensive and more likely to be venture-backed.

The research defined ‘high-intensity’ companies as those in the top third of per-employee, per-month AI spend in the first three months. Usually, the spend was on multiple AI models, primarily the most advanced and productivity-enhancing systems, in areas like coding agents rather than simpler chat subscriptions.

Paradoxically, the spending in the top third of companies was fairly low, about $30 per month, per employee and then increasing. 

The study also found that increased employment did not happen immediately. There was generally a six to 12-month hiatus before increases, partly because it took time for AI best practice to filter across the organisation.

The working paper, ‘A New Look at AI’s Impact on Jobs,’ used company-level spending data from US tech start-ups Ramp and Revelio Labs. Ramp joined with workforce data collected by Revelio Labs for more than 21,000 U.S. firms.

The research paper can be found here: https://ramp.com/data/ai-jobs-impact/paper
 
UK hiring trends
The June 'UK Report on Jobs' shows subdued business confidence driving a preference for short-term staff. Temporary staff billings rose at the steepest rate in over three years, while permanent staff appointments continued to decline, although at a much slower pace than in May. 

Overall demand for staff weakened at a quicker rate, largely reflecting a steeper reduction in permanent job vacancies. At the same time, an increase in redundancies contributed to a further marked increase in candidate availability. Despite this, pay trends improved, with employers raising starting salaries and wages at a faster rate as they sought to attract and secure candidates with sought-after skills.  

The KPMG and REC, 'UK Report on Jobs' is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies.

The latest survey data showed that the number of people placed into permanent positions fell at a marginal pace - the softest in three months, while temp billings rose at the quickest rate since April 2023. These trends were often linked to wider economic uncertainty and cost considerations, which have driven a greater preference for short-term staff and projects.

UK recruitment consultancies signalled further increases in the rates of starting pay for both permanent and temporary workers at the end of the second quarter as efforts to attract top talent had placed upward pressure on pay offers.

Nursing/medical/care and engineering were the only two monitored sectors to see improvements in demand for permanent staff in June. Retail, meanwhile, posted the sharpest reduction in permanent vacancies.  

Temp vacancies rose sharply in the blue-collar sector and solidly in the engineering sector. Of the eight other monitored areas that posted a reduction in temp staff demand, the most dramatic falls were seen in the Retail, Nursing/Medical/Care and
Executive/Professional categories. 
 
Proposed offence for reckless, untrue tax statements
HMRC have proposed a new criminal offence for making reckless, untrue statements or declarations about what's known as 'direct taxes' - Income Tax, National Insurance and the like. For Customs and Excise and VAT ('indirect taxes'), it is already possible to prosecute individuals who make untrue statements or submit incorrect documents either knowingly or recklessly, without the need to prove dishonesty. The penalties for such offences can be severe, including substantial fines and imprisonment. The direct tax regime does not currently contain an equivalent offence.

It is proposed that the offence would carry a custodial sentence and/or a fine on indictment, to be decided by the courts. Consideration is being given to following the Customs and Excise rules, which include a maximum sentence of two years and unlimited fines. This differs from the provisions for VAT rules, which provide for a potential custodial sentence of up to 14 years.

HMRC are looking for views on the proposals, which include examples of what they consider to be reckless errors. These proposals include:

• Making a significant relief claim without reading the relevant guidance properly or seeking advice or clarification on the basis that it will 'probably be fine'.
• A self-employed taxpayer who prepares their own tax return knows they have multiple bank accounts and suspects they have received taxable income therein. They do not check the statements and estimate income for the main account only, omitting income from secondary accounts. They unintentionally file a materially inaccurate tax return.

The document does make the point that carelessness would not be caught in this net, and 'deliberate behaviour' would be covered by existing penalty legislation.

The consultation can be found at https://www.gov.uk/government/consultations/proposed-offence-for-reckless-untrue-statements-direct-taxes/introducing-a-criminal-offence-for-making-reckless-untrue-statements-or-declarations-in-direct-tax--3#summary
 
New proposals to tackle Electronic Sales Suppression
The government is consulting on potential measures that target Electronic Sales Suppression (ESS). Proposals include the introduction of new software standards for Point of Sale systems. Electronic Sales Suppression (ESS) involves businesses using software or devices to manipulate Electronic Point of Sale (EPOS) systems to hide transactions and evade tax.

