Tax Services Archives

Effective Tax Strategies for Managing Rental Property Purchases and Sales

Posted on 2 July 20263 July 2026 by Farazia Gillani

Buying or selling a rental property can be one of the most financially rewarding moves a landlord makes, but it can also trigger a surprising number of tax obligations if you’re not properly prepared. From Stamp Duty Land Tax at the point of purchase to Capital Gains Tax when you sell, understanding how to manage rental property purchases and sales efficiently can save you thousands of pounds over the lifetime of an investment.

This guide walks through the key tax considerations UK landlords need to know, along with practical strategies to keep your tax bill as low as legally possible, whether you’re growing a portfolio or planning an exit.

Understanding Tax on Rental Income

Before getting into buying and selling, it’s worth understanding how property income tax works day to day, since this shapes many of the decisions you’ll make around acquisitions and disposals.

Rental income is added to your other earnings and taxed at your marginal Income Tax rate – 20%, 40% or 45% depending on your total income for the year. You can deduct allowable expenses before working out your taxable profit, including:

Letting agent and management fees
Landlord insurance
General maintenance and repairs (not improvements)
Council tax and utility bills paid on the tenant’s behalf
Accountancy fees

Since the phased withdrawal of full mortgage interest relief, individual landlords now receive a 20% tax credit on mortgage interest rather than deducting it fully from profits. This has pushed many landlords to consider whether buying through a limited company structure makes more sense, particularly for higher-rate taxpayers, as company profits are taxed at Corporation Tax rates rather than personal Income Tax rates.

Tax Considerations When Buying a Rental Property

Every purchase decision has tax consequences that extend well beyond the purchase price.

Stamp Duty Land Tax (SDLT)

Landlords buying additional residential property in England and Northern Ireland pay a surcharge on top of standard SDLT rates. This applies whether you’re buying your first buy-to-let or your tenth, and it’s calculated on the full purchase price using a banded system. Getting your SDLT calculation right at completion avoids costly amendments later, and in some cases, claiming back overpaid SDLT (for example, on mixed-use or multiple dwellings purchases) can be a legitimate way to reduce upfront costs.

Choosing the Right Ownership Structure

Deciding whether to buy as an individual, jointly with a spouse or partner, or through a limited company is one of the most important tax decisions you’ll make. Each route affects:

How profits are taxed annually
Mortgage interest relief treatment
Future Inheritance Tax planning
The tax due when you eventually sell

A limited company structure can be attractive for landlords planning to reinvest profits and build a larger portfolio, while personal ownership may suit those wanting simpler access to rental income.

Best Tax Strategies for Rental Property Purchases and Sales

Getting the timing and structure right across purchases and sales of rental property is where genuine tax savings are made. Some proven approaches include:

1. Spreading purchases and sales across tax years

If you’re disposing of more than one property, selling them in different tax years allows you to use more than one capital gains tax annual exempt amount, rather than wasting it in a single year.

2. Transferring ownership shares between spouses or partners

Transfers between spouses or civil partners are exempt from capital gains tax, so shifting ownership before a sale can help utilise both individuals’ tax bands and allowances.

3. Offsetting gains with losses

Capital losses from other investments or previous property disposals can be carried forward and used to reduce a taxable gain in the year of sale.

4. Timing improvements before a sale

Capital expenditure on genuine improvements (not repairs) can be added to your cost base, reducing the taxable gain when you sell.

5. Considering incorporation for long-term portfolios

Some landlords with substantial portfolios incorporate their holdings into a limited company, though this needs careful planning around Capital Gains Tax and SDLT on the transfer itself.

Tax on Property Sales: Capital Gains tax Tax Explained

When you sell a rental property, property sales tax typically forms capital gains tax (CGT) on any increase in value since you bought it.

Key points to know:

UK residential property sales by landlords must be reported to HMRC, and any CGT owed paid, within 60 days of completion.
The gain is calculated as the sale price minus the original purchase price, allowable buying and selling costs (such as solicitor and estate agent fees), and the cost of qualifying improvements.
Basic-rate taxpayers and higher/additional-rate taxpayers pay CGT at different rates on residential property gains, so your overall income level in the year of sale matters.
Everyone has an annual CGT exempt amount, which has been significantly reduced in recent years, making early planning more important than ever.

Read: Capital Gains Tax for landlords reshapes the buy-to-let sell-off

Strategies to Reduce Tax When Selling

A second area where tax efficiency matters is, again, tax on property sales, particularly around how and when you structure a disposal.

Use your annual exemption wisely – don’t let it go unused if you’re planning multiple disposals.
Deduct every allowable cost – legal fees, agent fees, and even costs of establishing the property’s value at purchase can all reduce the taxable gain.
Consider part-disposals – selling a share of a jointly owned property over more than one tax year can spread the gain.
Keep meticulous records – HMRC may ask for evidence of improvement costs, so retain invoices and receipts from day one of ownership.
Seek professional advice before exchanging contracts – once a sale is agreed, your tax planning options narrow considerably.

Common Mistakes Landlords Make

Forgetting the 60-day CGT reporting deadline after completion
Confusing repairs (deductible against income) with improvements (deductible against capital gains)
Not accounting for the SDLT surcharge when budgeting for a purchase
Failing to plan ownership structure before exchange, when changes are harder and costlier to make
Overlooking how rental income tax bands interact with CGT bands in the year of sale

Final Thoughts

Managing the tax side of rental property well comes down to planning ahead rather than reacting after the event. Whether it’s choosing the right ownership structure before you buy, keeping thorough records throughout your ownership, or timing a sale to make the most of allowances, small decisions made early can have a significant impact on your overall tax position. Given how frequently property tax rules change in the UK, it’s worth speaking to a qualified accountant or tax adviser before any major purchase or sale to ensure your strategy reflects current legislation. Contact Apex Accountants today for expert guidance on rental property purchases and sales and property tax compliance. Our team of tax relief for landlords offers tailored solutions to manage your rental property purchases and sales effectively. Let us help you navigate the complexities and secure your financial future.

Frequently Asked Questions

Do I pay tax on rental income if I make a loss overall?

No, if your allowable expenses exceed your rental income, you have no taxable profit for that property in that year. However, you must still report the figures on your self-assessment tax return, and losses can often be carried forward to offset future profits.

How soon after selling a rental property do I need to pay capital gains tax?

UK residents must report and pay any CGT owed on residential property within 60 days of completion, using HMRC’s online CGT reporting service.

Can I avoid Capital Gains Tax by reinvesting the proceeds into another rental property?

Unlike some business assets, there’s no general rollover relief for residential rental properties, so reinvesting proceeds does not automatically avoid CGT. Specific reliefs may apply in limited circumstances, so professional advice is recommended.

Is it better to own rental property personally or through a limited company?

It depends on your income tax band, long-term plans, and how you intend to use rental profits. Limited companies can offer tax advantages for larger portfolios but come with additional administrative responsibilities and different rules around extracting profits.

What expenses can reduce tax on rental income?

Allowable expenses include letting agent fees, insurance, repairs, ground rent, service charges, and a portion of mortgage interest (via the 20% tax credit). Capital improvements aren’t deductible against income but can reduce a future capital gains tax bill instead.

Does buying a second rental property always mean paying the SDLT surcharge?

In most cases, yes, additional residential properties attract the SDLT surcharge in England and Northern Ireland, regardless of whether it’s your second or your tenth. There are some exceptions, so it’s worth checking your specific circumstances with a conveyancer or tax adviser.

Are Schools Closing Because of the Private School VAT Change?

Posted on 4 June 20264 June 2026 by Farazia Gillani

Since the private school VAT change, effective 1 January 2025, private school tuition and boarding in the UK have been subject to 20% VAT, and from 1 April 2025 most charitable schools in England lost business rates relief.

This has shifted the question from “will fees rise?” to “can even larger schools cope?” Pressure is evident across the independent school sector. Pupil numbers in England fell between January 2025 and January 2026, and several schools were removed from the register in 2024. At the same time, new schools continued to open in 2025 and 2026, showing that the sector is both being squeezed and reshaped simultaneously.

How Schools Are Affected by the Private School VAT Change

Change	When It Applied	Why It Matters
VAT on private school education and boarding	1 January 2025	Core tuition and boarding fees are now standard-rated
Prepayments caught	Payments from 29 July 2024 for terms starting on or after 1 Jan 2025	Paying early did not always avoid VAT
Loss of charitable business rates relief (England)	1 April 2025	Many schools lost the 80% mandatory discount unless an exception applied

The business rates change is significant because charitable relief had previously reduced bills by 80%. Schools focused on pupils with EHCPs generally keep this relief.

A key point is that 20% VAT does not automatically mean fees rise by 20%. Schools can reclaim input VAT, leaving an average net VAT cost of about 15% of fee income. Average fee rises of around 10%, though some schools absorb more costs and others pass on more to parents.

Read: Everything About HMRC v Colchester Institute VAT Dispute

Why Larger Schools Are Now Affected

The pressure isn’t just about one tax. In England, there are 2,474 private schools, of which 1,127 are charities. Around 1,024 of these schools lost charitable rates relief.

