Tax Services Archives

Are Small UK Businesses Holding Back Growth To Stay Under The £90,000 VAT Threshold?

Posted on 9 March 202610 March 2026 by Maliha Javaid

Fresh HMRC figures have reignited an old VAT debate: whether the UK’s compulsory VAT registration threshold is creating a “cliff edge” that nudges small firms to stay small. In the year to December 2025, 683,700 businesses reported turnover below the £90,000 VAT threshold, up from 671,000 a year earlier. Over the same period, the number in the £90,000 to £150,000 bracket fell to 280,400 from 306,300.

This pattern can look like “bunching” around the threshold, especially in price-sensitive, labour-heavy sectors like hospitality, personal services and trades. A recent Business and Trade Committee report also warned the VAT threshold can discourage expansion and that cliff edges penalise firms that try to grow.

Why this matters for small businesses

VAT is not just a tax rate. It is a pricing decision, a cash flow issue, and an admin commitment.

Once you register, you generally need to:

charge VAT on most standard-rated sales (often 20%)
file VAT returns (usually quarterly)
keep VAT records and follow VAT rules on invoices, evidence, and adjustments

For firms selling mainly to the public (who cannot reclaim VAT), adding VAT can feel like an overnight price jump. For firms selling mainly to VAT-registered businesses, registration can be neutral or even helpful, because customers can often reclaim VAT and you can reclaim VAT on your costs.

The £90,000 VAT threshold: what the rules actually say

The VAT registration threshold increased from £85,000 to £90,000 from 1 April 2024.

The two tests that trigger VAT registration

You must register if either applies:

Test	What HMRC looks at	What happens
Past turnover test	Taxable turnover in the last 12 months goes over £90,000 (rolling, not tax year)	Register within 30 days of the end of the month you went over
Future turnover test	You expect taxable turnover to go over £90,000 in the next 30 days alone	Register immediately for that expected breach

Key point: it is a rolling 12-month calculation, not “your year end” and not “the tax year”.

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What counts as “taxable turnover”?

HMRC focuses on taxable supplies, which generally include standard-rated, reduced-rated, and zero-rated sales. Exempt and out-of-scope income is treated differently, which is where many small businesses slip up.

Why businesses may cluster below £90,000

The incentive is simple: staying unregistered can keep pricing simpler and admin lighter. But it can also cap momentum.

Common behaviours advisers report include:

turning away work late in the year to avoid breaching the line
reducing hours or pausing marketing during busy periods
delaying invoicing (which can be risky if it does not reflect the true tax point)
changing customer mix, focusing on zero-rated or VAT-friendly work where possible
restructuring activities into separate legal entities

That last point is the most dangerous if done mainly to sidestep VAT.

“Business splitting” and disaggregation risk

Splitting a business into multiple entities is not automatically illegal. But if it is an artificial separation, HMRC can treat the activities as a single taxable person for VAT. HMRC has detailed guidance on identifying when separate businesses are, in reality, one entity.

Practical ways to handle the VAT step-up without stalling growth

1) Price and margin planning (before you register)

model what happens if you add VAT to prices versus absorbing part of VAT in margin
review competitors: are they VAT-registered or not
check whether your customers can reclaim VAT (B2B often can, consumers cannot)

2) Consider VAT schemes that help admin or cash flow

Some schemes are designed to reduce friction:

Scheme	Why firms use it	Key threshold
Flat Rate Scheme	Simpler VAT calculation in some cases	Join if VAT turnover is £150,000 or less
Cash Accounting Scheme	Pay VAT when customers pay you, helpful for slow payers	Join if taxable turnover is £1.35m or less

These are not right for every business, but they can ease the transition for some.

3) Improve record-keeping and invoicing controls

keep clear evidence for VAT invoices and receipts
set up bookkeeping so VAT codes are consistent
avoid last-minute fixes that create errors and rework

What reforms are being discussed?

There is no consensus. The Business and Trade Committee has urged reform to address growth-discouraging cliff edges. Meanwhile, the Resolution Foundation has argued for a much lower threshold (around £30,000) to reduce distortions and raise revenue.

Others argue the opposite: raise the threshold so that only firms with more scale face compulsory registration (one proposal reported was £115,000).

A realistic outcome may involve reviewing how the cliff edge works, not just the number.

How We Help Small Businesses Navigate VAT

At Apex Accountants & Tax Advisors, we help growing businesses make VAT decisions based on numbers, not fear. Our VAT support typically covers:

VAT threshold monitoring and registration planning
pricing and margin reviews to reduce VAT shock
VAT return compliance and error checks
advice on suitable VAT schemes (where eligible)
risk reviews around disaggregation and trading structures, aligned with HMRC guidance

If you would like guidance on managing VAT thresholds or reviewing your VAT position, contact Apex Accountants or book a consultation with our team today.

Conclusion

The latest HMRC figures and parliamentary scrutiny suggest the £90,000 threshold still shapes behaviour. For some firms, holding turnover below the line may feel safer in the short term, but it can also limit long-term value. The better approach is to treat VAT as a planned transition, with proper tracking, pricing decisions, and systems that keep compliance tight while growth continues.

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FAQs

1. Do I have to register for VAT the moment my turnover reaches £90,000?

No. You must register when your taxable turnover exceeds £90,000 over any rolling 12-month period. Once the threshold is breached, you normally have 30 days from the end of that month to notify HMRC and complete VAT registration.

2. How can I correctly track the rolling 12-month VAT threshold?

Businesses should review their total taxable sales at the end of every month. Add together turnover for the previous 12 months, not the tax year. Accounting software or spreadsheets can help monitor the threshold and avoid accidental breaches.

3. What happens if my business goes over the VAT threshold accidentally?

If your turnover exceeds £90,000 and you fail to register on time, HMRC may still require registration from the correct effective date. You may have to pay VAT owed on earlier sales and could face late registration penalties.

4. Is voluntary VAT registration ever beneficial for small businesses?

Yes, voluntary VAT registration can be beneficial in some cases. Businesses that incur significant VAT on expenses or mainly serve VAT-registered customers may benefit because they can reclaim input VAT and appear more established to larger clients.

VAT on UK Private School Fees Survives Latest Legal Challenge

Posted on 9 March 202616 March 2026 by Maliha Javaid

The Court of Appeal has rejected the latest legal challenge to adding VAT on UK private school fees, confirming that the government acted within its powers under the Finance Act 2025. In a judgement handed down on 27 February 2026 in London, senior judges ruled that applying the standard 20% VAT rate to most independent school tuition fees is lawful.

The claim was brought by parents and faith-based schools who argued that the measure disproportionately affected families seeking religious education and risked forcing smaller schools to close. The court dismissed those arguments, holding that Parliament is entitled to determine tax policy and that there is no legal right to a particular type of education free from taxation.

Why this matters

The decision provides legal certainty for HMRC and the independent education sector. Unless overturned by the Supreme Court or reversed by future legislation, VAT at 20% will continue to apply to private school fees.

For schools and families, the financial impact is immediate. The removal of VAT exemption changes fee structures, cash flow, and compliance obligations for institutions that were previously outside the VAT system.

Key points

The Court of Appeal dismissed the challenge on 27 February 2026.
The change was introduced under the Finance Act 2025.
Most independent school tuition fees are now subject to 20% VAT.
The VAT registration threshold remains £90,000 taxable turnover.
Further appeal to the Supreme Court is possible.

What has happened

For decades, private education supplied by eligible bodies was treated as VAT-exempt under the Value Added Tax Act 1994. The Finance Act 2025 removed that exemption for most fee-paying independent schools.

The Court of Appeal confirmed that:

Tax exemptions are created by statute and can be withdrawn by Parliament.
The European Convention on Human Rights does not guarantee tax-advantaged private education.
The Government’s policy falls within its fiscal discretion.

This follows an earlier High Court ruling reaching the same conclusion.

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Background and context of private schools VAT case

VAT is charged at the standard rate of 20% unless a supply is exempt or zero-rated. With the exemption removed, tuition fees now fall within the standard rate.

Schools exceeding the £90,000 VAT registration threshold must:

Register with HMRC
File quarterly VAT returns under Making Tax Digital
Account for output VAT on fees
Apply partial exemption rules where relevant

VAT registration also allows recovery of input VAT on certain business costs, although this is subject to complex calculations.