While precise quantitative prevalence statistics are inherently difficult to capture for hidden fraud, ESS has been regarded by HMRC as a growing area of tax evasion.

HMRC have identified that certain individuals and businesses in Electronic Point of Sale (EPOS)/Mobile Point of Sale (MPOS) supply chains are developing or modifying POS systems to suppress sales to facilitate tax evasion. HMRC believe that ESS is more prevalent in small retail, takeaway and hospitality businesses.

The government is proposing to introduce software standards for the EPOS and MPOS sector, consisting of a set of uniform rules, protocols and compliance requirements to ensure that every system records sales and financial data accurately, securely and in a way that cannot be easily tampered with or manipulated.

The proposed measures include requiring an unalterable and complete transaction log that contains details of every individual transaction and adjustment, indelibly linked together in an encrypted chain using the Standard Audit File for Tax (SAF-T) format to store sales records. 

The government would also establish a register of EPOS/MPOS systems sold, transferred, or used in the UK. A certification system would show whether the software complies with the new standards. It would also make it compulsory for small retail, takeaway and hospitality sectors to use compliant EPOS/MPOS systems to record all sales.

17th July 2026 – Hillmans Weekly Update

17th July 2026 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend. 

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

Expansion of SME growth scheme
The Chancellor, Rachel Reeves, has announced an expansion of the British Business Bank’s (BBB) Growth Guarantee Scheme (GGS). This provides a 70% government guarantee on commercial loans to SMEs of up to £2 million, cutting credit risk.

The changes will enable the scheme to scale up with an additional £2 billion of Small to Medium-sized Enterprises (SME) lending per year by 2028/29. This will bring the total lending supported through the scheme to £3.35 billion per year, more than double the current £1.35 billion.

It will also increase the maximum term length of a loan from six to 10 years for loans of up to £1.1 million and increase the maximum size of businesses eligible for a loan under the scheme from £45 million in annual turnover to £54 million.

The British Business Bank estimates these changes will support an additional 12,000 businesses per year by 2028/29, a 150% increase on the 8,000 currently being supported, bringing the total to 20,000. Since its launch in 2022, the scheme has delivered over £3.7 billion of financing to UK SMEs, with £2.5 billion of this reaching businesses outside of London and the Southeast.

It is claimed that every £1 spent on the scheme is estimated to support around £10 of lending by banks.
 
Apply for Digital Twin Adoption Accelerator 2026
A programme that pairs Small and Medium-sized Enterprises (SMEs) with industry partners to build and test digital twin solutions for business problems is now open to applicants. Successful projects will also receive up to £100,000 in Innovate UK grant funding.

Participants will take part in a nine-month programme designed to accelerate the adoption of new technologies. It teams an SME industry adopter with a technology vendor in the areas of Automotive, Agri-tech, Maritime, Aerospace, Space, Defence, Clean Energy, Creative and Life Sciences.

It is organised by Digital Catapult, the UK innovation agency for advanced digital technology, developed in conjunction with Innovate UK. The lead applicant and co-applicant of the programme may be a representative from either the industry adopter or the technology supplier.

What the programme offers
Participants in the programme will get technical support from Digital Catapult and access to facilities and real-world testing environments. There will be one-to-one mentoring throughout the programme with opportunities to collaborate with industry partners. There will also be a final showcase event for industry, government and investors.

Who can apply
Applications must be from pre-formed partnerships between a UK-based technology SME developing digital twin capabilities (for example, in data services, cyber-physical systems or AI) and an industry organisation looking to adopt solutions.

Applicants must be a UK-registered company and have a demonstrable idea or solution to fit within the Digital Twin Technology Stack. 

They must be a partnership between a technology vendor and an industry adopter in automotive, agri-tech, maritime, aerospace (including space), defence, clean energy, creative and life sciences sectors and be available for the full programme duration over November and July and attend 75% of the workshops.