Average extra business-rates cost: £308 per pupil in 2025/26
For schools with over 1,000 pupils, per-pupil increase: £288
Total cash impact for large schools: £374,000 per school

Even though smaller schools face higher per-pupil increases, large schools still face significant total costs, especially with staffing, estates, and borrowing commitments.

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Most schools will not immediately close. They may first:

Use reserves
Cut non-essential spending
Raise fees

Financial pressure can build over time before a school reaches a breaking point.

Are Larger Private Schools Actually Closing?

Yes, closures are happening, but context matters.

58 independent school closures in England in 2024
85 closures in 2023
63 closures in 2022

This includes voluntary closures and regulatory removals. VAT alone cannot be blamed. The impact of VAT is difficult to predict in terms of how many additional closures will result.

Since 2000, England averages 74 closures and 83 new openings per year, showing a natural turnover.

Larger schools are under more financial pressure, pupil numbers are down, and some bigger schools are no longer shielded from challenges previously felt mostly by smaller schools.

What Schools and Parents Should Check

Practical steps matter more than headlines.

Check fee packaging: Bundled tuition may have one VAT treatment, while extras like meals or transport may be separate.
Understand exemptions: Nursery classes made up almost entirely of children under school age remain exempt. Care-based before- or after-school clubs can also stay VAT-exempt.
SEND placements: VAT applies to the fee, but local authorities can reclaim it when funding an EHCP placement.
Treat VAT recovery technically: Partial exemption and input VAT calculations are required for most schools.
Use official tools: Services like “Get Information about Schools” let parents compare school finances and performance.
Check registration fees: Application and registration fees are treated like normal tuition for VAT purposes.

Read: Getting Your Business Ready for the Summer’s Temporary VAT Cut

How We Help Private Schools Deal With VAT

At Apex Accountants, we support independent schools with the practical side of VAT changes:

VAT registration reviews and timing checks
Partial exemption and input VAT recovery calculations
Fee structure reviews for tuition, boarding, meals, clubs, and bursaries
Cash-flow and budget modelling for VAT and business rates changes
Support on restructuring, mergers, and orderly closure planning

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Conclusion

The biggest mistake is to reduce this story to a simple slogan. VAT and the loss of business rates relief have definitely increased pressure; pupil numbers in England’s independent sector have fallen for two consecutive years, and closures continue, but this does not isolate VAT as the sole cause and does not yet prove a clear wave of private-school closures in the UK.

A more accurate headline would be this: larger private schools are no longer protected from the same financial pressures that have already hit smaller schools, but the official evidence still points to a sector in costly transition, not a one-line collapse story.

FAQs on Private-School Closures in UK

When did VAT start on private school fees?

From 1 January 2025, with certain prepayments made from 29 July 2024 also caught if they related to terms starting on or after 1 January 2025.

Does VAT on fees mean schools had to raise prices by the full 20%?

No. Official estimates point to an average fee rise of around 10%, not a flat 20%, because schools can reclaim input VAT on relevant costs.

Is the business rates change a UK-wide policy?

No. VAT on fees applies across the UK, but the removal of charitable business rates relief applies in England.

Are larger schools always hit harder than smaller ones?

Not necessarily on a per-pupil basis: in the matched cohort, schools with more than 1,000 pupils show a lower per-pupil rates increase than very small schools, but their cash increase per school is still large.

Are nursery classes in private schools still exempt from VAT?

Yes, where they are wholly, or almost wholly, made up of children below compulsory school age.

What about after-school clubs and holiday clubs?

Educational extracurricular activities are taxable, but childcare-based before- or after-school clubs and holiday clubs that consist of care are exempt.

Can local authorities reclaim VAT on private school placements?

Yes, where the placement is funded by the local authority and the school is named in the pupil’s EHC plan, the local authority can reclaim the VAT through existing processes.

Do bursaries remove the VAT charge?

Not usually. Where a separate bursary funds part of a specific child’s fee, VAT still applies to the full fee; only a school funding its own bursary to itself is outside scope.

Are registration or application fees also caught?

Yes. Application and registration fees that must be paid for a pupil to attend are treated the same as normal school fees for VAT.

Do official figures prove that VAT is already causing a wave of large private school closures?

No. Official closure data mixes voluntary closures with regulatory removals, and the policy impact note says it is difficult to assess how many extra closures the measure will cause.

Getting Your Business Ready for the Summer’s Temporary VAT Cut

Posted on 4 June 20264 June 2026 by Farazia Gillani

A temporary VAT cut of 5% will apply from 25 June 2026 to 1 September 2026 on certain children’s meals, children’s and family tickets, and admission to qualifying family attractions. Preparing your systems, menus, ticket types, and records before 25 June will make summer trading smoother and autumn VAT returns easier to manage.

At Apex Accountants, we treat the task as a sales-mapping job first and a VAT-return job second. Knowing exactly which items qualify makes a busy summer manageable.

What You Need To Know About The Summer VAT Cut

The 5% VAT cut replaces the standard 20% rate for qualifying sales during the relief window and applies across the UK.

The 5% VAT relief covers three main areas:

Children’s meals sold only as children’s meals and eaten on the premises
Children’s tickets for cinemas, theatres, concerts, exhibitions, and shows
Admission to attractions suitable for families, including adult admissions when part of a qualifying family package

A theme park ticket for adults can fall within the temporary 5% rate, but an adult-only cinema ticket does not; for cinemas and theatres, the relief focuses on children’s tickets and family packages.

Examples of possible reductions if the full saving is passed on include:

£20 off family theme park tickets
£11 off family aquarium tickets
£2 off children’s meals

If your business is not VAT-registered, this is not a rate change you can apply in the usual way.

Read: Everything About VAT Return Deadlines in the UK

Temporary VAT Cut – Which Sales Qualify and Which Do Not

Sale Type	Temporary Rate	Notes
Children’s meal on a dedicated menu, on site	5%	Must be held out for sale only as a meal for children
Fixed-price children’s meal including drink/dessert	5%	Whole package qualifies if sold as one meal
Smaller adult portion sold cheaply	Normal rate	Not eligible
Takeaway children’s meal	Normal rate	Takeaways do not qualify
Children’s cinema/theatre ticket	5%	Must be marketed, priced, and presented as a children’s ticket
Adult cinema/theatre ticket sold on its own	Normal rate	Adult-only admissions stay standard-rated
Family cinema/theatre ticket including at least one child	5%	Whole family package can qualify
Generic group ticket not sold as family ticket	Normal rate	Does not qualify
Zoo, soft play, museum, or theme park admission	5%	Applies to the right of admission only
Food, merchandise, or upgrades sold separately	Normal rate	Only admission charge is reduced
Sports event entry, facility use, or participation	Not covered	Excluded
Season/repeat-entry passes beyond relief period	Usually not covered	Only fully qualifying passes within period count

The key is not who buys the item, but how it is sold. Items must be marketed, priced, and presented as intended for children.

A proper children’s menu is stronger than simply offering “small plates” from the adult menu
A clear “family ticket” is safer than a vague multi-buy group ticket

Non-alcoholic drinks included in a children’s meal can qualify. Meals including alcohol or separately priced extras from the standard menu remain standard-rated.

Admission is only reduced where it would otherwise be standard-rated. Exempt admissions are not affected.

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How to Prepare Pricing, Tills, and Records

Start with your stock codes and ticket codes rather than marketing. Your point-of-sale system must separate 5% sales from standard-rate sales.

Staff should operate the system correctly, even during busy periods. Keeping daily gross takings by rate, adjustments, and working papers will help manage VAT efficiently.

Practical Steps

List every potentially affected item — children’s meals, child tickets, family tickets, adult attraction tickets, bundles, and passes
Rename anything unclear to match eligibility
Program separate codes for 5% and standard-rate sales
Test mixed baskets such as adult ticket + child ticket + merchandise, or children’s meal + extra standard-menu item
Check website wording and online booking flows to ensure descriptions match tax treatment
Decide your pricing approach now to avoid mid-summer changes
Diary the switch-back date so rates return to normal after 1 September
Ensure receipts and VAT invoices show tax points, item descriptions, and rates

VAT-inclusive pricing fractions: 1/6 for 20% and 1/21 for 5%, which affects the tax element inside a gross price.

Also Read: VAT on Car Hire in the UK – What Businesses Need to Know

Summer VAT Cut on Booking and Bundle Considerations

Tickets bought for dates after 1 September remain standard-rated
Prepaid tickets for dates within the relief window can be adjusted; credit notes may be needed
Bundles (admission + meal + merchandise) must be split; only the qualifying portion can get 5%
Season passes covering dates outside the relief period usually do not qualify

How We Help Small Businesses Take Advantage of The 5% VAT Relief

Apex Accountants helps small businesses implement clean processes for VAT changes. We assist with:

Reviewing menus, ticket types, and family packages for eligibility
Mapping 5% and standard-rate items in tills, EPOS, and booking systems
Checking advance bookings, prepayments, and credit-note adjustments
Reviewing invoices, receipts, and bookkeeping records for mixed-rate sales
Preparing supporting schedules for VAT returns

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Conclusion

The summer relief is useful, but it is narrow. The main focus is on how items are sold, whether the sale is really a qualifying meal or admission, and when the right of admission actually falls, so small businesses should prepare around those three tests first.

