Category: Tax Services

What the Latest Ruling Means for VAT for Medical Staffing Agencies

Posted on by Talha Zubair

The First-tier Tribunal (FTT) delivered an important ruling in 1st Alternative Medical Staffing Ltd v HMRC [2025] TC09678. The Tribunal held that employment costs reimbursed to a medical staffing agency are fully taxable for VAT purposes. The case examined whether these costs, linked to the supply of nurses and care workers to hospitals and care homes, could fall within the VAT exemption for medical or welfare services. The ruling provides important clarification on VAT for medical staffing agencies, particularly where the agency is not subject to statutory regulation and does not deliver medical care directly. The Tribunal dismissed the agency’s argument and confirmed that VAT exemption applies only when the supplier is officially regulated and provides medical care themselves. The decision highlights HMRC’s strict approach to VAT relief in the healthcare staffing sector and reinforces how such services should be treated for VAT.

What Was the Case About?

1st Alternative Medical Staffing Ltd (AMS) supplied nurses and care assistants to NHS trusts, private hospitals, and care homes. These professionals were qualified and registered. All staff worked under the client’s direct supervision, direction, and control.

AMS invoiced its clients by splitting charges into:

– Employment Costs – covering wages, PAYE tax, and other staffing-related costs
– Commission – AMS’s own service fee

AMS charged VAT only on its commission. It treated employment costs as VAT exempt, arguing they related to exempt medical care.

HMRC’s View

HMRC disagreed with AMS’s VAT treatment. They originally planned to inspect AMS’s VAT returns but were prevented when AMS cancelled the visit.

Following correspondence, HMRC assessed that all amounts received—including reimbursed employment costs—were standard-rated for VAT. The tax authority issued VAT assessments totalling £265,590 for the relevant periods.

AMS challenged the assessments, arguing their services were VAT exempt. They also brought a judicial review, claiming HMRC acted against their “legitimate expectation”. The review failed.

AMS then appealed to the First-tier Tribunal (FTT).

Tribunal’s Decision

The Tribunal rejected the appeal. It found that AMS was not state regulated. To qualify for the VAT exemption for medical services, suppliers must meet strict conditions set out in Group 7, Schedule 9 of the VAT Act 1994. One of these conditions is regulation by a statutory health authority.

AMS was not approved, licensed, or registered by a statutory health authority. This disqualified them from relying on VAT exemption for medical care services under Note 8.

Even if the entity had been state-regulated, the services must still be “closely related” to medical care.

The Tribunal held that:

  • AMS simply supplied staff, not medical care itself.
  • The staffing function was not “indispensable” to medical treatment.
  • The services resembled those of any commercial staffing agency. 
  • Granting exemption would create unfair VAT treatment in the market

The Tribunal concluded that AMS’s services were taxable. The appeal was dismissed.

Why Does This Matter?

This ruling is a clear reminder that supplying qualified staff is not enough to secure VAT relief. Agencies operating in healthcare must meet strict exemption criteria before applying zero or exempt treatment. Many businesses in this sector now need to reassess the VAT treatment for healthcare staffing, especially when charging employment-related costs.

Applying the VAT exemption for medical services incorrectly can result in substantial VAT assessments and penalties. HMRC continues to enforce the rules strictly, and businesses must understand the legal conditions before relying on any exemption.

Reimbursed employment costs are not exempt merely because they support the delivery of medical care. If the agency does not deliver regulated medical care itself, VAT applies to the full charge. This view aligns with HMRC’s long-standing interpretation of the legislation.

Apex Accountants’ View

At Apex Accountants, we believe it’s crucial for healthcare staffing agencies to thoroughly assess their VAT treatment, especially when reimbursed employment costs are involved. Misapplying VAT exemptions could lead to costly financial consequences, including penalties from HMRC.

We recommend that all healthcare staffing agencies review their invoicing structure, contracts, and VAT treatment in light of this ruling. Our team of VAT specialists can provide tailored advice, ensuring that your agency remains compliant and avoids unnecessary tax liabilities. If you’re uncertain about your VAT position or facing an HMRC review, we can help you navigate these complex issues with confidence.

Key Takeaways for Employers and Agencies

  • VAT exemption applies only when strict legal conditions are met.
  • Being part of the healthcare delivery chain does not automatically mean exemption.
  • Staffing firms must review their VAT treatment, especially on employment costs.
  • HMRC may assess VAT on total consideration, not just service fees.
  • Cancelling a compliance check can lead to stronger scrutiny from HMRC.
  • “Legitimate expectation” arguments are unlikely to succeed if the legal framework is clear

Expert Support on VAT for Medical Staffing Agencies

At Apex Accountants, we support employment agencies, care providers, and healthcare staffing firms with all aspects of VAT compliance. Our team will assess your contracts, invoicing structure, and operational model to confirm the correct VAT treatment for healthcare staffing in line with current legislation.

If you are facing an HMRC review, unsure about your VAT position, or need to challenge a tax decision, we offer practical guidance tailored to your business model. From preventing costly errors to representing you in disputes, we are here to protect your interests.

Contact us today to get expert VAT advice that keeps your business compliant.

A Guide to R&D Tax Credits for Motion Graphics Studios in 2026

Posted on by Nida Umair

Motion-graphics studios combine design, software engineering, AI tools, and digital production. This innovative work makes them eligible for R&D tax credits under HMRC’s merged scheme and the Audio-Visual Expenditure Credit (AVEC). Technical innovation in motion graphics studios is becoming more common, which is raising the challenge of compliance and the need for stronger evidence. R&D tax credits for motion graphics studios can provide significant funding, but proper documentation is essential. 

Apex Accountants helps studios reduce this pressure by identifying qualifying activities, preparing technical documentation, and guiding teams through the full R&D and AVEC process with clarity.

2026 Updates on R&D Tax Credits for Motion Graphics Studios

HMRC’s September 2025 statistics show a clear shift in UK R&D activity. There were 46,950 R&D claims for 2023–24, a 26% drop from the previous year. Qualifying expenditure reached £46.1 billion, down 1%, while total relief claimed remained high at £7.6 billion. This indicates stronger compliance pressure but reinforces that funding is still available for innovation in motion graphics studios.