Applicants must also be within State Aid allowances. The deadline for applications is 6 September 2026.

More details, including links to FAQs, can be found on the Digital Catapult

website: https://dc.simplydo.co.uk/challenges/6a2c015ed41734038ed68628
 
Changes planned for modernising company taxation on capital distributions
HMRC have opened a consultation, ‘Modernising the taxation of distributions and repayments of capital from companies’. They are seeking views on proposals to modernise the tax framework dealing with distributions made by companies to shareholders who are individuals or trusts.

The consultation explains that there are seven areas of the distribution rules where HMRC consider that the legislation has not kept pace with commercial practice. It has remained largely unchanged since Corporation Tax was introduced in 1965. These are:

• Reduction of capital.
• Demergers.
• Income Tax treatment of distributions from non-UK resident companies.
• Interaction between debt, loans and the distributions legislation.
• Loans and other temporary extractions from non-UK resident companies.
• Purchase of own shares rules.
• Updated capital extraction anti-avoidance in respect of Transactions in Securities (TiS).

Financial or commercial extractions that do not fall within Income Tax (IT) often result in capital distributions, which are instead subject to Capital Gains Tax (CGT). This affects both the amount of the extraction that is taxed and the tax rate at which it is charged. The result is that economically similar payments to a shareholder can be taxed inconsistently. The proposed changes seek to address this.

Proposals
The consultation proposes that share buybacks and other returns of capital will reflect a ‘frozen’ amount of capital on the shares in any future holding companies at the amount subscribed on the original investment. This is to prevent a shareholder who does not meet the conditions for a purchase of their own shares from extracting capital by inserting a holding company and later implementing a capital reduction to withdraw funds at CGT rates.
It also proposes removing the capital reduction demerger route of restructuring a company or group, with a corresponding relaxation of the statutory demerger rules to allow the rules to apply to investment businesses and non-UK resident companies.

The distributing company could be dissolved post-distribution, provided that it contains no assets.

A statutory demerger route could be available to help the onward sale or change of control of the demerged business, or a cessation of trade. This would only apply if these events took place at least five years after the demerger transaction.

There could be new conditions for a company's purchase of its own shares, including that the selling shareholder must have held at least a 5% shareholding for two years before the transaction and have worked for the company throughout that period. This would be extended to five years, where the selling shareholder retains family connections with remaining shareholders and directors, with capital treatment being withdrawn if they return as a shareholder or director within five years.

There would be no retention of a small holding for sentimental reasons.

The company must also take reasonable steps to ensure that the consideration paid for the shareholding does not exceed the market value.
There are also proposals to bring more types of payment on foreign shares within the IT regime, including stock dividends, the transfer of assets or liabilities between the member and the company and certain issues of bonus shares.

It is proposed that there be a closer alignment of the loan to participators and distribution rules to provide greater clarity, including clearly setting out which rules take priority.

Proposals also include a charge under the loan to participators rules for loans from non-UK companies, which would be close companies if they were UK resident. This would likely fall on the UK resident individual.
It is suggested that an amendment or replacement of the TiS rules be made with an updated anti-avoidance regime. The new regime would tackle scenarios where a taxpayer is party to arrangements that enable them to extract value from a company and avoid paying tax.
Responses to the consultation can be emailed to distributionsreform@hmrc.gov.uk. The consultation ends on 14 September 2026. 
Should you be unsure of your tax position and would like advice on any capital distributions you are thinking about from your company, please get in touch. We’re here to help.
 
NAO says employer confidence is critical to construction skills package's success
The government has promised a package of reforms for the construction industry, but a new report from the National Audit Office has warned that its success could be at risk.

The government’s ambitions to build 1.5 million homes, upgrade home energy standards and deliver a £725 billion long-term infrastructure pipeline will depend on a significant expansion of the construction workforce.

There must be a stronger employer involvement in training the next generation of workers for it to work. The NAO warns that employers continue to be affected by challenging economic conditions that could put the success of the skills package and wider building commitments at risk.