The best plan is this: sort your qualifying items, fix your till and online checkout, test mixed transactions, and set a reminder for the switch back after 1 September. Done early, this is manageable; left late, it becomes a front-desk problem in the middle of your busiest weeks.

FAQs on 5% VAT Cut

Does the temporary 5% VAT rate start on 25 June 2026?

Yes. The official relief window runs from 25 June 2026 to 1 September 2026 inclusive.

Is the relief available across the whole UK?

Yes. The official fact sheet states that it applies in England, Wales, Scotland and Northern Ireland.

What counts as a children’s meal?

It must be held out for sale only as a meal for children and supplied by a restaurant, café or similar establishment for consumption on the premises. The key test is how it is marketed, presented and priced, not simply who eats it.

Does takeaway food qualify for a temporary VAT cut?

No. The detailed brief is clear that takeaway meals do not qualify for this temporary reduced rate.

If I sell a smaller adult portion, can I treat it as a children’s meal?

Not automatically. Smaller portions, lower-calorie options and discounted adult meals are specifically excluded unless they are genuinely sold as children’s meals.

Do adult cinema or theatre tickets qualify for 5% VAT?

Not when sold on their own. For cinemas, theatres, concerts, exhibitions and shows, the relief applies to children’s tickets, and adult admissions remain standard-rated unless they are part of a qualifying family ticket.

Do family tickets qualify even if they include adults?

Yes, where the ticket is sold as a family admission that includes one or more children. In that case, the whole family package can qualify.

Which attractions are covered?

The official list includes attractions such as theme parks, fairs, circuses, adventure parks, museums, zoos, aquariums, wildlife parks, farm visitor attractions, soft play and observation attractions. The reduced rate applies only to the right of admission, not to separately sold food, merchandise or upgrades.

Are sports events or sports facilities included?

No. The relief does not apply to admission to sports events, use of sports facilities, or participation in recreational sport.

What if customers booked early or bought a pass?

For admissions, what matters is the date of admission within the relief window. Advance sales can use the lower rate under the existing change-of-rate rules, but tickets for admission on or after 2 September 2026 stay standard-rated, and many season or repeat-entry passes running beyond the relief period will not qualify.

Can You Reclaim VAT on Transaction Fees in the UK

Posted on 4 June 20264 June 2026 by Farazia Gillani

Most businesses ask this as a yes-or-no question, but UK VAT does not work that neatly. VAT on transaction fees can be recoverable, partly recoverable, or blocked altogether, depending on who received the service, what the transaction was for, and whether the cost links to taxable business activity rather than a passive investment or an exempt share sale.

How VAT on Deal Fees is Applied in Various Situations

Deal situation	Usual VAT outcome
A trading company issues new shares to raise funds for its taxable business	Often recoverable under the normal rules, because a new share issue is not a VAT supply in itself. If the issue supports economic activity, the related VAT can be input tax, subject to partial exemption if relevant.
A passive holding company buys shares to earn dividends or sell later for gain	Usually not recoverable. Pure shareholding for dividends or capital growth is treated as investment activity, not taxable business activity.
A holding company buys a subsidiary and supplies genuine management services for real consideration	Often recoverable, but only if the holding company is the recipient of the adviser services, carries on economic activity, and makes taxable supplies. Partial exemption can still reduce the claim.
An acquisition is a direct extension of an existing taxable trade	Often recoverable. Such as buying a competitor, a key supplier, a key customer, or a property-owning subsidiary from which the buyer intends to trade.
A business sells existing shares	Usually restricted or blocked, because the sale of existing shares is normally an exempt supply. If the share sale is only incidental to the wider business, there are special partial exemption rules rather than an automatic full block.
The target company incurs vendor due diligence costs	Recovery can be possible for the target if the target is the actual recipient of the services and they were received for its own business.
A deal aborts after fees have been incurred	Recovery can still be possible if there is genuine, objective evidence of an intention to make taxable supplies. Failed projects do not automatically destroy recovery.

What Decides Whether the VAT Comes Back

Three questions usually decide the result.

Was the fee incurred in taxable business activity?
Is there a direct and immediate link between that cost and taxable supplies?
Is the business claiming the VAT actually the recipient of the service?

That is why labels like “legal fee”, “corporate finance fee” or “due diligence fee” do not settle the point on their own. The same type of cost can be recoverable in one structure and blocked in another, simply because the underlying activity is different.

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Importance of the Invoice Trail

A second point is often missed: the invoice trail matters. Whether the claimant contracted for the service, was invoiced, paid for it, and made use of it, while general VAT record rules also require valid VAT invoices and records that support the claim.

Partial Recovery for Mixed Activity

If a business has both taxable and exempt activity, it may only recover the taxable portion unless the de minimis rules help. The current de minimis limit is £625 per month on average and no more than half of the total input tax, with an in-period check and a year-end review.

Practical Takeaways

Decide early on the recipient entity: Decide before the first engagement letter is signed which entity should receive the service, because attribution is based on actual or intended use when the purchase is received.
Give the holding company a real taxable role: If a holding company is meant to recover VAT, give it a real taxable role. Genuine management services for more than nominal consideration are a strong starting point.
Expect partial exemption with loans: If the structure also includes interest-bearing loans, expect partial exemption to enter the picture.
Don’t ignore the year-end de minimis review: A claim that looks acceptable during the year can be clawed back later if the annual test fails.

Read: Court of Appeal ruling puts VAT on education grants under scrutiny

How common deal structures are treated

A holding company does not get recovery just because it owns subsidiaries. If it only holds shares, receives dividends and hopes for a later sale, that is investment activity, and the VAT on acquisition costs is normally not recoverable.

The position improves where the holding company buys the subsidiary to make taxable management services for consideration. The acquisition costs of such a holding company are part of its general overheads, so the VAT can be deductible only if the holding company receives the adviser services and makes taxable supplies.

A practical observation here is that vague plans do not help much. If the structure only contemplates charging the subsidiary “at some point later” or only if profits allow, that is weak; official case summaries and guidance both stress the need for genuine, priced services and real consideration.

Acquisitions that strengthen an existing trade

Not every acquisition needs a separate management charge to support recovery. Share acquisition can sometimes be a direct, continuous and necessary extension of an existing taxable trade, such as buying a competitor, a key supplier, a key customer, or a property-owning subsidiary from which the buyer plans to trade.

That is a useful point in real deals. If a trading business buys a company to reinforce its own trading operation, the fee can sometimes sit with the buyer’s existing taxable business rather than a standalone investment case.

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A sale of existing shares is normally an exempt supply. That is why VAT on legal and advisory fees linked directly to a share disposal is usually a problem, and a wider commercial reason for the sale does not automatically fix it.

Immediate Transaction Matters

That last point matters. Selling shares to raise money for wider taxable trading does not by itself turn the disposal fees into recoverable VAT, because the immediate transaction still matters.

Restructuring Context

There is, though, an important nuance. Some disposals in a restructuring context may fall within economic activity where the disposal is a direct, permanent and necessary extension of the taxable business, but this is fact-sensitive and should never be assumed.

Standard Partial Exemption Method

If the business uses the standard partial exemption method and a share sale is merely incidental to the main business, the value of that share sale should be excluded from the standard method calculation. The VAT on the related costs is then dealt with using normal attribution rules rather than by simply including the deal in the denominator and accepting the result.

Special Method and Residual Costs

If the business uses a special method, certain residual costs on incidental share sales must be apportioned by use. Costs such as:

Accountants
Financial advisers
Lawyers
Advertising agencies
Marketing consultants
Listing and registration services
Document preparation services

One other point saves confusion in practice: a share sale is not a TOGC. Where a limited company changes hands by way of a share transfer, the assets remain owned by the company, so there is no asset transfer to which TOGC rules apply.

Fundraising and VAT

A new share issue is treated differently from a sale of existing shares. The issue of new shares is not a supply for VAT purposes, and related VAT can be recoverable to the extent the issuer’s business generates taxable supplies.

Target-Side Fees

On the seller side, the target company’s own fees can sometimes be overlooked. Vendor due diligence and similar costs incurred by the target may be deductible where:

The target is the recipient of the services
The services were received for the target’s business

Aborted Deals

Aborted deals are not automatically lost causes either. If there was genuine objective evidence that the business intended to make taxable supplies, preparatory VAT can still be recoverable even where the project fails before those supplies are made.

A Must Read: Everything About VAT Return Deadlines in the UK

Check the Adviser’s VAT Status

Also check whether there is actually any VAT on the adviser bill in the first place.

Pure advice, such as advice on capital raising or defending takeovers, is taxable
A genuine intermediary service in a securities transaction can itself be exempt if it meets the exemption conditions

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How to improve the chances of recovery before the deal closes

The biggest practical point is timing. VAT attribution is based on how the service is used, or intended to be used, when the service is received, so sloppy structuring at the start of the deal is hard to repair later.