Key points for motion-graphics studios

Given these updates, studios must navigate tightening compliance requirements while still accessing valuable funding opportunities. The following are important points to consider:

  • Claim volumes are falling, yet funding remains available for genuine technical R&D.
  • The merged R&D scheme continues to support software, AI, rendering, and pipeline development, all of which are central to technical innovation in motion graphics studios.
  • AVEC offers strong credit rates for animation and VFX-heavy projects. Film and TV projects receive 34%, while animation and children’s content receive 39%. 
  • New VFX support opens further opportunities for studios building advanced tools and workflows. From April 2025, the government plans wider support for VFX costs, with rates up to 39% and potential removal of the 80% cap.
  • HMRC will tighten checks in 2026, making HMRC compliance for motion graphics studios even more essential.

How Motion-Graphics Projects Qualify for R&D and AVEC Relief

Motion-graphics studios often tackle complex technical challenges that push the boundaries of existing tools and systems. These activities can qualify for R&D tax relief for motion graphics studios if they involve

  • Developing new rendering systems to reduce noise or render times without losing quality
  • Creating bespoke tools for particle effects, crowd simulation, or procedural animation
  • Building real-time motion-graphics pipelines for virtual production or interactive installations
  • Implementing AI-driven rotoscoping, tracking, or asset-generation techniques when standard software falls short

To meet HMRC compliance for motion graphics studios, it is crucial to:

  • Keep detailed project logs that document technical challenges and solutions
  • Allocate costs accurately across R&D, AVEC, and other credits to avoid double claims

Many studios can qualify for both R&D relief and AVEC with careful cost allocation. Apex Accountants assists motion-graphics studios by guaranteeing accurate documentation, robust evidence, and complete compliance with HMRC’s expectations.

Case Study: How Apex Accountants Supported a Motion-Graphics Studio

A UK-based motion-graphics studio faced challenges while developing a real-time installation that responded to live audience data. The existing tools couldn’t meet the required performance standards, particularly in terms of latency and visual output quality. As a result, the team decided to build a custom rendering engine to address these issues.

Apex Accountants provided critical support throughout the process. Our team:

  • Reviewed the studio’s production pipeline and identified key stages of the project that qualified for R&D tax relief, including custom software development and technical challenges.
  • Categorised costs across the various elements of the project, such as software development, technical art, and data processing, ensuring accurate allocation of R&D expenditure.
  • Prepared a detailed technical report that clearly explained the uncertainties the studio faced, particularly around real-time rendering and handling live data integration.
  • Assessed the project for AVEC eligibility, ensuring the installation’s animation components were fully accounted for and aligned with the creative industry tax relief criteria.

As a result, the studio received a significant tax relief payment, which not only improved cash flow but also enabled further investment in developing new tools and refining its custom rendering system. 

Why Choose Apex Accountants

Apex Accountants helps studios identify qualifying projects, manage compliance, and maximise claims. Here’s how we assist:

  • We review production pipelines to identify where custom software, new rendering techniques, or AI-driven solutions qualify for R&D relief.
  • Our experts prepare clear documentation that meets HMRC’s guidelines, ensuring claims are compliant and well-supported.
  • We help animation studios navigate AVEC requirements, maximising both R&D and AVEC claims without risk of double claims.
  • Our team ensures accurate cost allocation across R&D, AVEC, and other credits, covering activities like procedural animation and AI-driven asset generation.
  • We develop long-term tax strategies to optimise R&D claims year after year and support ongoing innovation.

Contact Apex Accountants today to secure the relief your motion-graphics studio deserves while maintaining the highest compliance standards. 

A Guide to VAT for Packaging Design Agencies in the UK

Posted on by Farazia Gillani

The packaging design industry sits at the intersection of creativity and commerce. From producing brand-defining visuals to coordinating printed packaging materials, agencies often work across borders and with clients from diverse sectors. This makes VAT for packaging design agencies particularly complex, especially when distinguishing between taxable services, exempt scenarios, and international supplies.

At Apex Accountants, we work closely with packaging design firms to offer clear, practical advice on VAT registration, invoicing, and compliance, complementing the kind of commercial guidance provided by the Design Business Association. Our team understands the industry’s challenges and supports better tax planning for creative agencies, helping them make confident, well-informed financial decisions.

In this article, we explain when packaging design services fall within the scope of VAT, when exemptions may apply, and how to manage international clients and mixed supplies. Whether you’re approaching the VAT threshold or already registered, this guide is designed to help you avoid costly mistakes and apply the rules correctly.

When You Must Apply VAT

  • You must register for VAT if your taxable turnover in the last 12 months exceeds £90,000.
  • If you expect your taxable turnover to exceed £90,000 in the next 30 days, you must register.
  • Once registered, you must charge VAT on standard‑rated services (normally 20%) unless the service is exempt or zero‑rated.
  • Many firms seek VAT registration for packaging design firms early to recover input VAT and establish professional credibility.

Specific Issues For Packaging Design Agencies

  • Determine the place of supply of your service. For business‑to‑business (B2B) services the place of supply is usually where the customer belongs.
  • If your client is outside the UK and the supply is B2B, the VAT may not be charged in the UK; the reverse charge might apply.
  • If your service involves providing design materials for export (for example, physical packaging sent abroad), you must check whether movement of goods or services is involved and whether zero‑rating or reliefs apply.

Understanding these rules is crucial for accurate billing and proper tax planning for creative agencies working across borders.

When Exemptions Or Special Treatments May Apply

  • Some services may be exempt from VAT; however, standard design services generally will not qualify for exemption.
  • If the service is outside the scope of UK VAT (for example, the place of supply is outside the UK), you do not charge UK VAT.
  • Even if you’re below the VAT threshold, voluntary VAT registration for packaging design firms allows you to reclaim input VAT and present a more professional image to clients.

Practical Checklist For Packaging Design Agencies

  • Monitor your taxable turnover monthly and annually
  • Establish whether the client is a business or consumer, and where they “belong”
  • On invoices clearly state your VAT registration number if registered, and show VAT separately
  • If supplying services to non‑UK clients, include details supporting place of supply outside the UK
  • If you supply packaging goods as well as design services, check whether the goods movement triggers different VAT rules

Incorrect VAT treatment can lead to penalties, incorrect pricing and lost profits. At Apex Accountants we support packaging design agencies in balancing compliance with commercial clarity.

Case Study: VAT Clarity for a Growing Packaging Design Agency

A packaging design agency based in Leeds contacted Apex Accountants after securing several international clients. Although their UK turnover remained just below the £90,000 threshold, they were unsure how to handle VAT for overseas B2B clients and whether they should register voluntarily. Their invoices lacked consistency, and they couldn’t reclaim VAT on essential tools and outsourced services.