Who is affected

The ruling on VAT on private schools affects:

Independent day and boarding schools
Faith-based and lower-fee schools
Parents facing higher gross fees
Suppliers connected to education services

Smaller schools operating on narrow margins may face greater strain, particularly where fee increases cannot be fully passed on.

Apex Accountants Insight

The judgement reinforces a central tax principle: VAT treatment is a matter of legislation, not entitlement. Legal challenges to tax policy face a high threshold.

However, the operational impact is significant. Schools newly within the VAT regime must manage:

Partial exemption calculations
Capital expenditure planning
Contractual updates with parents
Cash flow implications of quarterly VAT payments

Where implementation has been rushed, compliance risks increase. HMRC penalties can arise from incorrect returns, late registration or errors in tax point treatment.

Why this matters for UK businesses

The consequences extend beyond the education sector.

Increased fees may alter enrolment patterns.
State schools could experience capacity pressure.
Local economies linked to independent schools may see indirect effects.
Professional advisers must factor policy risk into long-term planning.

The measure illustrates how fiscal policy can reshape established sectors quickly.

What businesses should do

Independent schools and related organisations should:

Confirm VAT registration status.
Review fee structures and parent contracts.
Conduct a partial exemption assessment.
Model cash flow under quarterly VAT reporting.
Seek specialist VAT advice where capital projects are involved.

Early action reduces financial and compliance exposure.

How We Help UK Schools

Apex Accountants & Tax Advisors supports independent schools and charities with:

VAT registration and compliance
Partial exemption and capital goods scheme advice
Contract and invoicing reviews
HMRC correspondence and dispute resolution

Our advice is grounded in current UK tax legislation and HMRC guidance. Get expert guidance on private school VAT today. Contact us now to ensure your school or charity stays fully compliant.

Conclusion

The Appeal Court’s decision on adding VAT to UK private school fees confirms that the policy is legally sound. The focus now shifts from litigation to compliance and financial resilience.

Schools must adapt to operating within the VAT system. Careful planning and technical advice will be essential in managing the long-term impact.

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FAQs About VAT on Private Schools

1. When did VAT start applying to private school fees?

VAT at 20% started applying to private school fees from 1 January 2025, following legislative changes in the Finance Act 2025. Prepayments made on or after 29 July 2024 for terms starting on or after this date are also subject to VAT.

2. What VAT rate applies to school fees?

The standard VAT rate of 20% applies to education, boarding, and vocational training services provided by private schools or connected persons.

3. Do all schools have to register?

No, registration is required only where taxable turnover exceeds the £90,000 threshold in any rolling 12-month period monitored by HMRC.

4. Can schools reclaim VAT on costs?

Yes, registered schools can reclaim input VAT on attributable business costs, subject to partial exemption rules where mixed taxable and exempt supplies exist.

5. Can the ruling be appealed?

Yes, the claimants may seek permission to appeal the Court of Appeal’s 27 February 2026 decision to the Supreme Court.

6. Are private schools closing due to VAT?

No widespread closures are confirmed solely due to VAT; historical annual closure rates were around 3%. Government analysis predicts a 12% long-term sector cost reduction through efficiencies and moderated demand, not mass shutdowns.

7. Is there a legal challenge to VAT on private schools?

Yes, a human rights challenge by parents and faith-based schools was dismissed by the Court of Appeal on 27 February 2026, upholding the policy under Finance Act 2025. A Supreme Court appeal remains possible.

8. Can I claim VAT back on private school fees?

No, parents and individuals cannot reclaim VAT paid on private school fees as it forms part of the taxable fee. Schools may recover input VAT on their own costs, subject to partial exemption rules.

How Do Employee Share Schemes Work? A Practical Guide for UK Businesses

Posted on 5 March 202627 March 2026 by Farazia Gillani

Attracting and retaining skilled employees has become more challenging for UK businesses, particularly for growing companies that need to manage costs carefully. Many business owners ask how do employee share schemes work?’ especially when looking for ways to reward staff without increasing fixed salary costs. Relying on salary increases alone can place pressure on cash flow and may not support long-term retention.

Employee share schemes provide a practical solution. Instead of relying solely on cash rewards, businesses can offer employees a stake in the company. This links employee performance with business success and creates a stronger sense of ownership. As a result, many businesses are exploring employee share schemes UK as a way to improve retention while managing costs effectively.

When structured correctly, employee share schemes can support retention, improve engagement, and offer tax advantages for both the business and its employees. However, the rules can be complex, and choosing the right structure is important to achieve the intended benefits.

Apex Accountants supports businesses in designing and implementing employee share schemes that align with their goals. With the right guidance, businesses can structure schemes that are compliant, tax efficient, and suitable for long-term growth.

This guide explains how employee share schemes work in the UK, the types available, and what businesses need to consider before putting a scheme in place.

Employee share schemes allow employees to acquire shares or rights to shares in the company they work for. Instead of receiving all compensation through salary or bonuses, employees are given the opportunity to benefit from the company’s future growth.

This approach creates a direct link between employee contribution and business performance. If the company grows, the value of the shares may increase, allowing employees to share in that success.

Schemes can be offered to all employees or limited to key individuals such as directors or senior staff, depending on the company’s objectives. Many employee share schemes UK are designed to support long-term employee engagement while maintaining tax efficiency.

Businesses use employee share schemes for several strategic reasons.

Staff retention and long-term commitment
Employees are more likely to stay with a business when they have a financial interest in its success.

Attracting skilled professionals
Startups and growing businesses can compete with larger organisations by offering equity alongside salaries.

Improving motivation and performance
Ownership often leads to greater commitment and accountability.

Supporting business cash flow

Equity-based rewards reduce the need for immediate cash payments.

Potential tax advantages
Certain HMRC-approved schemes provide tax advantages for both employers and employees.

Although the structure varies, most employee share schemes follow a similar process.

Granting shares or options
Employees may receive shares directly or be granted options to purchase shares at a fixed price in the future.

Vesting period
Employees are often required to remain with the company for a set period before they can access the shares or exercise options.

Exercising options
If the scheme involves options, employees can choose to buy shares after the vesting period at the agreed price.

Holding or selling shares
Employees may hold the shares or sell them when permitted, depending on the scheme rules.

Tax treatment
The tax position depends on the type of scheme and how it is structured.

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There are several types of employee share schemes available in the UK, each with different rules and tax implications.

Enterprise Management Incentives (EMI)

EMI schemes are commonly used by smaller and high-growth companies, including many scale-ups. The EMI share scheme is one of the most tax-efficient options available under employee share schemes. From 6 April 2026, updated eligibility limits will apply to EMI options granted, expanding access to a wider range of businesses.

Available to companies or groups with gross assets of up to £120 million (increased from £30 million)
The company must have fewer than 500 full-time equivalent employees (increased from 250)
The total value of options that can be granted across the company is £6 million (increased from £3 million)
Employees can be granted options worth up to £250,000
Options can generally be exercised within up to 15 years (extended from 10 years, and may also apply to certain existing options that have not yet been exercised or expired)
No Income Tax or National Insurance Contributions on grant or exercise in most cases, if qualifying conditions are met
Capital Gains Tax may apply on disposal, potentially at a reduced rate where reliefs such as Business Asset Disposal Relief are available
EMI schemes are popular because of their flexibility and favourable tax treatment and, from April 2026, will be available to a wider range of growing businesses under the revised limits.

EMI schemes are popular because of their flexibility and favourable tax treatment and are now available to a wider range of growing businesses.

CSOP schemes are suitable for businesses that do not qualify for EMI.

Employees can receive options up to £60,000
No Income Tax or National Insurance Contributions if conditions are met
Shares must usually be held for at least three years

SIP schemes allow companies to provide shares directly to employees.

Shares can be given for free, purchased, or matched by the employer
Tax advantages are available if shares are held for five years
Open to all employees, making it suitable for broader participation

Save As You Earn (SAYE)

SAYE schemes combine saving with share options.

Employees save a fixed amount each month
They can buy shares at a fixed price at the end of the savings period
No Income Tax or National Insurance Contributions on exercise if conditions are met

Unapproved schemes are tailored to specific business needs.

Greater flexibility in structure
Often used for senior staff or bespoke arrangements
Income Tax and National Insurance Contributions usually apply

Tax Considerations

Tax treatment is one of the key benefits of employee share schemes, particularly for HMRC-approved plans.