In real transactions, the weak spot is often not the technical rule. It is the evidence pack: the engagement letter is in one company’s name, the invoice is sent to another, and the payment comes from a third. That makes it much harder to show who really bought and used the service.

Document or step	Why it matters
Engagement letter in the right entity’s name	Helps show which business contracted for the service and was the recipient.
VAT invoice in that same entity’s name	A recoverable claim needs a valid VAT invoice and records that support it.
Payment trail	Official guidance on recipient status looks at who paid for the service as well as who contracted and who used it.
Board minutes, deal papers and business plan	These can provide objective evidence of intended taxable supplies, especially where the deal never completes or charges begin later.
Management services agreement with a real charging model	Helps show that services are genuine, for consideration, and more than nominal.
Actual management invoices after completion	Strong evidence that the structure reflected real taxable activity rather than a vague future intention.
Partial exemption workings	Essential where deal fees support both taxable and exempt activity, including share sales or exempt lending.
Six-year retention of VAT records	VAT records generally need to be kept for at least six years.

A final but important point is VAT grouping. Joining a VAT group does not automatically create recovery, and it does not turn passive investment activity into taxable business activity.

Where claims usually break down

The most common failure point is assuming that “commercial purpose” is enough. It is not enough to say the deal helped the group overall; what matters is the VAT link between the cost and taxable outputs.

Other problem areas come up again and again:

Passive holding activity dressed up as a business activity. Receiving dividends and holding shares is not enough on its own.
Management services that are never properly priced or invoiced. A loose intention to charge later is weak evidence.
Assuming a later VAT group will rescue old acquisition VAT. It does not do that automatically.
Invoices and contracts sitting with the wrong entity. The claimant still needs to show it received, used and paid for the services.
Forgetting the share-sale rules in partial exemption. Incidental share sales have their own treatment under both standard and special methods.
Ignoring the possibility that the adviser’s own service was exempt. Pure advice is usually taxable, but some intermediary work in securities transactions can be exempt instead.
Missing the annual de minimis re-test. Recovery allowed during the year can still be reversed at year end.

A smaller but still important trap is “stewardship” or group overhead costs. Some group audit, legal, regulatory, brand defence and bid defence costs may really belong to the group as a whole, even if the holding company receives the invoice for convenience.

How Apex Accountants Can Help Reclaim VAT on Transaction Fees

At Apex Accountants, we keep this area practical. Our focus is not just on whether VAT looks reclaimable in principle but on whether the contract, invoice trail, management model and partial exemption position actually support the claim.

We help clients with:

reviewing legal, due diligence, corporate finance and other transaction fees line by line
checking which entity should contract for, receive and pay each adviser
building evidence for management charges, intended taxable supplies and aborted deals
calculating partial exemption, de minimis and pre-registration claims
reviewing VAT grouping points before and after completion
preparing clear support packs for internal sign-off and external review

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Conclusion

VAT recovery on deal fees is possible, but it is rarely automatic. The strongest claims usually involve one of two positions: the fee sits inside an existing taxable business, or the acquiring company is carrying on real taxable activity and can prove it with proper documents and real charges.

Claims usually fail for the opposite reasons. The structure is really an investment; the fee links to an exempt share sale, the wrong entity received the service, or the paperwork does not match the story the business wants to tell.

FAQs on VAT on Deal Fees

Can a holding company reclaim VAT on acquisition fees?

Yes, but not just because it is a holding company. Recovery normally depends on the company being the recipient of the adviser services, carrying on economic activity, and making taxable supplies such as genuine management services for consideration.

What if the holding company only receives dividends?

That usually points the wrong way. Simply holding shares for dividends or a later capital gain as investment activity, not taxable business activity.

Do management charges need to be real and priced?

Yes. The services need to be genuine, provided for consideration that is more than nominal, and not left as a vague future idea that may or may not be billed later.

Does the invoice need to be in the claimant’s name?

In practice, yes, that is the safest position. Whether the claimant contracted for the service, was invoiced, paid for it and used it, and normal VAT rules also require valid VAT invoices and records to support the claim.

Does joining a VAT group automatically fix the issue?

No. Joining a VAT group does not automatically create recovery and does not turn passive investment activity into taxable business activity.

Usually not in full, because the sale of existing shares is normally an exempt supply. If the share sale is only incidental to the wider business, special partial exemption rules may soften the effect, but that is not the same as an automatic full reclaim.

Can a partly exempt business still recover all the VAT?

Sometimes. If the exempt input tax is no more than £625 per month on average and no more than half of the total input tax, the de minimis rules can allow full recovery, but the position must still be reviewed at year-end.

Can the target company recover VAT on vendor due diligence?

It can if the target is the real recipient of the services and the services were received for the purposes of the target’s own business.

What if the deal aborts?

A failed deal does not automatically kill the claim. Where there was genuine, objective evidence of an intention to make taxable supplies, preparatory VAT can still be recoverable even if the business never reaches the point of making those supplies.

Can pre-registration VAT on deal fees be reclaimed?

Potentially, yes. For services, normally a six-month lookback before registration, while goods can go back four years, but only where the costs were bought for the taxable business that is now registered.

HMRC v M R Currell Ltd [2026] – Genuine Loan via EBT Not Taxable as Salary

Posted on 26 May 202626 May 2026 by Farazia Gillani

In HMRC v M R Currell Ltd [2026] EWCA Civ 445, the Court of Appeal held that an £800,000 payment routed through an Employee Benefit Trust (EBT) was a genuine loan, not taxable employment income, because it carried a real obligation to repay. In April 2026, the court confirmed that Mr Currell received a loan, not extra pay, so he did not gain taxable earnings from the transaction. This clarifies that simply using a trust to channel funds does not automatically turn money into a salary – the substance of the transaction matters.

Disguised remuneration (DR) rules have long targeted schemes that shift pay into loans or benefits via third parties. In 2011 the government enacted Part 7A of ITEPA 2003 to catch such schemes involving intermediaries. Later, the controversial Loan Charge (2019) aimed to tax old loan arrangements. However, under general law, a payment is only taxed as earnings if it arises “from the employment”. As HMRC’s own manuals note, a profit or payment “arose from something else” than employment if it did not truly come as a reward for services. In Currell’s case, the money was a loan – a debt Mr Currell had to pay back – not an additional salary.

Background: Disguised Remuneration & EBT Loans

Disguised Remuneration Rules (Part 7A ITEPA 2003):

Introduced in 2011 to target third-party schemes avoiding income tax. They tax “relevant steps” (like making a loan through a trust) as if they were paid.

Loan Charge (2019):

Further rules will tax old disguised remuneration loans. Importantly, changes after a 2025 review limit the charge to loans made on/after 9 Dec 2010.

General Tax Law:

Under s.62 ITEPA (formerly s.19 ICTA), only payments “from the employment” are earnings. Courts ask, ‘Did the benefit come in return for work or from some other source?’

Example: HMRC’s own guidance says that a gift (e.g., a wedding present) from an employer is not taxed because it’s not “from the employment” but from a personal occasion. By analogy, a genuine loan made to an employee – especially through a trust – may not be “from” the job and thus not automatically considered earnings.

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Facts of the Currell Case

Date	Event
Nov 2010	Company Contribution: M R Currell Ltd (a small painting business) pays £800,000 into a newly created EBT.
Nov 2010 (same day)	Loan to Director: The EBT trustees immediately lend £800,000 to Mr M. Currell (a director) at 0% interest for 5 years, secured on the company shares he buys.
2010 (shortly after)	Share Purchase: Mr Currell uses the loan to buy shares (A shares) from his wife. Mrs Currell then loans the money back to the Company.
2011 onwards	Tax Challenge: HMRC investigates and assesses the £800k as if it were Mr Currell’s earnings, seeking income tax and NICs.

The key points of the arrangement were that the loan was fully documented, secured by Mr Currell’s shareholding, and he clearly intended (and was able) to repay it. The First-tier Tribunal (FTT) initially treated the payment to the trust as taxable pay, essentially calling it a reward for Mr Currell’s services. On appeal, the Upper Tribunal (UT) found the opposite: the contribution to the EBT was made solely to enable the loan, and since the loan had a real repayment obligation, the payment was not considered earnings.

FTT (201X):

Viewed the £800k contribution (the “Payment”) as remuneration for Mr Currell’s work, relying on previous cases like RFC 2012 Plc v Advocate General for Scotland (“Rangers”) that held payments to a trust could be earnings when they were agreed upon as part of salary.

UT (2024):

Ruled that the FTT made an error. It held that the loan itself was genuine and repayable, so the contribution was not Mr Currell’s pay. The UT “remade” the decision in HMRC’s favour (legally speaking) and concluded that the £800k was not taxable as earnings because of the loan’s bona fide nature.

Court of Appeal Decision

The Court of Appeal (CA) upheld the Upper Tribunal. It firmly agreed that the loan was genuine and properly characterised. Key principles from the judgement include the following:

Characterisation Over Purpose:

The court stressed that the character of a payment must be determined before applying tax law. Money spent on employee benefits does not automatically become “earnings” simply because of the purpose. In Currell’s case, the money went into the trust and then became a loan. The CA emphasised that one must look at what the transaction actually was, not just at why it happened.