We assessed their situation and advised them to register voluntarily for VAT so they could reclaim input VAT on UK costs. We also clarified the place of supply rules, helping them apply the reverse charge mechanism for EU clients and treat non-UK supplies correctly. With our support, they recovered over £4,700 in VAT, improved invoicing accuracy, and gained confidence in their international pricing structure.

The agency now operates with full VAT compliance, better cash flow, and a clearer financial strategy. Their creative team can focus on design while we manage the complexities behind the scenes.

What Makes Apex Accountants the Right Choice for VAT for Packaging Design Agencies

VAT compliance can be difficult for packaging design agencies, especially when dealing with international clients, digital-only services, and mixed supplies. At Apex Accountants, we combine profound sector knowledge with practical, up-to-date VAT guidance tailored to creative businesses. We help you apply the right rules, reclaim eligible costs, and avoid costly VAT errors.

Whether you’re just starting out or scaling your agency, our support gives you clarity and confidence in your VAT obligations. We take care of the complexities, from voluntary registration to invoice structure and input VAT recovery, so you can concentrate on your design work.

Contact us today to speak to a VAT expert for packaging design agencies.

A Detailed Guide on R&D Claim Notification Requirements For Businesses in UK

Posted on by Nida Umair

The tax relief scheme for research and development (R&D) offers valuable support to companies in the UK. But the rules for the R&D claim notification form are strict, and failure to follow them may cause your claim to be rejected. Below is a clear summary of what you must do.

What is the R&D Claim Notification Form?

From accounting periods beginning on or after 1 April 2023, companies must submit a “claim notification form” to HMRC if they are:

  • claiming R&D relief for the first time, or
  • their last valid claim was made more than three years before the end of the claim notification period.

The claim notification period starts on the first day of your “period of account” and ends 6 months after its end date.

For example, if your accounting period runs from 1 January 2024 to 31 December 2024, your claim notification window is from 1 January 2024 to 30 June 2025. If you fail to notify within that window, any claim for that period may be invalid. Extra care is needed because HMRC has issued clarifications about transitional cases. 

Key Details: What the Form Requires

When completing the claim notification, your company (or your agent) must include:

  • The company’s Unique Taxpayer Reference (UTR) matches the one on the CT600.
  • Contact details of the senior internal R&D contact (e.g., company director) and any agent.
  • The period of account start and end date; the accounting period start and end date.
  • A high‑level summary of your planned R&D activities. This should show how the work meets the standard R&D definition.

The Three‑Year Look‑Back Rule

You may not need to submit the claim notification if your company has submitted a valid R&D claim within the three years ending on the last date of your claim notification period. 

Important caveats:

  • A claim for a period starting before 1 April 2023 that is made via an amended return on or after 1 April 2023 does not count for the three‑year exemption.
  • If HMRC rejected your previous claim, then that claim is treated as if it did not count.

Additional Information Form (AIF)

Even after submitting the claim notification (if required), you must submit an Additional Information Form (AIF) for the accounting period for which you are claiming.

Key points:

  • The AIF must be submitted before or on the same day as your Company Tax Return (CT600). 
  • If you file the CT600 before the AIF, HMRC will remove your R&D claim. 

What Happens If You Miss the Deadline?

If you fail to file the claim notification when required, your claim may be rejected by HMRC, and you may lose the right to claim for that accounting period. HMRC has acknowledged some transitional errors (in the guidance), but these apply only in narrow cases. 

How Apex Accountants’ R&D Tax Relief Claim Services Can Help

At Apex Accountants we provide end‑to‑end support for claims related to R&D tax relief. Our services include:

  • Support with the claim notification form, verifying if your business needs to submit one and helping you meet the deadlines.
  • Preparation of the Additional Information Form (AIF) and submission alongside your CT600.
  • Full claim preparation services include assessing eligible projects, gathering costs, and preparing technical narratives.
  • Strategic advice on filing options, ensuring that your claim aligns with HMRC’s latest rules.

If you are considering an R&D claim and feel unsure about the paperwork or deadlines, our team is ready to help you manage the process professionally.

FAQs on R&D Claim Notification 

Q1. Do I always need to submit a claim notification form when I make an R&D claim?

No. You only need to submit a claim notification form if you are claiming for the first time or if you have not made a valid claim in the last three years before the claim-notification deadline. 

Q2. When exactly is the deadline to submit the claim notification?

The notification period ends six months after the end of the company’s period of account. 

Q3. If my period of account is more than 12 months (covers 2 accounting periods), does that change the rule?

Yes. If the period of account exceeds 12 months, it may cover two or more accounting periods, but you only need to submit one claim notification for that period of account. 

Q4. What happens if my previous claim was made more than three years ago, but it was for a period before 1 April 2023 via an amended return?

That type of claim does not count for the three‑year exemption. You would need to submit a claim notification form. 

Q5. Can I file the AIF and CT600 after the claim notification?

Yes, but the AIF must be submitted before or on the same day as your CT600. The claim notification must be submitted within its deadline. 

Q6. What information is needed in the claim notification form?

You will need UTR, contact details for the company and agent, accounting period dates, period of account dates, and a high‑level summary of planned R&D activity. 

Q7. If I miss the claim notification deadline, can I still claim?

It is very risky. HMRC guidance says if you fail to notify and you were required to, your claim may be invalid. 

Q8. Does submitting the claim notification guarantee that my R&D claim will be accepted?

No. It merely meets the notification requirement. The claim must still meet the R&D qualifying criteria, and the AIF and CT600 must be properly submitted.

Q9. Are there any transitional reliefs or special cases I should be aware of?

Yes. HMRC corrected previous guidance and allowed some claims where the guidance was incorrect. But the window is narrow and should not be relied upon. 

Q10. How far back can I claim R&D tax relief?

The claim itself must normally be submitted as part of the CT600 or an amendment within one year after the original filing date, but the claim notification requirement is separate and must meet its own deadline.

Why There is a Decline in R&D Tax Relief Claims by South West SMEs

Posted on by Nida Umair

Research and Development (R&D) tax relief has long been an essential resource for businesses in the UK, providing financial support to companies investing in innovation. However, recent reports show a worrying trend: a significant decline in the number of small and medium-sized enterprises (SMEs) in the South West of England claiming this relief.