For approved schemes such as EMI, CSOP, SIP, and SAYE:

Income Tax and National Insurance Contributions may be reduced or avoided
Capital Gains Tax is usually payable on disposal of shares
Business Asset Disposal Relief may reduce the Capital Gains Tax rate, subject to conditions

For unapproved schemes:

Income Tax and National Insurance Contributions may apply when options are exercised
Capital Gains Tax applies on any further gain when shares are sold

The exact tax position depends on the specific structure of the scheme and individual circumstances.

Key Considerations Before Setting Up a Scheme

Before introducing an employee share scheme, businesses should carefully plan its structure.

Share valuation
HMRC may need to agree the market value of shares, particularly for EMI schemes.

Eligibility criteria
Decide which employees will be included and on what terms.

Vesting conditions
Set clear rules on when employees can access their shares.

Leaver provisions
Define what happens if an employee leaves the business.

Compliance requirements
HMRC approved schemes must be registered and reported annually.

Impact on ownership
Issuing shares may dilute existing shareholders, so this must be considered.

Common Mistakes to Avoid

Businesses can face challenges if share schemes are not implemented correctly. Common issues include:

Failing to seek professional advice
Incorrect share valuations
Missing HMRC reporting deadlines
Poorly drafted scheme rules
Lack of communication with employees

A well structured scheme should be clear, compliant, and aligned with business objectives.

Employee share schemes can support long-term growth by aligning employees with the company’s success. When employees have a stake in the business, they are more likely to be engaged and committed.

These schemes also allow businesses to reward employees without increasing fixed salary costs, which is particularly valuable for startups and growing companies.

Over time, this can strengthen team stability, improve performance, and support sustainable growth.

Employee share schemes are a valuable tool for UK businesses looking to attract talent, retain key staff, and manage costs effectively. They also offer potential tax advantages when structured correctly.

However, setting up a scheme requires careful planning, accurate valuation, and ongoing compliance with HMRC rules. Choosing the right scheme and structuring it properly is essential to achieving the intended benefits.

Apex Accountants supports businesses with the design and implementation of employee share schemes, including the EMI share scheme, helping ensure they are structured correctly, meet HMRC requirements, and align with wider business and tax objectives.

If you are considering introducing an employee share scheme, professional advice can help you create a structure that fits your business needs and supports long-term growth.

If you would like support with setting up or reviewing your employee share scheme, you can contact Apex Accountants to discuss your requirements with our team.

Farmer Wins VAT Penalty Appeal: What The AFRS Rule Change Means For Farms And Rural Businesses

Posted on 4 March 20264 March 2026 by Muhammad Asif

A recent First-tier Tribunal decision on a farm VAT penalty appeal has put a spotlight on a problem many smaller businesses recognise. Tax rules change. Yet communication can fall short.

In Julian & Anor v HMRC [2026] UKFTT 159 (TC), the tribunal cancelled a £43,438 late VAT registration penalty issued to a small island farming partnership after finding it was reasonable they did not know a key VAT change had taken effect.

The case matters far beyond farming. It highlights how “reasonable excuse” can apply where a rule change was not communicated in a way an ordinary taxpayer could spot, even when the underlying law was in place.

This guide explains what changed in the Agricultural Flat Rate Scheme (AFRS), what the tribunal decided, and what farms and rural businesses should do now.

What happened in the Julian case?

The farming partnership operated on St Martin’s, Isles of Scilly. They used the AFRS, which lets eligible farmers charge a 4% flat rate addition on qualifying sales instead of registering for VAT in the standard way.

A reform announced at the 2020 Spring Budget took effect from 1 January 2021. It tightened the AFRS eligibility rules and introduced a clearer requirement to leave the scheme and register for VAT once turnover went beyond a set point.

The partnership’s farming turnover exceeded the new £230,000 exit threshold, but they did not notify HMRC. HMRC later issued a late registration penalty of £43,438.

Once HMRC raised the issue, the partnership registered and paid a large VAT bill within a year. The tribunal still had to decide whether the penalty should stand.

Why the tribunal cancelled the penalty

The tribunal accepted that the taxpayers had a reasonable excuse.

A key factor was how the change was communicated. The judge described the AFRS amendment as “very significant” yet effectively “hidden away” in specialist material, with limited publicity aimed at ordinary taxpayers.

That point is important. HMRC penalties for failure to notify can be cancelled where a taxpayer shows a reasonable excuse for the failure, then corrects the position without undue delay once aware.

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What is the Agricultural Flat Rate Scheme?

AFRS is a VAT simplification route for farming businesses that meet the conditions.

Instead of registering for VAT and reclaiming VAT on purchases, an eligible farmer:

stays outside standard VAT
charges a flat rate addition (commonly shown on invoices) to VAT-registered customers on qualifying supplies
keeps that amount, rather than paying it to HMRC

AFRS reduces admin, yet it is not “set and forget”. The eligibility tests matter, and they change.

What changed from 1 January 2021?

HMRC’s VAT Notice confirms the key AFRS thresholds:

Entry threshold: farming turnover must be below £150,000 to join
Exit threshold: members can stay on the scheme until annual farming turnover goes above £230,000

Once you exceed the exit threshold, you are expected to notify HMRC, leave AFRS, and register for VAT (standard VAT rules then apply).

Key point many farms miss

These AFRS thresholds are separate from the general VAT registration threshold.

For most UK businesses, VAT registration becomes mandatory when taxable turnover exceeds £90,000 in a rolling 12-month period (current figure).

So a farming business might face VAT registration because:

it must leave AFRS after passing the £230,000 AFRS exit point, or
it exceeds the general £90,000 VAT threshold (depending on supplies and structure), or
it expects taxable turnover in the next 30 days to exceed the threshold.

The penalty HMRC used: what it is, and why it stings

Late VAT registration penalties can arise under Schedule 41 Finance Act 2008, which applies where a business fails to notify HMRC of liability to register.

HMRC guidance explains that you can challenge a penalty through:

an HMRC review request (normally within 30 days), or
an appeal to the tribunal (normally within 30 days of the decision or review conclusion).

In farming, cash flow can be seasonal. A five-figure penalty on top of VAT due can put real strain on working capital, especially where margins stay tight and records are not run through dedicated finance teams.

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Practical lessons from this farm VAT penalty appeal case

1) Track the right turnover figure

AFRS uses turnover from farming activities for the entry and exit tests.

Action steps:

maintain monthly turnover summaries
separate farming activity turnover from non-farming income in your bookkeeping
keep a rolling 12-month view, not just year-end numbers

2) Build a “VAT trigger” checklist

A simple checklist prevents missed thresholds.

Use triggers such as:

farming turnover approaching £230,000
taxable turnover approaching £90,000
new income streams (farm shop, holiday lets, events, diversification)
major contract wins, that could push turnover over a limit within 30 days

3) Do not assume a scheme removes all VAT risk

AFRS reduces admin. It does not remove responsibility.

A farm can still become VAT-registered due to:

exceeding VAT thresholds
selling taxable non-farming supplies
structural changes in the business
changes in HMRC rules or guidance

4) If you find a missed registration, act fast

The tribunal gave weight to prompt corrective action once the issue came to light in this case reporting.

In real terms:

register quickly
quantify VAT due with working papers
agree a payment plan where needed
keep an evidence file showing when you became aware and what you did next

You Might Also Want to Know: Impact of the 182‑Day Let Tax Rule on Welsh Farm Businesses

5) Appeals need evidence, not frustration

“Reasonable excuse” is fact-specific. It is not automatic.

Evidence that helps:

copies of communications received (or not received)
records showing you ran the business without specialist support
notes of advice sought
timeline of discovery and corrective steps
HMRC’s own guidance sets out appeal routes and time limits, so deadlines matter.

AFRS vs standard VAT: A quick comparison

Topic	AFRS	Standard VAT registration
Admin level	Lower	Higher
VAT on sales	Flat rate addition (scheme rules)	Charge VAT at correct rate
VAT on purchases	No input VAT reclaim	Input VAT reclaim (subject to rules)
Key eligibility	Join < £150k, leave > £230k (farming turnover)	Must register over £90k taxable turnover
Common risk	Missing exit point	Rate errors, digital records, penalties

Thresholds and scheme conditions per HMRC guidance.

How We Help Farms Plan VAT

At Apex Accountants, we support farms, estates, growers, and diversified rural businesses with VAT planning and compliance that fits real operations.