Genuine Loan ≠ Earnings:

A loan with a real promise to repay is not earnings. The court noted that an employee receiving a genuine loan with repayment terms is not getting a benefit worth money in the sense of pay. Instead, any fiscal “benefit” (like zero interest) is taxed under the special loan/beneficial loan charge rules, not as salary. As the CA aptly put it, “In truth, what Mr Currell got was the loan. This was not a case of diverting remuneration to the EBT.”

Read: Everything You Need to Know About Director’s Loan Write-Off and the Douglas Boulton Case

Distinguishing Rangers:

In Rangers (the 2017 Supreme Court case), it was already common ground that the monies were remuneration; the only question was whether a trust could receive them. Here, by contrast, the very nature of the payment was in dispute. The CA highlighted a “fundamental distinction”: unlike Rangers, in Currell it was not agreed the money was due as salary in the first place. Because the loan was secured and had to be repaid, the Court found it was incorrect to equate it with Mr Currell’s pay.

Limited Circumstances for Taxing Loans:

The Court noted that only in limited cases – for example, a sham loan or arrangement – could a loan be treated as earnings. On Currell’s facts, there was no sham. The suggestion that a borrower’s control over a lender (e.g., via share ownership) could turn the loan into pay was dismissed; no legal authority supported that idea.

Caution Against Overreach:

In its concluding remarks, the CA warned that HMRC’s broad approach could have unintended consequences. It gave examples: if every loan through a third party were taxed as pay, ordinary loans (like directors withdrawing loan account balances or loan season-ticket schemes via payroll) might wrongly be caught. This “close inspection of the trees” could miss the bigger picture. The court thus signalled that normal commercial loans should not be swept up as disguised salaries.

In summary, the Court of Appeal agreed that the Upper Tribunal’s conclusion “was the only one that could have been reached” and expressly adopted its view that the £800k was not part of Mr Currell’s earnings.

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Practical Implications for Businesses and Advisers

The Currell ruling offers important guidance for businesses, directors and accountants dealing with trust-based benefits.

Genuine loans must be clear:

Any loan from a company (even via a trust) should be well-documented, with a realistic repayment schedule and security. The court noted Mr Currell’s loan was properly secured on his shares and he had independent means to repay them. Companies should “confirm loans from EBTs/trusts are properly documented, secured, and carry a realistic repayment obligation”.

Characterise the transaction:

Focus on the substance over the formal route. If an employee receives money that they must repay, it is more logically a loan than extra salary. As HMRC’s rules (and this case) emphasise, one must decide if the benefit came “from the employment”. In practice, explain in writing that the payment is a loan for a commercial purpose (e.g., a share purchase), not a payment for work.

Trustees’ independence:

Ensure that trustees genuinely make trust decisions, rather than merely rubber-stamping them as the company or director would. The CA pointed to the importance of true trustee control. If trustees simply do what the employer directs, HMRC may argue the trust is a sham conduit.

Use Currell in disputes:

If HMRC challenges a loan from EBT as disguised remuneration, this case is strong authority (for pre-2011 schemes) to insist the loan is taxed as such, not as salary. Advisers should request that HMRC confirm the character of the payment (loan vs remuneration) and cite Currell’s reasoning on s.62 analysis.

Beware modern DR rules:

Currell was a pre-2011 loan (Part 7A came into force in Oct 2011) and a pre-loan charge. After 2011, the law expanded to treat many third-party loans as income immediately. The Court acknowledged that Parliament later closed this gap. So do not assume that post-2011 or Loan Charge-era loans can avoid tax; new anti-avoidance rules will often apply. In short, Currell vindicates older arrangements, but “for post-2011 structures, Currell does not provide a free pass.”

Review legacy schemes:

This decision is an opportunity to re-check any old EBT or loan arrangements. Where a loan was truly made and intended to be repaid (even if it was tax-advantaged), Currell suggests it was not income at the time. Conversely, any sham or purely circular schemes should be unwound or settled.

Seek expert advice:

The line between a legitimate loan and a disguised salary can be fine. Specialist tax advice (or even HMRC clearance) is prudent for complex arrangements. The Currell judgement itself recommends getting professional opinions and structuring “defensively” under Part 7A rules.

How We Help

As chartered accountants and tax specialists, Apex Accountants can help you navigate EBT schemes and employee tax:

Tax planning & compliance: We advise on structuring loans, share purchases or benefits so they meet legal requirements and minimise tax risk.
Disguised remuneration & EBT advice: Our team stays up to date on cases like Currell. We can review any trust-based arrangements and ensure they pass the correct legal tests.
HMRC dispute support: If you face an enquiry or need to appeal an HMRC decision, we can help develop your case (for example, using Currell to argue your loan was not taxable earnings).
Loan Charge guidance: We assist clients with historic loan schemes to check if and how the Loan Charge or new rules apply.
Tailored accounting services: From company accounts to payroll taxes and beyond, we provide practical support to UK businesses of all sizes.

With our expertise, you’ll get clear, practical advice grounded in the latest laws and court decisions. We aim to protect your interests and help you stay compliant without paying more tax than necessary.

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Conclusion

The HMRC v M R Currell Ltd [2026] case is a reminder to look at the true nature of payments. A bona fide loan – even one routed through an EBT – should be treated as a loan for tax purposes, not as hidden earnings. This means thorough documentation and honest substance are vital. While later legislation (Part 7A, Loan Charge) has tightened the rules, Currell restores balance for older arrangements. It shows that legitimate trust arrangements with real loans won’t automatically trigger income tax just because a trust is involved. For specific situations, always seek tailored advice.

Contact Apex Accountants for expert support on employment taxes, EBT schemes and any HMRC issues. We’ll help you understand how cases like HMRC v Currell Ltd may affect your affairs and ensure you comply with tax law.

FAQs About HMRC v M R Currell Ltd [2026]

What was the main point of the Currell judgement?

The Court of Appeal confirmed that when a company’s contribution to a trust is used to fund a loan to an employee, this loan – if genuine and repayable – is not automatically taxable as earnings. In Currell’s case, the £800k he received was treated as a loan (with a real obligation to repay), not as salary.

How is this different from the Rangers’ case?

Rangers (2017) held that if an employee contracts to have part of their salary paid to a trust, it is taxable when it enters the trust. In Currell, by contrast, the court found that the parties disputed whether any salary was ever deferred; here, the arrangement was purely a loan. The Court emphasized that, unlike Rangers, it did not agree that Mr Currell had earned this money as pay.

Does this mean EBT loans are tax-free?

Not always. Currell specifically involved a loan made in 2010, before new anti-avoidance rules (Part 7A ITEPA, Loan Charge) took effect. The Court’s logic focused on that time. Today, many loans via trusts fall under strict DR legislation. However, Currell shows that if a loan was genuinely commercial and was entered into before 2011, it may not have been considered “earnings,” even if it was routed through a trust.

What should employers do now?

Companies should ensure any employee loans (direct or through trusts) are bona fide: documented, secured, and repaid. If using an EBT or similar vehicle, trustees must act independently. In case of HMRC enquiries, use the Currell case to argue that the loan should be taxed under the loan rules, not as salary, by highlighting the legal distinction. Always keep clear records of the purpose (e.g., a share purchase) to show the commercial rationale.

Will this case affect employees and tax appeals?

Yes. Individuals or employers who took loans from trusts (especially before 2011) can reference this ruling. It may overturn earlier assumptions that “trust = tax avoidance”. For appeals, lawyers and accountants will likely cite Currell when challenging HMRC assessments on genuine loans.

Everything About VAT Return Deadlines in the UK

Posted on 16 May 202617 May 2026 by Farazia Gillani

Submitting a VAT return on time is one of the most important VAT responsibilities for UK businesses. A missed deadline can lead to penalty points, late payment charges and interest.

Most VAT-registered businesses submit a VAT return every 3 months. This period is known as the VAT accounting period. The usual deadline is one calendar month and 7 days after the end of the VAT period. This date is also usually the deadline for paying VAT owed.

For example, if your VAT period ends on 31 March, your VAT return and payment are usually due by 7 May.

What Is a VAT Return?

A VAT Return shows:

how much VAT your business charged on sales
how much VAT your business paid on purchases
whether you owe VAT
whether you can reclaim VAT

Even if there is no VAT to pay or reclaim, a VAT-registered business still needs to submit a return. This is often called a nil VAT Return.

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Standard VAT Return Deadline

For most businesses, the VAT deadline follows a simple rule.

VAT period ends	VAT Return usually due	VAT payment usually due
31 March	7 May	7 May
30 June	7 August	7 August
30 September	7 November	7 November
31 December	7 February	7 February

The exact date can vary depending on your VAT accounting period. Your VAT online account shows your return dates and when payment must clear.

Simple Rule to Remember

Situation	Deadline
Standard quarterly VAT Return	1 month and 7 days after the period ends
Monthly VAT Return	Usually 1 month and 7 days after the month ends
Nil VAT Return	Same deadline as normal
VAT payment	Usually the same date as the return deadline

This means the filing deadline and payment deadline are normally the same.