According to the latest figures from HMRC, there has been a £50m drop in claims from South West SMEs in the 2023-24 period. This article explores the reasons behind the decline and why businesses should continue to take advantage of R&D tax relief.

The Decline in R&D Tax Claims in South West England

In the tax year 2023-24, South West SMEs made 2,780 claims, a drop from 4,055 claims in the previous year. The total amount of tax relief claimed also fell from £245m to £195m. The decline in R&D tax claims in South West England has been seen across various regions:

  • Cornwall & Isles of Scilly: 220 claims (down from 330)
  • Devon: 420 claims (down from 665)
  • Gloucestershire & Wiltshire: 710 claims (down from 1,050)
  • North Somerset, Somerset, and Dorset: 780 claims (down from 1,115)
  • West of England: 650 claims (down from 895)

This decrease is concerning for both businesses and the wider regional economy. R&D tax relief plays a crucial role in encouraging businesses to innovate, leading to the development of new products, services, and processes that benefit both the companies themselves and the local economy.

Why Are South West SMEs Avoiding R&D Tax Relief?

Several factors have contributed to the decline in claims.

  1. Increased Compliance Requirements: Recent changes in the application process have made it more difficult for SMEs to navigate the system. The tightening of rules has led to concerns over the time and cost involved in making a claim.
  2. Reduced Benefits for SMEs: The government has reduced the rate of tax relief available for SMEs. This has disincentivised smaller companies from claiming the relief.
  3. Concerns Over False Claims: Following a crackdown on fraudulent claims, businesses may be hesitant to apply for fear of being caught up in compliance checks, even when their claims are legitimate.

The Importance of R&D Tax Relief for SMEs

R&D tax relief can provide up to £27 for every £100 spent on qualifying R&D activities. For SMEs, this relief can make a substantial difference to cash flow, helping them to reinvest in innovation. Some benefits of R&D tax relief include:

  • Increased innovation capacity: With additional funding, businesses can invest in developing new products, services, or processes.
  • Financial support for high-risk projects: R&D often involves high costs and risks, and the relief can help offset these.
  • Encouragement for growth: As businesses innovate, they generate new revenue streams, which may lead to higher tax receipts in the long term.

The Role of Larger Companies and RDEC

Although SMEs have seen a decline in claims, the larger R&D Expenditure Credit (RDEC) scheme for bigger companies has seen a growth in claims, with the total relief amount rising by 36%. This shift has raised concerns about the growing disparity in R&D tax relief claims between SMEs and larger firms. SMEs, which make up nearly 99% of UK businesses, must be given the tools and support to continue benefiting from this crucial tax relief.

Why SMEs Should Continue Claiming R&D Tax Relief

Innovation is the backbone of any successful business. While the process of claiming R&D tax relief for SMEs can be complex, businesses should not shy away from this valuable support. Here’s why:

  • Innovative businesses fuel economic growth: Successful innovations create new products and services, expanding business opportunities and improving the economy.
  • Avoid losing out: The reduced compliance burden is temporary. Government efforts are underway to simplify the process.
  • Long-term financial benefits: The short-term administrative effort is outweighed by the long-term benefits of innovation.

How Apex Accountants Can Help South West SMEs With R&D Tax Relief Claims

At Apex Accountants, we specialise in helping businesses navigate the complexities of R&D tax relief claims. Our team of experts provides tailored advice and support to ensure your R&D tax claims are accurate and compliant. Whether you’re a small business in the South West or a larger firm across the UK, we are here to guide you through the process, helping you maximise the tax relief available to your business.

  • R&D Tax Relief Claims: We assist with identifying qualifying R&D activities, preparing claims, and managing compliance.
  • Tax Planning: We provide strategic tax planning advice to help you reduce your tax liabilities while supporting innovation.
  • Compliance Support: Our experts ensure that your claims meet all HMRC requirements, reducing the risk of an audit.

Conclusion

The decline in R&D tax relief claims by SMEs in the South West is a troubling development that may hinder innovation and growth. However, businesses can still benefit from this valuable support if they understand the process and take the necessary steps to comply with the new rules. At Apex Accountants, we are committed to helping you unlock the full potential of R&D tax relief, ensuring your business stays competitive in an ever-evolving market.If you’re unsure about your eligibility or need help with your claim, contact Apex Accountants today for expert guidance.

Everything Homeowners Need to Know About Mansion Tax Ahead of the 2025 Budget

Posted on by Nida Umair

Speculation surrounding the introduction of a mansion tax in the UK has reached new heights as we approach the Chancellor’s Autumn Budget in November 2025. This proposed levy, aimed at high‑value residential properties, has sparked widespread discussion among homeowners, property investors, and tax professionals. As property values rise across many parts of the UK, what could the Mansion Tax mean for homeowners? 

Here’s an in-depth look at what you need to know about this potential change.

What is the Mansion Tax?

The UK mansion tax is a proposed property tax that targets high‑value residential homes. The idea is to impose an additional tax burden on properties exceeding a certain threshold, typically homes valued at £2 million or more. While the tax has been discussed for several years, it has yet to be implemented in the UK. Recent speculation suggests that the UK government may be considering it as part of efforts to raise additional revenue without directly increasing income taxes.

Key details:

  • Threshold: Homes valued above £1.5 million or £2 million could face a tax.
  • Tax Type: The tax could either be an annual percentage levy or a one‑off charge triggered by ownership or sale.
  • Example: If a home is valued at £3 million, the owner could face an annual charge of £10,000 (1% on the amount over £2 million).

Why is the Mansion Tax Being Considered Now?

The Mansion Tax in the UK is being seriously discussed as a way for the government to boost revenue amidst ongoing fiscal pressures. The UK has faced rising borrowing and a need for sustainable revenue generation. With property values increasing in many regions, particularly in London and the South East, homes that were once considered average now exceed the £2 million threshold, bringing more homeowners into potential scope for this tax.

Key Factors:

  • Revenue Generation: The UK government is seeking ways to fill the growing fiscal gap, and the Mansion Tax could be a way to do this.
  • Rising Property Values: In areas like London, Dorset, and the South West, steady house price growth means that typical family homes could soon fall into the “mansion” bracket, making many homeowners liable for the tax.
  • Political Pressure: The tax could serve as an alternative to raising income taxes, a politically sensitive move.

How Would a Mansion Tax Be Calculated and Collected?