Our VAT support typically covers:

AFRS eligibility checks and exit planning
VAT registration reviews (threshold monitoring, timing, evidence file)
VAT return process set-up, plus MTD-ready bookkeeping workflows
Diversification reviews (holiday lets, farm shops, events, contracting)
Penalty defence packs, review requests, and tribunal-ready evidence bundles, where appropriate
Cash flow modelling for VAT liabilities, plus Time to Pay support where needed

If you want a clear position on whether you should stay on AFRS, leave it, or register for VAT, we can review your figures and map the next steps.

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Conclusion

The Julian tribunal decision is a reminder that VAT penalties are not always the final word. Where a major change was genuinely hard to spot, a reasonable excuse argument can succeed.

Yet the safer route is prevention.

If your farming turnover is climbing toward £230,000, or your wider taxable turnover is nearing £90,000, put monthly checks in place and get advice early.

Contact Apex Accountants today to review your VAT position and keep your business protected.

FAQs About AFRS and VAT

1) What is the AFRS flat rate addition?

It is a scheme-based addition (commonly 4%) charged on qualifying supplies by eligible farmers, kept by the farmer, rather than paid to HMRC.

2) When must I leave AFRS?

HMRC guidance says you can stay on AFRS until your annual farming turnover goes above £230,000.

3) What is the current VAT registration threshold?

HMRC states the registration threshold is more than £90,000 of taxable turnover.

4) What penalty applies for failing to notify VAT registration?

Penalties can be charged under Schedule 41 Finance Act 2008 for failure to notify liability, depending on facts and behaviour.

5) How do I appeal a late VAT registration penalty?

HMRC guidance explains you can request a review or appeal to a tribunal, typically within 30 days of the relevant letter.

6) Does paying the VAT due remove the penalty?

Not automatically. Payment helps, but penalties depend on notification failures and whether a reasonable excuse exists. The Julian case shows a penalty can still be challenged successfully on the facts.

These are the questions we see most often from farming and diversified rural businesses, based on recurring VAT registration and penalty queries:

7) Do I need to register for VAT once I pass £90,000?

In most cases, yes, when taxable turnover exceeds £90,000 on a rolling 12-month basis, or you expect to exceed it in the next 30 days.

8) I’m on AFRS. Do I still watch the VAT threshold?

Yes. AFRS has its own £230,000 exit test and other conditions, plus general VAT rules can still bite depending on supplies and structure.

9) Can ignorance of a rule change ever be a reasonable excuse?

Rare, yet the Julian decision shows it can happen where the change was poorly publicised and it was objectively reasonable the taxpayer did not know.

10) How long do I have to appeal a VAT penalty?

Normally 30 days, either for review or appeal, depending on the stage.

Rockstar’s “Grand Theft Tax” Row, Explained: What UK Video Games Tax Relief Really Does

Posted on 2 March 20262 March 2026 by Farazia Gillani

Rockstar Games’ UK tax position is back in the headlines. A recent report, picked up by The Scotsman and widely repeated across the games press, says Rockstar’s UK studio claimed more than £70 million through the UK’s Video Games Tax Relief (VGTR) in the 2024–25 financial year. The same coverage points to reported UK profits of over £87 million and dividends of around £85 million, which is why the story has sparked a fresh debate about whether the relief still hits its original target. A Labour MP has also criticised the scale of relief being claimed, using the phrase “Grand Theft Tax”, while worker representatives and unions have argued that public support should come with stronger expectations around fairness and workplace rights. Rockstar, for its part, says it has invested heavily in the UK and created a large number of creative-sector jobs.

At Apex Accountants, we see two separate issues getting mixed together:

How VGTR (and its replacement, VGEC) works in law
Whether the policy outcomes still match what taxpayers expect

This article explains both, so studio owners, finance teams and founders can make informed decisions.

What is VGTR and why does it exist?

VGTR was introduced in 2014 to support the development of video games with cultural value and to encourage production in the UK and Europe. An HMRC-commissioned evaluation describes VGTR as one of the UK’s creative industry tax reliefs, designed to incentivise culturally British or European games and strengthen the sector.

In practice, VGTR reduces corporation tax for qualifying games projects or produces a payable credit for loss-making companies. It has been especially important for smaller studios that need cashflow support while they build and ship a game.

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The key eligibility points (VGTR)

To claim VGTR, HMRC guidance says the game must:

Be certified as British by the BFI cultural test
Be intended for supply to the public
Have started production on or before a stated deadline in the guidance
Exclude certain categories, such as gambling and advertising products

The “British values” phrase that appears in some commentary is often a shorthand for the BFI cultural test and certification process, which is the formal route in the law and HMRC guidance.

The policy row: why Rockstar’s claim is controversial

The argument is not that claiming VGTR is illegal. It is about whether it is desirable for a very large studio, owned by a global group, to claim a large share of relief in the same years it reports strong profits and pays substantial dividends.

Several points are driving the debate:

Concentration risk: A significant portion of VGTR has been claimed by Rockstar across multiple years, raising questions about the policy balance between inward investment and support for smaller studios.
Worker allegations: A UK MP has raised concerns in Parliament after being contacted by constituents who believed they were dismissed for organising at work and said the claims should be scrutinised given the scale of relief.
Fairness optics: When headlines highlight large relief claims alongside profits and dividends, the public often reads the relief as “avoiding tax”, even though the mechanism is a relief built into the tax system.

Rockstar’s tax case response has been to emphasise local investment and job creation, stating that it has created substantial UK employment and helped build skills and innovation in the creative sector.

The practical reality: VGTR is changing, and studios must plan for 2026 and beyond

If you develop games in the UK, the bigger operational story is not Rockstar. It is the transition from VGTR to the Video Games Expenditure Credit (VGEC).

VGEC: the new regime replacing VGTR

HMRC guidance confirms:

VGEC can be claimed on qualifying expenditure incurred from 1 January 2024
The credit is calculated at a headline rate of 34% of qualifying expenditure (subject to the scheme’s rules)
Qualifying expenditure is based on UK core costs and is capped through the scheme’s formula

The BFI also explains that expenditure credits are available from 1 January 2024, with new productions moving to the expenditure credits from 1 April 2025, and a full move by 1 April 2027.

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VGTR vs VGEC: what changes in real life

Here are the differences that matter for finance teams.

VGTR (older relief)

Relief is linked to the qualifying trade computation and can reduce tax or create a payable credit.
It relies on the BFI cultural test and qualifying expenditure rules.
It applies to games that meet the scheme conditions and timeline restrictions.

VGEC (new credit)

It is a taxable expenditure credit calculated on qualifying spend.
HMRC sets a 34% headline rate, but you still need to model the net impact after corporation tax and your company’s position.
UK spending rules are central, so your outsourcing and subcontracting profile matters.

This is why two studios can have the same budget and receive very different outcomes.

The compliance risks studios need to manage

Whether you are a five-person indie team or a multi-site studio, most VGTR and VGEC problems come from avoidable process gaps.

Watch out for:

Incorrect “core costs” classification (mixing production costs with non-qualifying spend)
Weak evidence files for cultural test scoring, interim certification and final certification
Project boundary issues if several products or expansions are treated inconsistently
Late planning around the transition dates, which can affect relief choice and cashflow
Overlaps with R&D claims that are not properly mapped, documented and reconciled

HMRC expects clear, supportable numbers, with a proper trail from bookkeeping to claim schedules.

What grand theft tax means for the UK games sector

The headline row will continue. But for most UK studios, the key takeaway is simpler:

The UK still backs game development through tax policy.
The mechanism is shifting to VGEC.
Better record keeping and earlier modelling will decide who benefits most.

Public pressure may also increase scrutiny, even for fully compliant claims. So your documentation and governance matter more than ever.

How We Can Help You

If you are a UK game developer, publisher or creative studio group, Apex Accountants can support you with:

VGTR and VGEC eligibility reviews and project structuring
BFI cultural test support and evidence packs
Claim preparation and submission support with clear audit trails
R&D tax credit reviews where relevant to your development activity
Management accounts and forecasting for project cashflow control
Bookkeeping and cloud accounting setups built around clean cost coding
Payroll and contractor payments support aligned to project reporting

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Conclusion

Rockstar’s tax case has reignited a public argument about the purpose of creative tax support and who should benefit most from it. The political optics are real, and so are the concerns about policy concentration and fairness.