VAT Payment Deadline

VAT payments must reach the account by the payment deadline. Therefore, businesses should not delay making payments until the last minute.

Different payment methods can take different amounts of time. Direct debit can help with timing because the payment is normally collected 3 working days after the VAT Return is submitted, but the return must still be filed by the deadline.

What If the Deadline Falls on a Weekend or Bank Holiday?

Filing deadline: The same date applies even if it falls on a weekend or bank holiday. You still must file by that date (e.g., if 7 May is a Sunday, the deadline is still 7 May).
Payment timing: If you pay by bank transfer, it must be in HMRC’s account by the close of business on the due date. If the payment date is a weekend or bank holiday, aim to pay on the last working day before it to avoid late-payment penalties.

You can file online on the official date, but if the due date is a non-working day, plan for the payment to clear by the last working day before that date.

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Annual Accounting Scheme Deadlines

Some small businesses use the VAT Annual Accounting Scheme. The scheme works differently from standard quarterly VAT returns.

Under this scheme, a business usually submits one VAT Return each year. If the accounting period is between 4 and 12 months, the return is due 2 months after the end of the accounting period. When the accounting period lasts fewer than 4 months, the return must be submitted 1 month after the period concludes.

Annual Accounting Scheme	Deadline
Accounting period of 4 to 12 months	Return due 2 months after period end
Accounting period under 4 months	Return due 1 month after period end
Monthly advance payments	Due at the end of months 4 to 12
Quarterly advance payments	Due at the end of months 4, 7 and 10
Final balancing payment	Due with the annual return

This scheme can help with budgeting, but the payment plan must be followed carefully.

Payments on Account for Large Businesses

Large businesses with high VAT liabilities may need to make VAT payments on account.

These businesses usually make advance payments during the VAT quarter, instead of paying the full amount only at the return deadline. The payment dates are the last working day of the second and third months of the VAT quarter. The 7-day electronic payment extension does not apply to these payments.

Payment type	When it is due
First payment on account	Last working day of month 2
Second payment on account	Last working day of month 3
Balancing payment	With the VAT Return
VAT Return	Based on the business payment schedule

This mainly affects larger businesses, but it is important to know if your VAT position grows over time.

What Happens If a VAT Return Is Late?

For VAT periods starting on or after 1 January 2023, late submission penalties use a points-based system. A business gets a penalty point each time it submits a VAT Return late. This includes nil returns and repayment returns. Once the penalty point threshold is reached, a £200 penalty can apply.

Filing frequency	Penalty point threshold
Annual	2 points
Quarterly	4 points
Monthly	5 points

After the threshold is reached, further late returns can lead to more £200 penalties.

What Happens If VAT Is Paid Late?

Late payment penalties can apply when VAT is not paid in full by the due date.

The current late payment rules are:

How late the VAT payment is	Penalty position
Up to 15 days late	No first or second late payment penalty
16 to 30 days late	First penalty based on VAT owed at day 15
31 days or more late	Further penalty and daily penalty may apply

Late payment interest can also run from the first day the payment is overdue until it is paid in full.

Tips to Avoid Missing a VAT Deadline

Check your VAT online account regularly.
Keep digital VAT records up to date.
Reconcile sales and purchase records before the period ends.
Set reminders at least 2 weeks before the deadline.
Allow enough time for payment to clear.
Do not ignore nil returns.
Review your VAT scheme if cash flow is tight.

How We Help Businesses File VAT Returns

Apex Accountants offers comprehensive support to keep your VAT affairs on track:

VAT return preparation: We prepare and file your VAT returns accurately and on time, so you never miss a deadline.
Deadline reminders: Our team monitors your VAT periods and sends alerts well before filing and payment dates.
Scheme advice: We can advise if annual accounting, flat rate, or other schemes suit your business and handle the filings accordingly.
Payment planning: We help you manage cash flow for VAT payments – including setting up direct debit and scheduling instalments, if needed.
Penalty help: If you face any HMRC penalties or queries, we’ll liaise with HMRC on your behalf and guide you through appeals.

Always file and pay your VAT on time to avoid fines. Keep the one-month+7-day rule in mind, use your online VAT account for dates, and consider professional help to manage your VAT obligations smoothly.

With Apex Accountants handling your VAT returns, you can focus on running your business while we manage the deadlines. We prepare accurate filings, check the figures carefully and help you meet the correct VAT payment deadline without last-minute stress.

We also support you with payment planning, digital records and timely reminders, so your VAT returns stay compliant and organised throughout the year.

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FAQs About VAT Return Deadlines

When exactly is my VAT return due?

It’s due 1 calendar month + 7 days after your VAT period ends. For most quarterly filers, that means if your period ended 31 March, the return is due by 7 May.

What if I owe no VAT?

You still must submit a nil return by the deadline. Failing to file a nil return on time still risks penalties.

Does Direct Debit extend the deadline?

No – it doesn’t change the filing due date. It only means HMRC collects funds 3 days later, reducing the chance of a late payment.

What if the due date is a weekend or holiday?

Make sure any payment clears on the last working day before the due date. (Filing the return should still be by the official date.)

How can I find my exact deadline?

Your online VAT account will list all upcoming return and payment deadlines. It’s wise to check there or set up reminders.

2026-27 VAT Fuel Scale Charges: Key Changes and What They Mean for Your Business

Posted on 5 May 20265 May 2026 by Farazia Gillani

From 1 May 2026, the UK VAT road fuel scale charges change to cover the period to 30 April 2027. These flat-rate charges apply when a business reclaims VAT on vehicle fuel but a car is used for private travel. In practice, instead of keeping detailed mileage logs, a fixed scale charge is added to the VAT return to account for the private fuel usage. The new charges (VAT-inclusive) are set by CO₂ emission band and by the length of the VAT accounting period (1, 3 or 12 months). Businesses must start using the updated scales in the first VAT period beginning on or after 1 May 2026.

What is a fuel scale charge?

A fuel scale charge is effectively a fixed amount of output VAT owed per car, depending on CO₂ emissions. For example, a car emitting 140 g/km CO₂ has a charge of £98 for a one-month period (or £1,182 for a 12-month period). These values include VAT, so the VAT element is already built into the published figures. Typical 2026/27 charges include:

CO₂ (g/km)	12-month charge (£)	3-month charge (£)	1-month charge (£)
120 or less	657.00	163.00	54.00
140	1,182.00	294.00	98.00
180	1,708.00	426.00	142.00
225 or more	2,297.00	574.00	190.00

Table: Example VAT fuel scale charges for 2026–27 (VAT inclusive).

Read: How Company Car Tax Bands Work and What You Will Pay

Key Changes for 2026–27 VAT Road Fuel Scale Charges

The 2026–27 rates are slightly lower than in 2025–26, following official adjustments. For instance, the top band (225+ g/km) charge fell from £2,314 to £2,297 per year, and the lowest band (≤120 g/km) fell from £661 to £657 per year. All businesses using the fuel scale must switch to these new figures for any VAT period starting 1 May 2026 or later. The published guidance makes clear that “the VAT road fuel scale charges are amended with effect from 1 May 2026” and must be used from that date onwards.

How to Calculate Your Fuel Scale Charge

Identify the car’s CO₂ emission band

Check the official CO₂ figure from the vehicle logbook, the DVLA database, or the manufacturer’s certificate. If the exact figure isn’t a multiple of 5 g, round it down to the nearest 5 (e.g. 143 g becomes 140 g). If the vehicle has more than one CO₂ figure (e.g. separate figures for petrol and hybrid modes), use the lowest or the combined rating as advised.

Special case – older cars:

Cars registered before 1997 may lack a CO₂ figure. In that case, use engine size to pick a band: up to 1,400 cc = 140 g/km band; 1,401–1,999 cc = 175 g/km band; 2,000 cc or more = 225 g/km band.

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Choose period and charge:

Determine your VAT accounting period (1, 3 or 12 months). Then look up the corresponding charge for your CO₂ band. For example, a car at 125 g/km is in the 125 band, giving a charge of £246 for 3 months or £81 for 1 month (see table above).

Pro-rate if needed:

If the vehicle was used privately for only part of the VAT period, pro‑rate the charge. Calculate the percentage of the period during which the car was used, and apply that to the scale charge. For example, if the accounting period is 12 months but the car was used only 6 months, a 50% adjustment applies. This approach is confirmed in the guidance: “record [the percentage] of the accounting period. Apply this percentage to each road fuel scale charge to get a total figure”.

Include on the VAT return

The fuel scale charge (which already contains VAT) is added to the VAT return as output tax owing on fuel. In other words, businesses reclaim input VAT on fuel normally, then add the flat scale charge to Box 1 of the VAT return for the period.

Also Read: VAT on Car Hire in the UK – What Businesses Need to Know

Applying the Scale Charge

One driver per car:

The scale charge is applied per person-car combination. Each employee or director using a company car privately incurs one charge for that vehicle. If more than one person uses the same car, each must be treated separately.

Multiple cars:

If an individual has multiple cars, apply the same steps to each vehicle. If two cars happen to fall in the same CO₂ band for the same person, HMRC notes they “should be treated as if they were one car” when calculating percentages. In practice, this rarely affects the outcome compared to treating them separately.