If this tax were implemented, it could be calculated in one of two ways:

  1. Annual Charge: Homeowners could pay a yearly charge based on the portion of their home’s value exceeding the threshold (e.g., £2 million).
  2. One-off Levy: A tax could be triggered when the property is sold or transferred, though this type of charge is less likely to be implemented.

Example Calculation:

  • A £2.5 million home would face an additional £5,000 annual tax (1% on £500,000).
  • A £5 million home would face a £30,000 charge.

The biggest challenge here would be accurately valuing homes, especially since property values fluctuate frequently. There may also be discrepancies in how two homes of similar size or location are valued, leading to potential disputes over whether they fall above or below the threshold.

Which Properties and Owners Might Be Exempt from a Mansion Tax?

Though the exact exemptions are yet to be defined, it’s expected that some homeowners might be relieved from this burden. Possible mansion tax exemptions could include:

  • Charitable Properties: Homes owned by charities could be exempt from the tax.
  • Agricultural Properties: Rural properties tied to farming may receive special treatment.
  • Adaptations for Disabled Persons: Homes specially adapted for disabled individuals may qualify for relief.
  • Asset‑rich but Cash‑poor Owners: There could be considerations for homeowners whose wealth is tied up in property but who have limited income.

These mansion tax exemptions would aim to ensure that those who are truly unable to pay the tax—such as retirees or long‑term homeowners—are not unfairly impacted.

What Are the Pros and Cons of a Mansion Tax?

Pros:

  • Fairness: The Mansion Tax could redistribute the tax burden from ordinary homeowners to those with substantial property wealth.
  • Revenue Generation: It could help raise billions in much‑needed revenue for the government.
  • Targeted at the Wealthy: This tax would specifically focus on high‑value properties and their owners, often those with significant assets but not necessarily high incomes.

Cons:

  • Liquidity Issues: Many homeowners affected by the tax may not have enough liquid income to cover it, even though their property values are high.
  • Potential Market Distortion: The tax could impact the property market, particularly in areas with homes hovering near the threshold, leading to price fluctuations.
  • Administrative Challenges: Accurately assessing property values and implementing the tax could be complex and costly.
  • Impact on Older Homeowners: Homeowners who have benefited from decades of rising property values may experience themselves financially strained, despite not having substantial income.

How Will the Mansion Tax Impact the Housing Market?

The introduction of the mansion tax could have a noticeable effect on the housing market, particularly at the higher end. Here’s what might happen:

  • Reduced Demand: Homes valued just above the threshold could see reduced demand as buyers factor in the long‑term tax burden.
  • Price Adjustments: In areas like London and the South East, prices may adjust downward as properties over the £2 million mark become less desirable.
  • Cooling Effect: Homeowners may delay property sales or hesitate to invest in home improvements if those upgrades push their property value above the threshold.
  • Potential for Increased Supply: If more homeowners sell to avoid the tax, the market could see more properties coming to market, which might help balance out demand.

What Should Homeowners Do Now?

Homeowners should remain informed and start preparing until the Autumn Budget provides further details. Here are some steps to consider:

  • Get an Updated Property Valuation: Know where your property stands relative to the potential tax threshold.
  • Consult with Financial Professionals: Speak to accountants, tax advisors, and financial planners to understand how the Mansion Tax could impact your finances.
  • Review Your Options: Consider long‑term financial strategies, such as downsizing or equity release, to manage the potential tax burden.
  • Avoid Rushed Decisions: Do not make significant property decisions based on speculation. Wait until the full details are confirmed.

How Apex Accountants Can Help You Navigate Potential Property Taxes in the UK

At Apex Accountants, we specialise in helping homeowners and property investors navigate complex tax changes, like the potential mansion tax. Our services include:

  • Property Tax Planning: We provide proactive strategies to manage potential property tax liabilities.
  • Wealth Management: Tailored financial advice to help you preserve your wealth and assets in light of new tax proposals.
  • Tax Advice for Property Owners: We guide you through the complexities of property taxes, helping you prepare for potential changes.

Conclusion

While the UK mansion taxremains a proposal and not yet law, it is clear that its potential introduction could have far‑reaching implications for high‑value homeowners across the UK. With discussions ramping up ahead of the 2025 Budget, homeowners should be proactive in understanding how this tax could impact their property ownership and financial plans. Ensure you stay informed, seek professional advice, and prepare for any eventualities. For tailored advice and more information, contact Apex Accountants today. We’re here to help you make the best decisions for your financial future in light of any tax changes.

FAQs

What is Mansion Tax?

Mansion Tax, officially the High Value Council Tax Surcharge, is an annual levy announced in the UK Autumn Budget 2025 by Chancellor Rachel Reeves. It targets residential properties in England valued over £2 million (based on 2026 valuations by the Valuation Office Agency), starting from April 2028, and is collected alongside council tax bills with revenue going to central government. It affects under 1% of properties, mainly in London and the South East.​

How is the Mansion Tax Calculated?

Mansion Tax uses fixed annual bands based on 2026 market values, revalued every five years, not a percentage of property value. Bands include £2,500 for £2m–£2.5m, £3,500 for £2.5m–£3.5m, £5,000 for £3.5m–£5m, and £7,500 for over £5m, uprated yearly by CPI inflation. Middle bands and exact details await a 2026 consultation.​

Mansion Tax Exemptions

No confirmed exemptions exist yet; a 2026 consultation will cover reliefs, deferrals (e.g., for cash-poor owners), appeals, and possible cases like job-tied homes. Primary residences, charities, or agricultural properties lack automatic exemptions, differing from past proposals. Support mechanisms are under review by the Valuation Office Agency.​

Does Mansion Tax Apply to Farms?

Mansion Tax may apply to farms, as the government has not ruled out farmhouses valued over £2m, despite farmer concerns that they are working businesses, not luxury homes. This could compound recent inheritance tax changes on farms over £1m, with details pending VOA consultation. No agricultural property relief exemption is confirmed for this surcharge.​

Cost of Buying a Second Property and Mansion Tax

Mansion Tax does not apply to the cost of buying a second property; it is an ongoing annual surcharge post-purchase for qualifying homes over £2m. Second properties face separate Stamp Duty Land Tax (SDLT) surcharges (typically 3% extra on residential rates), plus potential local council second-home premiums. The tax layers on from 2028 regardless of primary or second-home status.