For studios, though, the action point is not the headlines. It is your own compliance and planning.

VGTR and VGEC can be valuable. But the rules are detailed, and the transition timeline is active. HMRC and the BFI guidance is clear on certification, qualifying spend and the move to expenditure credits.

If you want to claim with confidence, start with clean project cost tracking, early modelling and a strong evidence file. That is how you protect cashflow, reduce risk and keep your claim defensible if questions arise.

If you would like support with Video Games Tax Relief or the new expenditure credit, you can contact Apex Accountants today. Our team can review your eligibility, prepare your claim, and guide you through HMRC requirements. Visit our website or get in touch to discuss your project.

FAQs: Video Games Tax Relief and VGEC in the UK

1. How does VGTR work in the UK?

Video Games Tax Relief (VGTR) allows eligible companies to reduce Corporation Tax or receive a payable credit. Relief is based on qualifying core costs, such as designing and testing. Claims can cover up to 80% of costs, with an effective benefit around 20%.

2. Who qualifies for video games tax relief?

A company can qualify if it develops a game intended for public release, passes the BFI cultural test, and is subject to UK Corporation Tax. The company must be responsible for design, production, and testing and cannot claim for advertising or gambling products.

3. What is the BFI cultural test, and how do you pass it?

The BFI cultural test assesses whether a game is “British”. It is points-based, requiring at least 16 out of 31 points across areas such as cultural content, contribution, location, and personnel. Certification is mandatory for both VGTR and VGEC claims.

4. VGTR vs VGEC: which is better?

VGTR offers a deduction or payable credit on profits or losses, while VGEC provides a taxable credit at a headline rate of 34% of qualifying UK expenditure. The better option depends on project timing, cost structure, and whether production began before April 2025.

5. Is VGTR ending, and when?

Yes, VGTR is being phased out. New productions starting after 1 April 2025 must use the Video Games Expenditure Credit. Existing projects can continue claiming VGTR until 31 March 2027, after which all claims will move fully to the new system.

6. Can overseas-owned studios claim UK relief?

Yes, overseas-owned studios can claim UK relief if they operate a UK company subject to Corporation Tax. The company must meet eligibility rules, including passing the cultural test and carrying out qualifying development activity within the UK.

Lycamobile Loses VAT Appeal on Prepaid Bundles: Key VAT Lessons for Subscription Models

Posted on 2 March 20262 March 2026 by Rida Ahmed

In February 2026, the UK Upper Tribunal (Tax and Chancery Chamber) ruled that Lycamobile UK Ltd must pay VAT on the full price of its prepaid mobile “plan bundles” at the point of sale, not just on the minutes or data actually used. In a decision widely summarised as Lycamobile Loses VAT Appeal, the tribunal rejected the company’s argument that VAT should be treated purely as a tax on consumption. Lycamobile had only accounted for VAT when customers used their allowances, but HMRC maintained that the entire bundle constituted a taxable supply upfront. The tribunal agreed with HMRC, meaning Lycamobile now faces VAT liabilities exceeding £50 million.

Lycamobile VAT Case

Dispute timeline:

HMRC first challenged Lycamobile’s VAT treatment in 2012 and issued assessments for around £51 million covering 2012–2019. Lycamobile appealed to the First-Tier Tribunal (FTT) in 2024, but the FTT largely sided with HMRC (allowing only minor adjustments for calls/data used outside the EU). Lycamobile then appealed that decision to the Upper Tribunal (UT). On 12 Feb 2026 the UT (Mr Justice Cawson and Judge Scott) dismissed Lycamobile’s appeal and upheld HMRC’s position.

Bundle structure

Lycamobile sold prepaid bundles, typically 30-day plans, with fixed allowances of call minutes, SMS messages, and data, and in some cases additional value-added services such as roaming or digital content. Any unused allowances expired at the end of the period. The dispute centred on VAT on bundled services, with HMRC arguing that the sale of the bundle itself represented a supply of services, meaning VAT was due on the full price at the point of sale. Lycamobile, however, maintained that the bundles operated more like vouchers or stored credit, so VAT should only arise when customers actually used their allowances.

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Arguments: VAT at Sale versus VAT on Use

Lycamobile’s view:

The company argued that buying a bundle created a right to future services, not the services themselves. In other words, customers had only prepaid for a possible future supply, so VAT should be a consumption tax applied on use. Under this theory the correct VAT “tax point” occurs when and only if an allowance is used. Lycamobile pointed to cases like MacDonald Resorts (Points Rights) and FindMyPast, and to the EU voucher rules, to support the idea that unused rights carry no VAT. It said treating the bundle itself as a supply would “undermine” voucher legislation which treats multi-purpose vouchers as taxable on redemption only.

HMRC’s view:

HMRC countered that Lycamobile sold a package of services (guaranteed minutes/text/data for a fixed time). The true supply was the bundle itself – the availability of those services – fixed in advance and paid for in full. HMRC compared the bundle to a subscription or ticket: for example, a streaming or gym membership. A person pays a flat fee for access (regardless of how much they use). Likewise, most Lycamobile bundles were under-used (customers typically used only 5–10% of their allowances), yet the price was the same. HMRC argued that VAT had to be charged when the bundle was sold – just like charging VAT on a fixed-price concert ticket or a monthly media subscription – irrespective of later usage.

First-Tier Tribunal Decision

Before reaching the UT, the FTT (in 2024) already decided that Lycamobile’s bundles were supplies taxable at sale. The FTT held that each Type 1 bundle (call/data/text only) was a single supply made when sold, and for Type 2/3 bundles (including value-added or roaming services) the extra features were merely ancillary to the main supply. In practice the FTT charged VAT on the full bundle price, but allowed retrospective VAT adjustments for any services used outside the UK (up to October 2017, before EU rules changed). Lycamobile appealed on four grounds, but the core dispute (first ground) was simply whether the supply occurs at sale or at use.

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Upper Tribunal’s Ruling

The Upper Tribunal firmly sided with HMRC. Its key findings were:

VAT at point of sale:

The UT agreed that the bundle sale is the “real supply” for VAT. “Receipt of the Allowances was the customer’s purpose in buying the bundle… VAT therefore arose at the point of sale,” the UT held. In other words, Lycamobile supplied the availability of minutes/data in advance, so VAT was due on the entire bundle price immediately.

Bundle = guaranteed availability:

The tribunal emphasised that customers were buying guaranteed access to a set amount of telecommunication services for a fixed period. This “guaranteed availability, at a fixed price, for a fixed period” was the substance of the supply. The fact that most bundles went largely unused (only 5–10% of allowances typically used) only underscored that customers paid for availability rather than per-minute use.

No “all information” requirement:

Lycamobile had argued (relying on cases like MacDonald Resorts and FindMyPast) that VAT cannot be charged until all relevant details (like future use) are known. The UT rejected this. It noted those cases dealt with prepayment timing, not with identifying the supply itself. The judges pointed out that if Lycamobile were right, it would undermine virtually all fixed-price services: “how could there ever be a supply of availability or access” (for example a monthly streaming subscription) “if usage is unknown” at the start. The tribunal expressly held that there is no legal rule preventing VAT from being due on an advance payment even if not all future details are known at sale.

Voucher rules inapplicable:

Lycamobile also claimed its bundles were multi-purpose vouchers under Schedule 10A/10B of UK VAT law (and the 2019 EU Voucher Directive). If so, VAT would only be payable on redemption (use of the voucher). The UT disagreed. It agreed with the FTT that Lycamobile’s bundles failed the criteria for vouchers. A true voucher is an identifiable instrument with a monetary face value that can be redeemed. By contrast, a bundle was simply a sale of services: there was no “instrument” being accepted as consideration when the bundle was used. In short, these were not vouchers under the VAT Act, so the voucher deferral rules (Schedule 10B after 2019, or Schedule 10A before) did not apply.

Other grounds:

The UT also rejected Lycamobile’s arguments about value-added services and about EU outside-use. For completeness, the UT agreed the FTT correctly treated ancillary services as part of the bundle supply, and it agreed the limited VAT adjustments for non-EU usage (pre-Nov 2017) in the FTT decision. But these were minor technical points. The main outcome is that Lycamobile’s appeal was dismissed in full.