Record-keeping:

Keep records of how each charge was calculated (CO₂ figure sources, period length, and any percentage used). This protects you in case of a VAT inspection.

Electric/hybrid vehicles:

A fully electric car does not use VATable fuel, so the fuel scale does not apply. For plug-in hybrids or conventional hybrids, use the petrol/diesel CO₂ band as above.

How We Can Help You Deal with VAT on Automobiles

VAT Return Support: We help businesses apply the correct fuel scale charges on each VAT return. Our team will ensure the right CO₂ band and period are used, so the fuel VAT is calculated correctly.
Company Car and Expenses Advice: Our experts can advise on company car tax and benefit rules. We explain the fuel scale method and alternatives (like mileage logs) so you choose the best option.
Record-Keeping and Compliance: We can set up simple spreadsheets or software entries to track usage percentages and keep evidence of CO₂ figures. This ensures your accounting is robust for HMRC review.
Proactive Updates: Tax rules change frequently. We monitor official updates (such as the new 2026/27 rates) and notify our clients promptly. You can rely on Apex Accountants to keep you compliant without surprises.

Our dedicated advisers stay current with all HMRC rules and can guide you through the fuel scale process. If you provide cars or fuel to staff, our firm can take the stress out of calculating and reporting these VAT charges correctly.

For more details or personalised support, get in touch with the Apex Accountants team. We can help you implement the new VAT fuel scale charges smoothly and ensure your VAT returns are accurate.

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FAQs About Fuel Scale Charges in UK

Who must use fuel scale charges?

Any business that reclaims VAT on fuel for a car and allows private use must account for fuel. The fuel scale is a simple, blanket method, so many companies choose it instead of tracking actual miles. If no VAT was reclaimed on fuel, the scale charge is not needed.

What if fuel is paid by personal funds?

The scale charge only applies when the company reclaims fuel VAT. If an employee buys personal fuel with no VAT reclaimed, no output tax is due.

How to find a car’s CO₂ figure?

Check the car’s V5C logbook, or use the DVLA online vehicle checker or the manufacturer’s data. Use certificates if needed.

What the Glasgow Restaurant VAT Fraud Case Teaches About Tax Compliance

Posted on 17 April 202617 April 2026 by Talha Zubair

In a recent case in Glasgow, two restaurant owners were found guilty of carrying out nearly a £700,000 VAT fraud scheme. This shocking case highlights the importance of maintaining proper financial records and adhering to VAT regulations.

The Glasgow Restaurant VAT Fraud Case

Two Glasgow restaurateurs were jailed after pleading guilty to large-scale VAT fraud. Antonio Carbajosa (41) and Kevin Campbell (44), involved in the Glasgow Restaurant VAT Fraud Case, ran several Glasgow venues — including Cranside Kitchen, Pickled Ginger, and Halloumi. They admitted fraudulently evading VAT for £682,882 between November 2011 and October 2016.

Their accountant, Khalid Javid (67), also pleaded guilty to submitting false VAT returns on their behalf.

Person	Role	Charge	Outcome
Antonio Carbajosa (41)	Restaurateur	Fraudulent evasion of £682,882 VAT	3 years in prison
Kevin Campbell (44)	Restaurateur	Fraudulent evasion of £682,882 VAT	3 years in prison
Khalid Javid (67)	Accountant	False statements in VAT returns (2 companies)	Pleaded guilty; sentencing pending

How Was the £700k VAT Fraud Scheme Exposed

Both owners suppressed their true sales figures and under-declared their takings. This meant their businesses kept cash that should have gone to HMRC as VAT.

HMRC investigators spotted unexplained discrepancies in the VAT returns. An inquiry called Operation Keyholder followed, with forensic accountants examining accounts from 2012 to 2016. The probe confirmed a total VAT shortfall of £682,882.

Three of their companies were never registered for VAT at all — despite having annual turnovers well above the registration threshold.

The two restaurateurs admitted they and their accountant “acted together in a co-ordinated way” to cheat the VAT system. By hiding sales, the businesses appeared smaller. As the prosecutor noted, the companies could pay bills and draw higher wages because they were pocketing VAT that should have gone to HMRC.

Recent VAT Cases in UK:

How VAT for Restaurants Work

Food and drink consumed on the premises is always standard-rated at 20% VAT
Service charges and paid tips on top of meals are also subject to VAT
Hot takeaway food is usually standard-rated.
Cold takeaways and most plain foods are zero-rated or exempt
The VAT registration threshold (since April 2024) is £90,000 of taxable turnover

Any business expecting to exceed that in a 12-month period must register and start charging VAT. Businesses must also:

Issue proper VAT invoices
Keep till receipts and bank statements
Pay all VAT collected to HMRC
Retain all records for at least 6 years

Consequences of VAT Fraud

Under Section 72 of the Value Added Tax Act 1994, fraudulently evading VAT can lead to:

Up to 7 years in prison
Unlimited fines
Confiscation (POCA) orders to seize illicit gains
Criminal records and business bans
Reputational damage

Penalties are not limited to business owners. Corporate officers and accountants can also be prosecuted — as this case shows with Mr Javid.

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How HMRC Catches VAT Fraud

HMRC uses automated data-matching and analytics to flag anomalies. In this case, HMRC noticed discrepancies in the VAT returns of two of the businesses, which triggered Operation Keyholder.

Common red flags include:

Missing till records
Undeclared cash sales
Invoices that don’t add up

HMRC cross-checks VAT returns against bank deposits, industry benchmarks, and supplier statements.

How We Help Restaurants Manage VAT and Stay Compliant

At Apex Accountants we help businesses navigate VAT rules and handle HMRC enquiries. Our services include:

VAT compliance reviews: We review your sales and records to ensure returns are correct and complete
VAT registration & planning: We advise on when and how to register, and on available VAT schemes for hospitality businesses
Support during HMRC investigations: Our experts guide you through meetings, help prepare responses, and liaise on your behalf
Forensic accounting & recovery planning: In serious cases, we reconstruct finances to clarify tax liabilities and protect your interests

Proper guidance can significantly impact the outcome of an investigation, ensuring a smooth process rather than a costly one.

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FAQs About VAT For Restaurants

Is all restaurant food subject to VAT?

Generally yes. Food eaten on-site is standard-rated at 20%. Some cold takeaway food may be zero-rated, but on-premises meals and drinks are a clear-cut VAT case.

What if I forget to register for VAT?

HMRC can backdate the VAT liability. You may owe unpaid VAT, penalties of up to 100% of the amount owed, and interest. Voluntary early disclosure usually reduces penalties; hiding it can lead to criminal investigation.

Can I get in trouble for honest mistakes?

HMRC understands errors happen. Genuine mistakes may attract lower penalties. But deliberate under-reporting or falsifying returns is treated as fraud. Even reckless inaccuracies carry serious consequences.

Do I have to repay VAT after conviction?

HMRC usually tries to recover unpaid VAT through court orders. Businesses should assume they will be held responsible for all unpaid tax.

How can I avoid VAT penalties?

Register for VAT when required
Charge the correct VAT rates on each sale
Keep all invoices, receipts and till rolls
File accurate VAT returns and pay on time
Get professional advice quickly if HMRC contacts you

How Starbucks UK Tax Credit Reached £13.7m Despite Higher Sales

Posted on 17 April 202617 April 2026 by Farazia Gillani

Starbucks UK’s tax credit situation highlights that sales growth does not necessarily lead to tax liabilities. Despite reporting a turnover of £525.6 million for FY2024, the company posted a loss before tax of £35.2 million, resulting in no current corporation tax charge. This loss was driven by deductible costs such as royalty payments and finance costs, which pushed the company into a tax-loss position. UK tax guidance allows businesses to carry forward or carry back trading losses against future profits.

The £13.7 million corporation tax credit reported in subsequent filings is most likely due to loss relief and deferred-tax accounting, rather than sector-specific credits. Starbucks’ primary business in the UK involves the retail and wholesale of coffee, tea, and related products. This case demonstrates how even profitable businesses can report a tax credit through strategic tax planning, leveraging available relief.

Starbucks UK Tax Strategy: A Strategic Overview

Starbucks UK’s tax strategy focuses on optimising loss relief and deferred tax accounting to manage its tax obligations efficiently.

Loss Relief: Starbucks UK offsets trading losses against future profits, reducing tax liabilities in profitable years.
Deferred Tax: By recognising deferred tax based on temporary differences, Starbucks adjusts its tax line to reflect future taxable profit, contributing to the £13.7 million tax credit.
Royalties and Fees: Payments for brand and intellectual property use are treated as operating costs, reducing taxable profit and potentially creating a tax loss.

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What the Latest Official Filings Show

The relevant filing path is straightforward. The FY2023 full accounts were filed on 4 April 2024, the FY2024 full accounts were filed on 14 April 2025, and the latest FY2025 full accounts were filed on 8 April 2026. That gives a clear official timeline for the story.

These dates come directly from the Companies House filing history for Starbucks Coffee Company (UK) Limited.