The watchdog examined the government’s progress in delivering its £625 million construction skills package, announced in March 2025, which aims to support up to 60,000 more construction workers by 2029. The package combines tried and tested initiatives alongside newer ideas, including Skills Bootcamps, new foundation apprenticeships and construction technical excellence colleges.

The NAO points out that there are flaws. The package is not designed to meet all future workforce needs, with government estimates showing that between 201,000 and 755,000 extra workers could be required by 2030, before accounting for those who leave the sector for other jobs.

This comes as statistics show the construction sector had the highest rate of hard-to-fill vacancies due to skills shortages - 45% compared with a 27% national average.

Businesses make recruitment and training decisions depending on the expected pipeline of work, costs and market competition. Tough economic conditions are affecting employers’ confidence to invest and take on new employees and apprentices. In 2024, employer investment in training per construction trainee was at its lowest level in 10 years.

The National Audit Report could be found here: https://www.nao.org.uk/reports/increasing-construction-skills/

Free, hands-on cyber consultancy available for SMEs
Cyber Advisors are offering free 30-minute consultations to help small businesses get started with cybersecurity.

As smaller businesses become more frequently targeted, the National Cyber Security Centre (NCSC) is reiterating the need for them to be more robust in their approach to digital security. It’s aware that investing in cyber security can seem more like a costly distraction than a priority for smaller companies as they concentrate on keeping customers happy, managing cash flow and day-to-day business.

The NCSC points to the statistics. In 2025, 65% of medium and 46% of small organisations reported a cyber breach or attack. The problem is that Small to Medium-sized Enterprises (SMEs) see cybersecurity as too complicated, too expensive and don’t address the real-world risks that small businesses face.

Many Cyber Advisors are now offering a free 30-minute consultation for SMEs that are looking to get started with Cyber Essentials, the government's baseline for cybersecurity.

This no-strings-attached introductory consultation provides businesses with an opportunity to ask questions and get an explanation of how the five steps that make up Cyber Essentials can be applied to your organisation using practical, achievable implementations.

The National Cyber Security Centre (NCSC) introduced Cyber Advisors in 2023, a network of cybersecurity consultants who’ve been assured by the NCSC to work specifically with smaller organisations. 

More information on the free consultation can be found here: https://iasme.co.uk/cyber-advisor/free-advice/
 
HMRC is watching you
Companies and individuals that are careless or even illegal in their tax affairs need to watch out. New figures show that HMRC has paid out £1.4 million in rewards to whistleblowers of tax illegality.

A record number of reports were made to HMRC in the 2025-26 tax year, hitting 170,992.

The last Budget saw the government strengthen a reward scheme for tip-offs. Payouts only go to tips that lead HMRC to recover more than £1.5 million in tax. Informants now receive between 15% and 30% of the value of the extra tax collected.

Recent HMRC figures on the tax gap - the difference between the tax owed and the amount actually collected – showed that small businesses made up the largest share of uncollected tax, two-thirds of the £59.2 billion shortfall.

HMRC have also just released a two-minute YouTube video as a ‘general explainer’ on the scheme. It is aimed at employees, family members, friends or acquaintances of high-net-worth individuals or businesses engaged in suspected serious tax evasion or avoidance. It sets out what the scheme is, what rewards eligible informants could receive and how any information provided may help HMRC to tackle the tax gap and fund vital public services.
The video can be found here: https://www.youtube.com/watch?v=wsmzQR-Uhqc

Should you be unsure of your tax position and need advice, please get in contact. We’re here to help.
 
Rules of Origin under the UK-India Free Trade Agreement
The new UK-India Free Trade Agreement (FTA) promises to create new opportunities for businesses to strengthen trade links with India, according to the government.

To benefit from the agreement's preferential tariff rates, it is important to understand the rules of origin, which determine whether goods qualify for preferential tariffs. Businesses must also register with HMRC if they are planning to complete origin declarations for exports under the FTA.

Businesses should be aware that it's not all good news. While the FTA is between the world's fifth and sixth largest economies and removes or reduces tariffs on 99% of Indian exports to the UK and 90% of UK imports into India, the details are complex.