In summary, the UT confirmed that VAT must be charged on Lycamobile’s plan bundles at the time of sale. This reflects HMRC’s view that VAT is a tax on the provision of service availability, not strictly on consumption of units.

Lycamobile Loses VAT Appeal Case: Implications for Businesses

This decision has important lessons for mobile operators and others selling bundled or prepaid services in the UK:

VAT timing:

Companies must charge VAT when prepaid plans or bundles are sold, even if customers do not use all the allowances. They cannot defer VAT until usage. VAT on unused allowances is effectively non-recoverable (because no supplies happen after sale), so selling bundles at a fixed price now carries a higher tax cost.

Pricing and cash flow:

Some operators may need to revisit their pricing or marketing. Lycamobile and other MVNOs serving cost-sensitive segments often sell bundles with generous allowances (and many go unused). With VAT due on the full amount, operators could face higher upfront VAT bills and cash-flow pressure. Retailers and distributors should also check their margins – VAT inclusion might need adjusting in bundle prices if previously omitted.

Voucher rules clarified:

The case clarifies that multi-use vouchers (Schedule 10B) will not cover typical prepaid bundles unless they have a distinct redeemable instrument with trackable value. Only genuine vouchers (like gift cards or prepaid cards with face value) can use those deferral rules.

Precedent for other industries:

While this case is about telecoms, the principle applies to any fixed-fee subscription or bundle. Service providers should note that under UK law VAT is often due on advance payments for access (consistent with the VAT Directive). In practical terms, firms selling subscriptions or membership-type services (online, fitness, travel, etc.) can usually rely on charging VAT at sale.

Roaming and outside-the-EU usage:

On a side note, HMRC had also examined whether data/voice used outside the UK (pre-Nov 2017) was outside the scope of UK VAT. The UT largely let the FTT’s limited adjustments stand, but also hinted this did not change the main supply treatment. Businesses should still apply the “place of supply” rules carefully for roaming.

Overall, HMRC’s position is now confirmed: VAT is payable on prepaid telecom bundles at sale. Lycamobile (and similar operators) may choose to seek further appeal, but any higher court would likely follow the tribunal’s reasoning.

How We Help Subscription Businesses

At Apex Accountants we help clients navigate complex VAT issues like this one. Our specialists can assist with:

VAT compliance and planning – ensuring your telecom or service bundles are structured correctly for VAT, and advising on how voucher and subscription rules apply.
Tax dispute support – representation and advice in tax tribunal appeals and negotiations with HMRC.
Cash-flow and pricing analysis – modelling how VAT at point of sale affects your pricing, margins and cash flow; we can help redesign bundle offerings if needed.
Training and updates – keeping your finance team informed about VAT rules on vouchers, prepayments and digital services.

Whether you sell mobile services, digital subscriptions or bundled products, we can help you stay compliant and minimise surprises.

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Conclusion

The Lycamobile case underscores a simple VAT truth: if you sell a product that guarantees future use (like a bundle or subscription), the tax is normally due up front. The Upper Tribunal’s decision is thorough and well-founded: Lycamobile’s prepaid bundles are taxable supplies at the point of sale. Businesses should take note and ensure their VAT accounting matches this outcome.

In future, operators will need to charge VAT on any unused allowances and cannot treat those amounts as tax-free. As one judge noted, otherwise VAT could never be charged on services like monthly streaming or gym memberships, which would not reflect how VAT law operates in practice. This ruling removes uncertainty and aligns UK practice with long-standing principles of VAT law.

If you would like guidance on how these changes affect your business, you can contact us for tailored VAT advice and support.

FAQs: VAT on Bundled Services and Subscription Models in UK

1. When is VAT due on bundled services in the UK?

VAT is generally due at the point of sale when a bundled service is supplied. The Lycamobile case confirmed that telecom bundles create a taxable supply upfront, even if services are used later or remain unused.

2. Do businesses pay VAT on unused services or allowances?

Yes. The Upper Tribunal confirmed that VAT applies to the full price paid for bundled services, including unused allowances. Customers are paying for access or availability, not actual usage, so unused elements remain taxable.

3. Are prepaid mobile bundles treated as vouchers for VAT?

No. The tribunal held that telecom bundles are not vouchers under UK VAT rules. Instead, they represent a direct supply of services at purchase, meaning VAT must be charged on the total price upfront.

4. What was the key issue in the Lycamobile VAT case?

The dispute focused on whether VAT was due when bundles were sold or only when allowances were used. The tribunal confirmed VAT arises at sale, rejecting the argument that taxation should depend on usage.

5. Why did HMRC argue VAT should be charged upfront?

HMRC argued that customers purchase guaranteed access to services for a fixed price. This creates a taxable supply at sale. The tribunal agreed, stating that availability itself is a supply for VAT purposes.

6. Did the tribunal allow any exceptions to VAT on bundles?

A limited exception applied to older supplies before November 2017. Where services were effectively used outside the EU, VAT adjustments could be made. However, the general rule remains that VAT is due on sale.

7. What does this ruling mean for subscription businesses?

The decision confirms that subscription models, including telecoms, gyms, and streaming services, are taxable when sold. Businesses cannot defer VAT based on customer usage, as payment secures access rather than consumption.

8. How does this affect VAT compliance for UK businesses?

Businesses must identify the correct tax point and charge VAT at sale for bundled or subscription services. Incorrect timing can lead to assessments, penalties, and interest, especially where VAT has been under-declared.

9. Can VAT be adjusted if services are not used?

Generally, no adjustment is allowed simply because services are unused. VAT is based on the supply made at sale. Adjustments are only possible in specific circumstances, such as non-EU use under earlier rules.

10. What lessons should UK businesses take from the Lycamobile case?

The key lesson is to assess the real nature of the supply. If customers pay for access or availability, VAT is due upfront. Businesses should review pricing models, contracts, and VAT treatment to avoid significant liabilities.

Everything You Need to Know About Corporation Tax in the UK

Posted on 25 February 202625 February 2026 by Malaika Sohail

Corporation tax in the UK is one of the most challenging responsibilities for companies to manage. With changing tax rates, strict deadlines, and complex filing rules, even small mistakes can lead to penalties, cash flow issues, or unnecessary stress for business owners.

If you run a limited company, you are not alone in finding corporation tax confusing or time-consuming. Many businesses struggle to keep track of what they owe, when payments are due, and how to file correctly while also trying to focus on running and growing their company.

This guide brings clarity to the process. Drawing on current UK tax rules, it explains corporation tax, covering up-to-date rates, key deadlines, payment methods, and practical corporation tax support that helps businesses stay compliant, organised, and financially confident.

What Is Corporation Tax?

Corporation Tax is a tax charged on the profits made by UK companies. It applies to:

UK limited companies
Foreign companies with a permanent presence in the UK
Clubs, societies, and associations that generate taxable income

Tax is paid on profits after allowable business expenses, reliefs, and capital allowances have been deducted.

What Counts as Taxable Profit?

Taxable profit usually includes:

Trading profits from day-to-day business activity
Investment income such as interest
Capital gains from selling business assets

Allowable expenses can reduce your tax bill. These include staff costs, office expenses, professional fees, and certain equipment costs.

UK Corporation Tax Rates (2025 to 2026)

The UK uses a tiered corporation tax system based on profit levels.

Corporation Tax Rates Table

Annual Profits	Corporation Tax Rate
£50,000 or less	19%
£50,001 to £250,000	Between 19% and 25%
Over £250,000	25%

Companies with profits between £50,000 and £250,000 benefit from marginal relief. This reduces the effective tax rate so it increases gradually rather than jumping straight to 25%

Patent Box Rate

Companies earning profits from patented inventions may qualify for a reduced effective tax rate of 10% under the Patent Box regime, subject to conditions.

Corporation Tax Deadlines You Must Know

There are two separate deadlines. One for paying the tax and one for filing the tax return.

Corporation Tax Payment Deadline

Most companies must pay corporation tax within nine months and one day after the end of their accounting period.

Example

If your accounting year ends on 31 March 2025, your corporation tax payment is due by 1 January 2026.

Corporation Tax Return Deadline (CT600)

The CT600 return must be submitted within twelve months after the end of the accounting period.

Using the same example above, the CT600 must be filed by 31 March 2026.