The table below combines the latest FY2025 headline figures tied to the 8 April 2026 filing with the FY2024 figures visible in the prior-year statutory accounts filed on 14 April 2025. The FY2024 figures are directly visible in the official accounts. The FY2025 headline figures are the figures associated with the latest filed accounts.

Key figure	FY2025 latest filing	FY2024 filed comparator	Year-on-year change
Sales / turnover	£556.3m	£525.6m	+5.8%
Corporation tax line in the accounts	£13.7m credit	£1.0m charge	£14.7m swing
Current UK corporation tax line	Check note 11 in the FY2025 filing before quoting separately	Nil	n/a
Loss before tax	£41.3m loss	£35.2m loss	Loss widened

The official FY2024 accounts also show that the business earned £321.4m from company-operated stores and £203.4m from licensing and franchising, with total turnover of £525.6m. That matters because it shows the group’s revenue mix is broader than counter sales alone.

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Why a Tax Credit Can Appear Even When Sales Rise

Corporation Tax Is Based on Taxable Profits, Not Sales

Corporation ta x is levied on taxable profits, not revenue. A business can increase its turnover but still report a tax loss after accounting for deductible trading costs, finance charges, capital allowances, and other tax adjustments. GOV.UK confirms that tax is calculated on profits, not sales.

Loss Relief

UK tax rules allow trading losses to be carried forward to offset future profits or carried back to earlier periods. This means a company can receive a tax credit even in a loss-making year if it has sufficient future profits to offset the losses.

Accounting and Deferred Tax

Starbucks UK’s FY2024 accounts mention deferred tax recognition on temporary differences. A tax credit is reflected in the accounts when there is an expectation of future taxable profits, allowing the company to recognise a deferred tax asset.

Corporation Tax Rates

The current UK corporation tax rate is 25% for profits above £250,000, with a 19% rate for small profits and marginal relief in between. A company making a large loss is not subject to current tax but still must account for temporary differences and deferred tax balances at the higher rate.

Specialised reliefs like R&D or creative industry credits do not seem relevant to Starbucks UK’s activities, as its primary business is the retail and wholesale of coffee and tea.

What the Filed Accounts Already Point To

The FY2024 strategic report reveals that Starbucks UK is licensed by Starbucks EMEA Ltd to use the Starbucks brand in the UK, for which it pays royalties. The company’s principal activities are described as the retail and wholesale trade of gourmet coffee, tea, and related products in the UK.

This is important because the FY2024 accounts show significant operating costs, such as:

Royalties and licence fees: £40.368 million
Staff costs: £118.6 million
Net impairment: £28.4 million

These large charges explain why high sales figures don’t automatically lead to taxable profit.

The FY2024 profit and loss statement outlines:

Turnover: £525.6 million
Operating loss: £27.5 million
Finance costs: £6.6 million
Loss before tax: £35.2 million
Tax charge: £1.0 million
Loss after tax: £36.2 million

This confirms the business was already in a loss-making position before the FY2025 filing.

The FY2024 tax note provides additional insight, showing:

No current UK corporation tax charge
A prior-year UK tax adjustment of £455k
Deferred tax of £522k
A total tax charge of £977k

It also highlights the tax effects from fixed asset differences and movements in deferred tax assets. The balance sheet shows a deferred tax asset of £37k, down from £559k the year before, further confirming the tracking of deferred-tax balances due to losses and timing differences.

The FY2025 filing, which reports a much larger tax credit, can be understood in the context of these prior-year details. The accounts already indicated the potential for such a change.

How Tax Planning Help Businesses in UK

At Apex Accountants, we help businesses read the tax line properly, not just the sales line. For companies facing similar issues, our work usually focuses on:

Corporation tax reviews to reconcile accounting profit, taxable profit and the tax note.
Loss relief planning so carried-forward and carried-back claims are used efficiently and correctly.
Deferred tax support to test whether recognition is appropriate and defensible in the accounts.
R&D and specialist relief screening so businesses do not miss legitimate reliefs or claim the wrong ones.
Accounts and filing support for Companies House filings, tax-note drafting and year-end documentation.

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Conclusion

Under UK rules, tax is driven by taxable profit, not turnover, and the prior-year Starbucks UK retail business accounts already show the ingredients that can produce a tax-loss position: royalty charges, finance costs, impairment and deferred-tax movements. That is why a £13.7m corporation tax credit in the latest filing is not inconsistent with sales growth. It is a tax-accounting outcome, not a contradiction.

FAQs About Starbucks UK Tax Credit

Why Did Starbucks UK Receive a Tax Credit Despite Increased Sales?

Sales growth and taxable profit are not the same. UK corporation tax is based on taxable profit, which is calculated after deductible costs and tax adjustments. If expenses such as impairments, finance charges, and other adjustments lead to a tax loss, it can result in a tax credit being recorded.

Does a Tax Credit Mean Starbucks UK Received Cash from HMRC?

Not necessarily. A tax credit in statutory accounts typically refers to an accounting entry related to loss relief or deferred tax recognition. It does not automatically indicate that cash was paid out to the company.

Did Starbucks UK Pay Corporation Tax in the Previous Year?

In the FY2024 accounts, the current UK corporation tax charge was nil. However, the total tax line included a £977k charge, which accounts for prior-year adjustments and deferred tax.

Could the £13.7 Million Tax Credit Be R&D Relief?

While it’s possible for a company to claim R&D relief for qualifying science or technology projects, Starbucks UK’s filed principal activity is the retail and wholesale of coffee, tea, and related products. The public filings do not suggest R&D as the primary reason for the tax credit.

Could the £13.7 Million Tax Credit Be a Creative Industry Relief?

Unlikely. Creative industry reliefs are aimed at production companies in sectors such as film, TV, theatre, and games. As Starbucks is a coffee retail business, it doesn’t fall into this category.

What Should Readers Look for in the Accounts to Understand the Tax Credit?

To understand the tax credit, readers should refer to the FY2025 full accounts filed on 8 April 2026. Key sections to review include the strategic report, the profit and loss account, and the taxation note. Additionally, the FY2024 accounts, filed on 14 April 2025, show how royalties, impairments, finance costs, and deferred-tax movements impacted the tax position.

Understanding Tax on Rental Income

Tax Considerations When Buying a Rental Property

Stamp Duty Land Tax (SDLT)

Choosing the Right Ownership Structure

Best Tax Strategies for Rental Property Purchases and Sales

Tax on Property Sales: Capital Gains tax Tax Explained

Strategies to Reduce Tax When Selling

Common Mistakes Landlords Make

Final Thoughts

Frequently Asked Questions

Do I pay tax on rental income if I make a loss overall?

How soon after selling a rental property do I need to pay capital gains tax?

Can I avoid Capital Gains Tax by reinvesting the proceeds into another rental property?

Is it better to own rental property personally or through a limited company?

What expenses can reduce tax on rental income?

Does buying a second rental property always mean paying the SDLT surcharge?

How Schools Are Affected by the Private School VAT Change

Why Larger Schools Are Now Affected

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Are Larger Private Schools Actually Closing?

What Schools and Parents Should Check

How We Help Private Schools Deal With VAT

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Conclusion

FAQs on Private-School Closures in UK

When did VAT start on private school fees?

Does VAT on fees mean schools had to raise prices by the full 20%?

Is the business rates change a UK-wide policy?

Are larger schools always hit harder than smaller ones?

Are nursery classes in private schools still exempt from VAT?

What about after-school clubs and holiday clubs?

Can local authorities reclaim VAT on private school placements?

Do bursaries remove the VAT charge?

Are registration or application fees also caught?

Do official figures prove that VAT is already causing a wave of large private school closures?

What You Need To Know About The Summer VAT Cut

Temporary VAT Cut – Which Sales Qualify and Which Do Not

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How to Prepare Pricing, Tills, and Records

Practical Steps

Summer VAT Cut on Booking and Bundle Considerations

How We Help Small Businesses Take Advantage of The 5% VAT Relief

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Conclusion

FAQs on 5% VAT Cut

Does the temporary 5% VAT rate start on 25 June 2026?

Is the relief available across the whole UK?

What counts as a children’s meal?

Does takeaway food qualify for a temporary VAT cut?

If I sell a smaller adult portion, can I treat it as a children’s meal?

Do adult cinema or theatre tickets qualify for 5% VAT?

Do family tickets qualify even if they include adults?

Which attractions are covered?

Are sports events or sports facilities included?

What if customers booked early or bought a pass?

How VAT on Deal Fees is Applied in Various Situations

What Decides Whether the VAT Comes Back

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Importance of the Invoice Trail

Partial Recovery for Mixed Activity

Practical Takeaways

How common deal structures are treated

Share acquisitions through a holding company

Acquisitions that strengthen an existing trade

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Share Sales and VAT

Immediate Transaction Matters

Restructuring Context

Standard Partial Exemption Method

Special Method and Residual Costs

Share Sales Are Not TOGC

Fundraising and VAT

Target-Side Fees

Aborted Deals

Check the Adviser’s VAT Status

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How to improve the chances of recovery before the deal closes

Where claims usually break down

How Apex Accountants Can Help Reclaim VAT on Transaction Fees

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