Trade experts believe that the overall impact of the deal could be incremental rather than transformational.

Data reported by the BBC show that India exported $13.4 billion worth of goods to the UK in 2025-2026, but more than half of these exports already came into the UK duty-free under its most favoured nation regime. On the import side, India imported $11.7 billion from the UK, but over 45% consisted of silver.

What are the Rules of Origin?
Rules of origin determine whether a product is considered to originate in the UK or India for trade purposes. Only goods that meet the agreement's rules of origin are eligible for the preferential tariff rates. Businesses need to review their supply chains, sourcing arrangements and origin documentation to ensure they are ready to benefit when trading under the agreement and benefit from reduced or zero tariffs.

If your business exports goods to India or is exploring new opportunities in the market, the government recommends checking whether the products meet the rules of origin requirements and registering with HMRC to complete origin declarations.

If you do not register, your origin declarations will be rejected, and your importer will not be able to claim the preferential tariff rates available under the agreement.

To find out more, go to: https://www.gov.uk/guidance/register-to-complete-origin-declarations-under-the-uk-india-free-trade-agreement
 
New UK investment fund
Investors representing over $3 trillion of assets under management from across North America, the Gulf, Asia and Australia will participate in InvestConnect, a new UK investment fund. Aimed at connecting the UK’s nations and regions to trillions of pounds of global capital, the new platform was developed in consultation with professional investors, government partners and the UK's nations and regions.

Touted as “... a trusted, AI-enabled platform”, somehow the technology will help “... package opportunities, standardise information and connect global capital with credible UK investment opportunities”.

Launched at the Chancellor’s annual Mansion House dinner, the new digital in vestor-led platform is being developed by InvestConnect Global Limited in partnership with the City of London Corporation. Cornwall Council, the Scottish Government and Liverpool City Region Combined Authority have become the platform's first Founding Opportunity Partners.

The argument is that while there is a global appetite to invest in the UK, opportunities have been seen as fragmented and inconsistently presented, making them difficult for investors to access and compare.

The new investment platform is expected to launch in Autumn 2026 and will initially focus on large-scale infrastructure and real asset opportunities, typically representing transactions of £100 million or more. 

🌟Client Spotlight🌟: Need Professional 2D Drawings for Your Business?
Orust Projects supports businesses that need clear, accurate and compliance-ready 2D drawings without the overhead of employing in-house staff or the cost of appointing an architect. They turn concept ideas, compliance audits and site challenges into practical drawings that teams can actually use, providing a far clearer visual representation than relying solely on signs or written text.

They have produced drawings for a wide range of commercial properties, helping clients with facilities management, planning improvements, preparing for inspections and documenting their sites accurately.

Orust Projects is currently looking to take on new clients and offers a wide range of 2D drawing services, including:

• Compliance drawings for audits, with layered information presented clearly and logically.
• Fire zone charts, working alongside BAFE-accredited contractors.
• Factory and site layouts for operations, planning and workflow improvements.
• Flow diagrams for processes, hygiene routes and production sequencing.
• Incident control drawings.
• Building and site services layouts.
• Wall type drawings, including composite panel identification for fire and insurance reviews.
• Proposed layouts and expansion concepts to help visualise future plans.
• Professional drawings, sketches and illustrations for reports.
• General “ideas on paper” to explore options before committing to a project.
• Printing of A1 drawings.

If you have an upcoming project or would like to find out more, please visit www.orustprojectsltd.co.uk or email chris@orustprojectsltd.co.uk.

10th July 2026 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend. 

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

MANDATORY PAYROLLING OF BENEFITS IN KIND: PHASED INTRODUCTION CONFIRMED
HMRC has confirmed that mandatory payrolling of benefits in kind (BiKs) will now be introduced in two phases, starting from 6 April 2027. This change will move the reporting of most benefits away from annual P11Ds and into real-time payroll, resulting in Income Tax and Class 1A National Insurance being reported through the payroll each pay period (e.g. weekly or monthly).