How to Increase Your Tax-Free Personal Allowance to £20,070 Through HMRC Rent-a-Room Scheme

Posted on by Nida Umair

Income tax thresholds in the UK have been frozen until at least 2028. This freeze has created what many call “fiscal drag”, where rising wages push more people into higher tax bands even when their living standards have not improved. In response, households are searching for lawful ways to reduce their tax exposure and protect more of their income.

One of the simplest and most effective options is the Rent-a-Room Scheme. This HMRC programme allows you to earn £7,500 tax-free from letting a furnished room in your main home. When combined with the standard £12,570 personal allowance, your total tax-free income can reach £20,070.

At Apex Accountants, we guide individuals through the rules, eligibility criteria and reporting requirements so they can take advantage of this allowance with confidence.

What is HMRC Rent-a-Room Scheme

The Rent-a-Room Scheme lets resident landlords earn tax-free income by renting out furnished accommodation in their primary residence. The scheme is designed to encourage homeowners to make unused space available while benefiting from a generous exemption.

To qualify, the room must be furnished, and the property must be your main residence. The exemption applies whether you rent to students, professionals, short-term visitors or long-term lodgers. What matters is that you live in the property and provide the tenant with furnished accommodation.

You cannot use the scheme if the property is a buy-to-let, the room is unfurnished, or it is not your main home. HMRC treats these situations as standard rental activity, which follows different tax rules.

How the Tax-Free Personal Allowance Reaches £20,070

The standard personal allowance gives you £12,570 of tax-free income each year. The Rent-a-Room Scheme adds up to £7,500 more. Together, they give qualifying individuals:

£12,570 + £7,500 = £20,070 tax-free income.

If the rental income belongs to more than one person (for example, joint homeowners), each person receives £3,750 instead of the full £7,500. The total allowance for the property remains the same, but it is split between the parties sharing the income.

Do You Need to File a Tax Return?

HMRC applies the exemption automatically if your rental income is less than £7,500. In this case, you do not need to register for self-assessment unless you have another reason to do so.

A self-assessment return becomes necessary when:

  • Your income from renting out rooms exceeds £7,500.
  • You wish to opt out of the scheme to claim actual expenses.
  • You already file a return for another source of income.

The reporting process is straightforward, but there are strategic decisions to make—especially if your expenses exceed your rental income. Apex Accountants can help you decide whether using or opting out of the scheme gives you the better result.

When Opting Out Might Be Better

Although most people benefit from the simplicity and generosity of the scheme, there are situations where opting out makes more financial sense. For example, if you have dealt with significant repair costs or major damage to the room, you may wish to claim these expenses against your rental income.

Opting out also allows you to offset losses against other property income, which can be helpful for individuals with buy-to-let portfolios. However, once you opt out, you must follow standard property tax rules and cannot take advantage of the £7,500 exemption.

Key Benefits of the HMRC’s Rent-a-Room Scheme

The scheme remains popular because it offers a clear set of advantages:

  • You can earn extra income without increasing your tax bill.
  • Administration is simple with minimal record-keeping.
  • You do not need to calculate or track expenses unless you opt out.
  • The scheme helps homeowners manage rising living costs.
  • It also supports the wider housing market by increasing room availability.

At the same time, there are practical considerations. Some mortgage lenders require consent before you take in a lodger. Insurance policies may need updating. Council tax rules can also change depending on occupancy. These issues are manageable but important to check in advance.

How to Claim the £7,500 Allowance

Claiming the allowance is a simple process once you confirm that the room is eligible. Most people qualify automatically, and the exemption applies without any action on their part. If you expect to stay below the £7,500 threshold, you can begin letting the room and keep basic records of income and agreements.

If you expect to exceed the threshold, you will need to report the income through self-assessment. This involves declaring the total rent you received and confirming whether you wish to use the scheme or opt out of it. The decision should be based on which option gives you the lower tax bill.

Apex Accountants can run both calculations for you and explain the outcome clearly so you can proceed with confidence.

How Apex Accountants Can Help

Apex Accountants provides end-to-end tax support for individuals who want to use the Rent-a-Room Scheme. Our services include:

  • Personal advice on whether the scheme suits your situation
  • Full preparation and submission of Self Assessment tax returns
  • Capital Gains Tax guidance for properties with shared use
  • Assessment of whether opting out offers a better financial outcome
  • Lodger agreement reviews for compliance and clarity
  • Support with insurance and mortgage considerations
  • Year-round personalised tax planning

Our goal is to help you reduce your tax exposure through legal and effective planning. With rising household costs and frozen tax thresholds, every tax-free allowance matters.

Conclusion

The Rent-a-Room Scheme offers one of the most straightforward ways for UK households to earn tax-free income. By combining the £12,570 personal allowance with £7,500 of eligible rental income, you can earn up to £20,070 without paying income tax. The scheme is simple, flexible and widely used across the UK, but it still requires careful consideration in areas such as insurance, mortgage conditions and reporting.

This guide answers the most common questions people search for online and provides a clear understanding of how the scheme works. If you would like personalised advice or need support with your Self Assessment, Apex Accountants is ready to help.

Frequently Asked Questions

Do I need to tell HMRC if I earn less than £7,500?

No. HMRC applies the exemption automatically when your rental income stays below £7,500. You only need to report it if you already complete a Self Assessment return for other income.

Can I use the scheme if I rent through Airbnb?

Yes. You can use the scheme for furnished rooms in your main home listed on Airbnb. Entire property rentals do not qualify, because the scheme only applies to resident landlords.

Can I rent out more than one room under the scheme?

Yes. You may rent multiple furnished rooms in your main home. The £7,500 tax-free allowance applies to the total combined income, not per room, regardless of how many tenants you have.

Is the £7,500 allowance per person or per property?

The allowance applies per property. If two people share rental income, the exemption splits equally, giving each person a £3,750 tax-free limit instead of the full amount individually.

Will the scheme affect my Capital Gains Tax position?

Possibly. Letting part of your home can reduce Principal Private Residence Relief, depending on how the space is used. Professional advice helps assess long-term CGT implications before renting rooms.

Do I need a tenancy or lodger agreement?

A formal agreement is not required by HMRC. However, written terms protect both parties, clarify expectations, prevent disputes, and help outline responsibilities for rent, deposits, utilities and behaviour.

Does the scheme apply to annexe?

Only when the annexe forms part of your main home and has internal access. A fully separate or self-contained unit normally fails the criteria, so it usually cannot claim the allowance.

Do I need special insurance to take in a lodger?