Corporation Tax Deadlines at a Glance

Accounting Period End	Tax Payment Due	CT600 Filing Due
31 March 2025	1 January 2026	31 March 2026
30 June 2025	1 April 2026	30 June 2026
30 September 2025	1 July 2026	30 September 2026
31 December 2025	1 October 2026	31 December 2026

Special Rules for Large Companies

Companies with profits over £1.5 million usually cannot pay corporation tax in one lump sum.

Instead, they must pay through quarterly instalment payments.

Quarterly Instalment Overview

Instalment	When It Is Due
First	Six months and thirteen days after the start of the accounting period
Second	Three months after the first instalment
Third	Three months after the second instalment
Final	Three months and fourteen days after the end of the accounting period

Very large companies with profits above £20 million may have earlier payment schedules.

How to Pay Corporation Tax

Corporation Tax must be paid electronically. Accepted payment methods include:

Online or telephone banking
Faster Payments
BACS bank transfer
CHAPS same-day transfer
Direct Debit
Corporate debit or credit card

Always use your unique 17-character corporation tax payment reference so HMRC can match the payment correctly.

What Happens If You Miss a Deadline?

Late Payment

Interest is charged automatically from the day after the payment deadline until the tax is paid in full.

Late Filing Penalties

Delay Length	Penalty
One day late	£100
More than three months	Additional £100
More than six months	10% of unpaid tax
More than twelve months	A further 10% of unpaid tax

Repeated late filing increases fixed penalties.

Corporation Tax Solutions for UK Businesses

Managing corporation tax does not have to be stressful. The right solutions can save time, reduce errors, and improve cash flow.

Accounting Software

Most companies now use commercial accounting software to prepare and submit corporation tax returns. This is especially important because HMRC’s free online CT600 filing service closes on 31 March 2026.

Benefits include:

Automatic profit calculations
Built-in deadline reminders
Direct online submission to HMRC
Better record keeping throughout the year

Professional Corporation Tax Support

Accountants provide valuable corporation tax support for businesses with:

Marginal relief calculations
Quarterly instalment requirements
Research and development claims
Patent Box claims
Group company structures

Professional advice can reduce risk and help businesses claim all available reliefs legally.

HMRC Online Business Tax Account

Every company should maintain an HMRC business tax account. It allows you to:

View Corporation Tax liabilities
Check payment history
Set up Direct Debit
Receive official HMRC messages

This helps businesses stay organised and avoid missed deadlines.

Case Study Example

Small Company

Annual profit: £40,000
Corporation Tax rate: 19%
Tax payable: £7,600
Payment due: Nine months and one day after year-end
Filing due: Twelve months after year-end

Growing Company

Annual profit: £180,000
Marginal relief applies
Effective tax rate between 19 and 25%
Requires careful calculations to avoid overpaying

Using accounting software and professional advice helped both companies meet deadlines and avoid penalties.

How Apex Accountants Helps with Corporation Tax in the UK

Managing corporation tax correctly is essential for the financial health and compliance of any UK company. With changing tax rules, strict deadlines, and increasing digital requirements, many businesses find it difficult to keep up while also focusing on growth.

Apex Accountants provides clear, reliable, and proactive corporation tax solutions designed around your business needs. We handle everything from accurate profit calculations and CT600 submissions to deadline management and tax planning, ensuring nothing is missed. Our approach combines up-to-date accounting technology with hands-on professional expertise, giving you clarity, confidence, and control over your tax position. By choosing Apex Accountants, you reduce the risk of penalties, improve cash flow planning, and gain a trusted advisor who understands your business. If you want expert support with your corporation tax and a partner you can rely on, contact Apex Accountants today to find out how we can help.

Everything You Need to Know About VAT Returns UK

Posted on 25 February 202625 February 2026 by Malaika Sohail

Filing VAT returns UK is a legal duty for all VAT-registered businesses. To stay compliant with HMRC, businesses must submit accurate figures, keep the right records, and file on time using Making Tax Digital-compliant software. Understanding what to do, which documents are needed, and the important VAT dates can make the process much easier and reduce the risk of penalties.

Many businesses choose VAT return assistance services to make sure everything is done correctly and on time.

What Is a VAT Return?

A VAT return is a report submitted to HM Revenue & Customs (HMRC), usually every quarter, detailing the amount of VAT a business has charged to customers (output VAT) and the VAT it has paid on purchases (input VAT). The return determines whether the business needs to pay VAT to HMRC or is entitled to a refund.

Errors in VAT returns can lead to penalties, interest charges, and unwanted HMRC enquiries, which is why accuracy and compliance are so important.

What You Need to Do to File VAT Returns UK

To file VAT returns correctly, businesses must follow these steps:

Keep accurate VAT records for all sales and purchases
Calculate total output VAT charged to customers
Calculate total input VAT paid on allowable expenses
Work out the difference between output VAT and input VAT
Submit the VAT return using Making Tax Digital software
Pay any VAT owed to HMRC by the deadline

Errors or late submissions can lead to fines, interest charges, and HMRC checks, which is why accuracy is important.

Documents Needed for VAT Returns

To prepare VAT returns, businesses must keep clear and complete records. These documents are required:

Sales Records

VAT invoices issued to customers
Till receipts and sales summaries
Records of zero-rated and exempt sales

Purchase Records

VAT invoices from suppliers
Receipts for business expenses
Import and export VAT documents if applicable

Accounting Records

Bank statements
Cash records
VAT account showing running totals

HMRC requires VAT records to be kept for at least six years, and they must be stored digitally under Making Tax Digital rules.

VAT Rates and Figures You Need to Know

When filing VAT returns, businesses must apply the correct VAT rate:

The standard rate VAT is 20%
Reduced-rate VAT is 5% for certain goods and services
Zero-rate VAT is 0% for qualifying items
Exempt supplies are not subject to VAT

Using the wrong rate can lead to incorrect VAT returns and penalties.

VAT Return Deadlines in the UK

VAT returns must be submitted one calendar month and seven days after the end of the VAT period.

For example:

VAT period ending 31 March must be filed by 7 May
VAT period ending 30 June must be filed by 7 August

Any VAT owed must also be paid by the same deadline. Late payments may result in interest and penalties.

Making Tax Digital Requirements

All VAT-registered businesses must follow Making Tax Digital rules. This means:

VAT returns must be submitted using MTD-compatible software
VAT records must be kept digitally
Manual submissions through the HMRC portal are not allowed

Who Can Help with VAT Returns?

Several types of professionals and services can help UK businesses manage their VAT returns, depending on the size and complexity of the business.

Accountants and Chartered Accountants

Accountants are one of the most common sources of VAT return support. They can prepare and submit VAT returns, ensure compliance with HMRC rules, and advise on VAT efficiency. Chartered accountants and firms regulated by professional bodies such as ICAEW or ACCA offer an added level of reassurance.

Bookkeepers

Bookkeepers often handle day-to-day financial records and can prepare VAT returns using accounting software. They are particularly helpful for small businesses and sole traders who want ongoing support rather than ad hoc advice.

VAT Specialists and Consultants

For businesses with complex VAT arrangements—such as international trade, partial exemption, or property-related VAT—specialist VAT consultants can provide tailored advice. They help with VAT planning, dispute resolution, and HMRC investigations, as well as routine VAT returns.

Online Accounting and VAT Software Providers

Many UK businesses now use cloud-based accounting software that supports VAT return preparation and submission under Making Tax Digital. While software does not replace professional advice, many providers offer additional VAT support services or partner with accountants who can review submissions.

VAT Return Assistance Services in the UK

VAT return assistance services in the UK range from basic filing support to fully outsourced VAT management. Common services include:

VAT registration and deregistration
Preparation and submission of VAT returns
Making Tax Digital (MTD) compliance
VAT reconciliations and error correction
Advice on VAT schemes, such as the Flat Rate Scheme or Cash Accounting Scheme
Support during HMRC queries or inspections

These services are available both locally and nationally, with many firms offering remote support, making it easy for businesses anywhere in the UK to access expert help.

Benefits of Using VAT Return Assistance Services

Using professional VAT return assistance services can save time, reduce stress, and minimise the risk of costly mistakes. Businesses also benefit from up-to-date knowledge of VAT legislation, proactive advice, and reassurance that their returns are accurate and compliant with HMRC requirements.

Choosing the Right VAT Support

When choosing who can help with VAT returns, UK businesses should consider the provider’s experience, qualifications, and familiarity with their industry. Transparency on fees and clear communication are also key factors.