From April 2027, the first phase will apply to:

• Company cars and car fuel
• Vans and van fuel
• Employer-provided medical benefits.

From April 2028, most other benefits will be brought into the regime, although beneficial loans and employer-provided living accommodation will remain voluntary.

Under the new system, employers will report benefits through payroll each pay period using RTI, rather than reporting them after the year end. While this change will reduce the need for year-end forms, it increases the importance of getting payroll right throughout the year. Errors will be picked up more quickly, and corrections may need to be made in real-time.

There is still time to prepare. HMRC is continuing to work with software providers and will release further technical guidance during 2026, with final details expected ahead of the Autumn Budget.

Employers should start planning now. Review the benefits you currently provide and identify which will fall into the first phase.  This is a significant shift in how benefits are taxed and reported. Preparing early will reduce disruption and make the transition much smoother.
Please get in touch if you would like help reviewing your benefits or preparing your payroll systems for these changes.
 
VAT AND PUBLIC ELECTRIC VEHICLE CHARGING POINTS
HMRC have published 'Revenue and Customs Brief 4 (2026): VAT liability of supplies of electricity from public electric vehicle charge points'. This explains HMRC’s position following the First Tier Tribunal (FTT) decision in Charge My Street Ltd v HMRC, where the FTT decided in favour of Charge My Street Limited, finding that electric vehicle charging supplied at public charging stations qualified for VAT reduced rating.HMRC have applied for permission to appeal the FTT’s decision, and their view remains that charging electric vehicles at public charge points is standard-rated for VAT.
 
Supplies of fuel and power to domestic premises are subject to the reduced rate of VAT at 5%.

HMRC’s long-standing policy is that electric vehicle charge points located in public areas do not qualify as domestic premises and the standard rate of VAT applies to the supply of electricity at these locations.
 
The FTT ruling does not set a legal precedent, however, and HMRC’s policy means that there is VAT-rate disparity between electricity used to charge vehicles at home and electricity used to charge vehicles at public charging points.
 
ADVISORY FUEL RATES FOR COMPANY CARS
 
The table below sets out the HMRC advisory fuel rates from 1 June 2026. These are the suggested reimbursement rates for employees' private mileage using their company car.
 
Where the employer does not pay for any fuel for the company car, these are the amounts that can be reimbursed in respect of business journeys without the amount being taxable on the employee.
 
Advisory Fuel Rates
 
* Petrol
    * 1400cc or less: 14p per mile (12p)
    * 1401cc to 2000cc: 17p per mile (14p)
    * Over 2000cc: 26p per mile (22p)
* Diesel
    * 1600cc or less: 15p per mile (12p)
    * 1601cc to 2000cc: 17p per mile (13p)
    * Over 2000cc: 23p per mile (18p)
* LPG
    * 1400cc or less: 11p per mile (10p)
    * 1401cc to 2000cc: 13p per mile (12p)
    * Over 2000cc: 21p per mile (19p)
 
Previous rates are shown in brackets.
 
You can also continue to use the previous rates for up to 1 month from the date the new rates apply.
 
Note that for hybrid cars, you must use the petrol or diesel rate.
 
For fully electric vehicles the rate is 7p (7p) per mile where the vehicle is charged at home. The rate applicable to vehicles charged using public facilities is 15p (15p) per mile.
 
Employees using their own cars
For employees using their own cars for business purposes, the Advisory Mileage Allowance Payment (AMAP) tax-free reimbursement rate was increased on 6 April 2026 to 55p per mile (plus 5p per passenger) for the first 10,000 business miles, reducing to 25p per mile thereafter. Note that for NIC purposes the employer can continue to reimburse at the 55p rate regardless of mileage as the 10,000 mile threshold does not apply.
 
Input VAT
Within the 55p/25p AMAP payments, the amounts in the above table represent the fuel element. The employer is able to reclaim 20/120 of the fuel amount as input VAT provided the claim is supported by a VAT invoice from the filling station. For a 1500cc diesel-engine car, 2.5 pence per mile can be reclaimed as input VAT (15p x 1/6).