Possibly. Many insurers require policy updates when a lodger moves in. This protects you from claims, accidental damage, and liability issues and avoids invalidating existing home or contents insurance cover.

What happens if my income exceeds £7,500?

You must register for Self Assessment and declare the income. You then choose whether to use the scheme or opt out to deduct actual allowable expenses instead.

Is the UK tax-free allowance increasing?

No. The personal allowance remains frozen at £12,570 until at least 2028. This freeze increases fiscal drag, pushing more taxpayers into higher bands as wages rise.

Is it better to earn £50,000 or £55,000?

Earning £55,000 increases take-home pay overall, but higher marginal tax and reduced benefits, like tapered Child Benefit, may apply. Personal circumstances determine whether the additional income remains financially worthwhile.

Can HMRC investigate my savings?

Yes. HMRC can review bank accounts, savings, investments and interest records. They use data from financial institutions to identify undeclared income, discrepancies or tax irregularities that require further investigation.

Shop Owner Pleads Guilty to Duty and VAT Fraud in South Belfast

Posted on by Farazia Gillani

A shop owner based in South Belfast, operating at Blue Nile Groceries on Donegall Road, pleaded guilty to two charges relating to duty and VAT fraud.

  • On 28 July 2023, the shop owner was charged with handling 21,640 cigarettes in an attempt to defraud duty.
  • On the same date, he admitted involvement in the fraudulent evasion of VAT.
  • The defendant entered a plea of “Guilty” on both counts and will be sentenced on 14 January 2026 after a pre-sentence report.

This case highlights the serious consequences of duty and VAT fraud in the UK tobacco trade.

What Is Duty and VAT Fraud in Tobacco Trading?

Duty fraud in the UK

Under the UK law – such as the Tobacco Products Duty Act 1979 – excise duty applies to tobacco products like cigarettes, hand-rolling tobacco and other smoking products.

If goods are stored, moved or sold without the proper duty being paid or recorded, the business and individuals may commit a criminal offence.

VAT fraud in UK

Fraudulent evasion of VAT occurs when someone is knowingly involved in taking steps with a view to avoiding VAT.

In the tobacco market, this can happen when goods are disguised, duty-paid requirements ignored, or VAT rules bypassed.

Why these frauds matter

  • Revenue loss: Duty and VAT fraud drain public funds.
  • Unfair competition: Legitimate retailers face disadvantage when others trade illicitly.
  • Legal risk: Those convicted can face heavy fines, seizures or imprisonment. 

How We Help Maintain Retail and Excise Compliance in UK

At Apex Accountants, we offer support to retailers and businesses dealing in excisable goods, helping you navigate the risks of duty and VAT compliance. Our services include:

  • Compliance audit: Review your tobacco purchasing, stock and sales processes for duty, VAT, and fiscal-mark issues.
  • Record-keeping systems: Implement robust systems to track excisable goods and evidence duty has been paid.
  • Risk assessment: Identify weak spots in supply chains or trading practices that may trigger HMRC action.
  • Training & guidance: Educate owners and staff on duty/VAT obligations, what to watch for, and how to respond to enquiries.
  • Representation & advice: Provide guidance if you face an investigation or HMRC enforcement action.

Our aim is to help you trade your business legally, reduce exposure to risk, and protect your reputation.

Conclusion

The recent guilty plea by the shop owner in South Belfast underlines the serious nature of duty and VAT fraud in the tobacco sector. If your business deals with tobacco or other excisable goods, it is vital to remain compliant. Non-compliance can lead to serious customs and excise fraud cases, resulting in both financial and legal consequences.

Contact Apex Accountants to assess your obligations and build a strong compliance framework today.

FAQs on Duty and VAT Fraud in the UK

What is the difference between VAT and duty?

VAT is a tax applied to most goods and services sold in the UK. Duty is a specific tax charged on certain products such as tobacco, alcohol, and fuel. Duty is based on the type and quantity of the product, while VAT is usually a percentage of the sale price.

What triggers an HMRC investigation into tobacco duty or VAT fraud?

  • Discrepancies in stock or records.
  • Alerts from intelligence or enforcement agencies.
  • Possession or sale of tobacco products without proper duty or fiscal marks.

Is VAT fraud a criminal offence in the UK?

Yes. VAT fraud is a criminal offence. Anyone who knowingly avoids VAT or helps someone else avoid it can face prosecution. Convictions often result in heavy fines, asset seizure, and, in serious cases, imprisonment.

How serious are the penalties for duty or VAT fraud?

Penalties can be severe. HMRC may seize goods, freeze bank accounts, or issue financial penalties worth thousands of pounds. If the case goes to court, the individual may face a custodial sentence. The level of punishment depends on intent, the value of the fraud, and any previous offences.

What counts as “taking steps” towards fraudulent evasion of VAT?

This includes any action that supports the evasion of VAT. Buying, storing, or selling goods without VAT, falsifying invoices, or concealing untaxed items are all considered steps towards evasion. Even preparatory actions that show intent can be used as evidence.

Can a business avoid liability if it was unaware the goods were illicit?

Ignorance is not a guaranteed defence. If a business “suffers” its premises to be used for illicit goods and knew or ought to have known, it may be liable.

What steps should a retailer dealing in tobacco goods take to stay compliant?

  • Ensure all tobacco products carry the correct fiscal marks and duty has been properly paid. 
  • Keep clear and accurate records of purchases, sales and movements of excisable goods.
  • Be alert to suspicious suppliers or logistics routes that may raise red flags.
  • When in doubt, seek professional advice or report concerns to HM Revenue & Customs.

What is the penalty for customs or excise fraud?

Customs and excise fraud can lead to fines, seizure of goods, loss of licences, and criminal prosecution. Serious or repeated offences can result in long prison sentences. HMRC and Border Force have strong powers to investigate and confiscate illicit products.

Can you report someone for VAT fraud?

Yes. Anyone can report suspected VAT fraud to HMRC. Reports can be made online or through HMRC’s fraud hotline. You do not need evidence; suspicions based on behaviour are enough for HMRC to review.

What happens when you report someone to HMRC?

HMRC reviews the information and decides whether to open an investigation. HMRC does not disclose the identity of the person who made the report. They may check tax returns, visit the premises, request documents, or begin a formal enquiry. If wrongdoing is proven, penalties or prosecution may follow.

Can I report tax evasion anonymously?