How Apex Accountants Can Help with VAT Returns

VAT returns are an essential part of running a VAT-registered business in the UK, but they don’t have to be stressful. At Apex Accountants, we offer expert VAT return support designed to save you time, reduce errors, and keep your business fully compliant with HMRC rules and Making Tax Digital requirements.

Whether you need help from experienced accountants, bookkeepers, or VAT specialists, Apex Accountants provides personalised guidance and professional service tailored to your business. With us handling your VAT returns, you can focus on growing your business with confidence, knowing that your compliance and financial reporting are in safe hands.

Get in touch with us today to see how we can help your business.

Supreme Court Ruling on Input VAT Recovery: Hotel La Tour Decision and Its Impact on Share Sales

Posted on 23 February 202623 February 2026 by Farazia Gillani

The UK Supreme Court has brought finality to a long‑running dispute about whether companies can reclaim VAT on professional fees associated with selling shares in a subsidiary. In HMRC v Hotel La Tour Ltd [2025] UKSC 46, the court held that the input VAT incurred on adviser fees for an exempt share sale is not deductible, even where the purpose of the sale is to fund future taxable activities. This landmark ruling clarifies the direct and immediate link test for input VAT recovery and underscores the importance of transaction structuring for businesses.

Background to the Hotel La Tour dispute

Hotel La Tour Ltd (HLT) acted as a holding company and owned all the shares in Hotel La Tour Birmingham Ltd (HLTB). HLT provided management services to HLTB, and together they formed a VAT group.
In 2015 HLT decided to build a new hotel in Milton Keynes. To finance the project it sold its shares in HLTB to a third party. The sale proceeds, minus professional fees of about £382,900 plus VAT of £76,823, were used to fund the Milton Keynes development.
HLT reclaimed the input VAT on those fees, arguing that the services were linked to its general hotel business and not the share sale. HMRC denied the claim on the basis that the share sale was a VAT‑exempt transaction.

Hotel La Tour Decisions of the tribunals

First‑tier Tribunal (FTT): The FTT accepted HLT’s argument. It found that the professional services were not cost components of the share sale and that the sale’s purpose—to finance the Milton Keynes hotel—meant the fees were linked to taxable downstream activities.
Upper Tribunal (UT): HMRC appealed, but the UT agreed with the FTT. It held that the share sale did not break the link to the taxable hotel activities; since the proceeds funded the new hotel, the fees were indirectly linked to taxable supplies.

Court of Appeal Outcome

HMRC appealed again. The Court of Appeal overturned the tribunals’ decisions, finding that the professional services were directly and immediately linked to the exempt share sale and therefore the VAT was irrecoverable. The Court of Appeal emphasised the BLP Group plc v Customs and Excise Comrs (CJEU) precedent, which states that where costs relate to an exempt transaction, input VAT cannot be deducted.

HLT then appealed to the Supreme Court.

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On 17 December 2025 the Supreme Court unanimously dismissed HLT’s appeal. Lady Rose, delivering the judgement, confirmed key points:

Direct and immediate link test:

The court reaffirmed that to recover input VAT there must be a direct and immediate link between the services received and a taxable output. Where a service is a cost component of an exempt transaction—here, the share sale—VAT cannot be recovered. The court rejected the FTT and UT’s use of a ‘cost component’ analysis focused on whether the fees were built into the share price.

Purpose of fundraising is irrelevant:

HLT argued that because the purpose of the sale was to fund the taxable hotel business, the fees should be linked to that business. The Supreme Court disagreed. It held that the purpose for which funds are raised does not override the statutory treatment of a share sale as an exempt supply.

Distinguishing exempt and out‑of‑scope transactions:

The court drew a clear distinction between transactions within scope but exempt and those out of scope of VAT. If a transaction is out of scope (e.g., issuing new shares or obtaining a loan), costs may be linked to the general business, and VAT recovery may be allowed; but where the transaction is an exempt share sale, no deduction is possible.

VAT grouping:

HLT argued that because it and HLTB formed a VAT group, the share sale should be treated as out of scope and the fees attributable to the overall business. The Supreme Court rejected this, explaining that VAT grouping simplifies tax administration but does not change the nature of supplies; members continue to carry on economic activities between themselves.

The court therefore concluded that the professional fees were directly linked to the share sale and not to HLT’s general business; the input VAT was irrecoverable.

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Key principles on input VAT recovery

The decision clarifies several principles for businesses considering share sales:

Exempt share sales block recovery

When a company sells shares in a subsidiary, the transaction is exempt from VAT under the financial services exemption. Input VAT on adviser fees incurred for that sale is not deductible.

Out‑of‑scope transactions may allow recovery

If a transaction is outside the scope of VAT—such as issuing new shares or obtaining a loan—the related costs can be attributed to the overall business and input VAT can be recovered to the extent the business makes taxable supplies.

Partial exemption for holding companies

Holding companies providing management services can sometimes recover VAT on professional costs if they can demonstrate that the costs relate to their economic activity and not solely to exempt transactions. However, the Supreme Court indicated such cases are fact‑specific and require evidence that services are linked to the general business.

VAT grouping does not create a ‘fundraising exception’

Being in a VAT group does not convert an exempt share sale into an out‑of‑scope transaction. VAT grouping is a mechanism for simplifying administration and does not create new reliefs.

Why purpose doesn’t trump exemption

Some commentators hoped that the Supreme Court might recognise a “fundraising exception” for share sales used to raise capital for taxable activities. The court firmly rejected this approach. It said allowing the underlying purpose to determine VAT recovery would create uncertainty and encourage companies to manipulate records to suit tax goals. The decision restores legal certainty: if costs are directly linked to an exempt transaction, the intended use of the proceeds is irrelevant.

Implications of input VAT recovery case for businesses

Plan the transaction structure

The ruling makes clear that the method used to raise funds determines VAT recoverability. Companies that sell shares to fund projects cannot recover VAT on adviser fees because the share sale is exempt. In contrast, selling the business assets as a transfer of a going concern (TOGC) is outside the scope of VAT. In such cases, provided the buyer continues the same business and meets other conditions, VAT is not charged, and the seller may recover VAT on related costs.

Consider alternative fundraising options

Loan financing or share issues: Raising finance via loans or issuing new shares may be outside the scope of VAT, meaning adviser fees could be attributable to the general business and input VAT recoverable.
Selling assets instead of shares: If HLT had sold the hotel as a going concern rather than the shares in HLTB, the sale might have been outside the scope of VAT and VAT recovery on fees could have been possible.
Partial exemption: Businesses with both taxable and exempt activities should regularly review their partial exemption method to maximise recovery of overhead VAT and ensure compliance.

Importance of expert advice

The Hotel La Tour case illustrates how easily VAT recovery can be misunderstood. Advisory fees for major transactions can be substantial, and getting the VAT analysis wrong may materially affect deal economics. Professional advisers can help businesses assess whether costs are linked to exempt or out‑of‑scope transactions and plan accordingly.

How We Help Businesses

At Apex Accountants, we specialise in helping businesses navigate the complexities of VAT on corporate transactions:

Transaction planning and structuring: We analyse whether a proposed sale or acquisition should be structured as a share sale, asset sale or other finance arrangement to optimise VAT recovery.
VAT and partial exemption reviews: Our team reviews your business’s VAT position, ensuring that partial exemption methods are appropriate and that input VAT on overheads is maximised within the law.
Deal execution support: We work alongside legal advisers during due diligence to identify VAT risks, manage adviser fees and ensure compliance with HMRC requirements.
Representation and dispute resolution: If HMRC queries your VAT treatment, we provide robust defence and negotiate with HMRC on your behalf.

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Conclusion

The Supreme Court’s decision in HMRC v Hotel La Tour confirms that adviser fees connected to exempt share sales are not recoverable. It emphasises that the method of fundraising matters more than its purpose: selling shares is an exempt supply, whereas issuing shares, taking loans, or selling assets as a going concern may be out of scope and allow VAT recovery.

Businesses planning transactions should carefully examine the VAT implications and seek professional advice to avoid costly surprises. By structuring transactions appropriately and understanding the direct and immediate link test, businesses can maximise VAT recovery while remaining compliant with UK law.

If you are planning a share sale, restructuring, or fundraising transaction, it is important to review the VAT position early. Apex Accountants provide practical VAT advice tailored to your business activities. You can contact us to discuss your situation and understand the best approach before taking any steps.

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