Yes. HMRC allows anonymous reports. You do not need to give your name or contact details. You also cannot receive updates on the investigation if you choose to stay anonymous.

Is there a reward for reporting tax evasion in the UK?

HMRC sometimes gives rewards for cases involving large sums or organised crime. Rewards are not guaranteed. HMRC decides based on the value of the information and the outcome of the investigation.

How do I report VAT or duty fraud to HMRC?

You can report it online through HMRC’s tax evasion reporting service or by calling the HMRC fraud hotline. Please include as many details as possible, such as names, addresses, dates, and the manner in which the fraud is occurring.

How UK’s Proposed 20% Exit Tax Will Impact Individuals and Businesses

Posted on by Nida Umair

Chancellor Rachel Reeves has reportedly been considering a 20% “exit tax” that would apply to high-net-worth individuals (HNWIs) leaving the UK. This tax would target unrealised gains on business and investment assets acquired while an individual was a UK resident. The exit tax is being discussed as part of the 2025 Budget to help cover the UK’s growing fiscal deficit.

This exit tax would impose a capital gains tax (CGT) on unrealised gains for individuals who have been UK residents and then decide to emigrate or relocate their tax residence. Such a move aims to prevent the avoidance of UK tax when wealthy individuals move their assets abroad without paying tax on the value appreciation that occurred during their time as UK residents.

What is an Exit Tax?

An exit tax is a tax that countries impose on individuals or businesses when they leave the country and cease to be tax residents. Specifically, it taxes the unrealised gains (the increase in the value of assets, such as shares, businesses, or real estate) that have occurred during the time the individual was a resident.

Exit taxes are designed to stop people from leaving a country and selling assets in a way that avoids paying capital gains tax (CGT) on the appreciation that occurred while they were residents.

Why Might the UK Introduce an Exit Tax?

The UK is facing an economic challenge, and the government needs new ways to generate revenue. Here are some reasons why the UK exit tax is being considered:

1. Raise Revenue

Supporters believe the exit tax could raise around £2 billion for the Treasury by taxing unrealised gains when individuals leave the country. This would help protect the UK’s tax base and prevent individuals from avoiding capital gains tax by emigrating.

  • Wealthy individuals can avoid UK CGT by simply moving abroad and holding onto appreciating assets without selling them.

2. Align with International Norms

Other countries, such as France, Canada, and the United States, already impose exit taxes on individuals when they leave. Advocates for the UK exit tax suggest that the UK should adopt a similar approach to maintain consistency with global standards and prevent wealthy individuals from leaving without paying their fair share of tax. 

3. Prevent Tax Avoidance

The exit tax is considered a tool to curb tax avoidance by wealthy individuals who may otherwise leave the country and avoid paying tax on large capital gains. By taxing unrealised gains, the UK government can ensure that these individuals pay tax on their assets while they are residents. 

Why is the Exit Tax Controversial?

While the proposal aims to raise revenue, critics argue that it could have significant negative consequences. Here are some key concerns:

1. Possible Exodus of Wealth

Business leaders, investors, and tax advisers have warned that even the discussion of an exit tax could encourage wealthy individuals to leave the UK earlier than planned. The concern is that if the tax is introduced, many individuals might accelerate their exit plans to avoid being taxed. This could lead to a reduction in investments in the UK.

2. Practical Challenges in Valuing Assets

One of the major challenges of implementing an exit tax is how to fairly value assets, especially privately held businesses or illiquid investments. Determining the market value of these assets when an individual exits the UK can be complex and subjective. There are concerns that such an approach could create administrative burdens and disputes.

3. Impact on the UK’s Competitiveness

Imposing an additional tax burden on high-net-worth individuals may discourage entrepreneurs from investing in the UK or starting businesses here. The UK already has high corporate tax rates and the highest personal tax burden in decades. An exit tax could send the signal that the UK is no longer a hospitable place for wealth creators.

What Will Be Taxed?

The exit tax would primarily target assets held by high-net-worth individuals that have appreciated in value during their time as UK residents. These could include:

  • Business assets (such as shares in private companies)
  • Real estate (if applicable)
  • Investment assets (stocks, bonds, etc.)

The tax would likely apply when the individual departs the UK. Their assets would be deemed to have been sold, and they would be taxed on the capital gains accrued during their residency in the UK. 

How Can Apex Accountants Help?

At Apex Accountants, we specialise in helping individuals and businesses navigate complex tax changes and plans. Our services include:

  • Tax Planning – We assess your current tax position, reviewing your assets and potential exposure to an exit tax.
  • Residency & Structuring Advice – We guide you on residency status, structuring your assets in a tax-efficient manner.
  • Cross-Border Tax Advice – We offer advice on managing your global tax liabilities when relocating or moving assets across jurisdictions.
  • Budget Monitoring – We stay on top of legislative changes, advising on the best timing for asset disposals or relocation to minimise tax exposure.

Conclusion

The proposed 20% exit tax is still under consideration, but it marks a significant change in how the UK may treat wealthy individuals who decide to leave the country. The tax aims to address tax avoidance and boost revenue, but it may also lead to unintended consequences such as driving capital away from the UK and discouraging investment. As the UK’s tax system evolves, it is crucial for high-net-worth individuals and businesses to seek professional advice and plan ahead.

Frequently Asked Questions

1. When Would the Exit Tax Take Effect?

The exit tax is speculated to take effect after the November 2025 Budget or at the start of the next tax year. This depends on the legislative process and government decision.

2. What Assets Are Exempt From UK Exit Tax?

Typically, primary homes and pensions are exempt from UK exit taxes in many countries. While the UK may follow this pattern, the specifics remain uncertain until the final rules are released.

3. How Can I Prepare for the Exit Tax?

To prepare, review assets with unrealised gains, consider restructuring through trusts or offshore entities, and seek advice on residency status and cross-border tax liabilities to mitigate exposure.

4. Which Countries Have an Exit Tax?

Countries such as France, Canada, the US, and Australia have exit tax regimes that tax unrealised gains when individuals leave, preventing capital gains avoidance by emigrants.

5. How Is an Exit Tax Calculated?

The exit tax would likely calculate gains on the market value of assets at departure, taxing those gains accrued during UK residency. Deferrals may apply under certain conditions.

6. Are There Any Deferrals or Exemptions?

Some countries allow deferrals or exemptions for certain assets like primary homes or pensions. While the UK may follow a similar approach, this is not confirmed yet.

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