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UK VAT Group Advice After Barclays Ruling Raises Concerns

Posted on by Rida Ahmed

A recent Upper Tribunal ruling has increased demand for UK VAT group advice by casting doubt over the terms on which international businesses can access UK VAT grouping, raising concerns that a structural advantage the UK has long promoted to attract overseas investment may be quietly eroding. 

The decision, handed down on 8 June 2026 in Barclays Services Corporation & Anor v HMRC [2026] UKUT 211 (TCC), dismissed an appeal by a US-incorporated company that sought to join its UK affiliate’s existing VAT group. The judgement turned primarily on whether the company’s UK branch qualified as a “fixed establishment” at the time of the application. The tribunal concluded it did not.

Tax advisers say the implications reach well beyond one bank’s corporate structure.

Why UK VAT group advice matters after Barclays 

Before examining the ruling, it is important to understand the implications.

Under section 43 of the Value Added Tax Act 1994, two or more commonly controlled corporate bodies can apply to be treated as a single taxable entity for VAT purposes. The immediate benefit is straightforward: supplies between members of the group are disregarded for VAT. No VAT is charged on intra-group transactions, and no compliance is required on those supplies.

For businesses that make largely exempt supplies, such as financial services and insurance firms, this matters significantly. Because they cannot recover the VAT they incur on services they receive, any VAT charged on intra-group services becomes a permanent, irrecoverable cost. VAT grouping eliminates this.

The UK’s approach has historically been described as relatively permissive compared to EU member states. For overseas companies wishing to join a UK VAT group, the key condition is that the company must have a “fixed establishment” in the UK — meaning a genuine operational presence with sufficient human and technical resources available to it.

What the Barclays Case Was About

Barclays Services Corporation (BSC) is a Delaware-incorporated company that provides shared services to other Barclays entities worldwide, including Barclays Execution Services Limited (BESL) in the UK. BESL is the representative member of the Barclays UK VAT group.

As part of a broader regulatory restructuring, BSC registered a UK branch in July 2017. VAT planning was openly identified as a key driver. BESL applied for BSC to join the VAT group on 1 December 2017, with internal documentation indicating a one-off benefit of £21 million was available if the branch was operational before year-end.

HMRC refused the application on two grounds. First, it said BSC had no fixed establishment in the UK at the date of the application. Second, and in the alternative, it argued that refusing admission was “necessary for the protection of the revenue”, a power HMRC holds under the legislation.

The First-tier Tribunal upheld HMRC’s refusal in August 2024. The Upper Tribunal, after hearing the case in March 2026, issued its judgement on 8 June 2026 and dismissed the appeal. The full decision is published on GOV.UK.

Why BSC failed the VAT group fixed establishment test 

The Upper Tribunal found that BSC’s UK branch was, in the tribunal’s own word, “skeletal” at the time of the application.

The key findings were the following:

  • UK-based staff were not employed by BSC directly
  • The branch lacked ownership or comparable control over those employees
  • The branch did not control the premises or technical systems it used
  • The resources associated with the branch had initially been attributed to BESL, not to BSC

A fixed establishment, the tribunal confirmed, requires more than a registered address or a Companies House filing. It requires the permanent presence of both human and technical resources that are genuinely controlled by and available to the overseas entity. Having costs attributed to a UK affiliate while the branch itself is being set up does not satisfy that test.

The Upper Tribunal added obiter comments — observations that were not strictly necessary for the outcome — that the bar for what qualifies as a fixed establishment may have been set too low in earlier cases. These remarks are not binding, but they are significant.

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The ‘Protection of the Revenue’ Question

The second ground raises a broader concern.

HMRC can refuse a VAT grouping application where it considers the refusal “necessary for the protection of the revenue”. The Upper Tribunal, while not required to decide the point given its conclusion on fixed establishment, indicated that HMRC could reasonably have refused the application on this ground as well.

The reasoning was that the anticipated VAT savings were very considerable, the branch’s substance on the application date was minimal, and the timing of the application had been expressly driven by the opportunity to capture a one-off pre-year-end tax saving that was described internally as a “financial imperative”.

This is the part of the judgement that has attracted most concern from advisers. Abigail McGregor, a tax lawyer at Pinsent Masons, said the obiter comments on the protection of revenue would concern businesses. “The suggestion that there might be a test weighing substance against the amount of savings is especially concerning, as it introduces a level of uncertainty that will no doubt impact the entire industry,” she said.

What This Means in Practice

The immediate effect is clear. Overseas companies looking to join a UK VAT group must demonstrate real, controlled presence in the UK. A branch registration alone is insufficient. The substance must exist at the time of the application — not merely be anticipated.

The wider concern is different. If HMRC can refuse a grouping application on the basis that the VAT savings are large relative to the branch’s substance, even where a fixed establishment technically exists, the protection of the revenue power becomes a more significant constraint on VAT group planning than many businesses had previously assumed.

Several other cases are currently stayed behind the Barclays appeal. Their outcome will depend on their individual facts, but the Barclays decision provides the framework against which they will be assessed.

The potential business impact falls into three categories:

For existing cross-border VAT groups:

 Businesses should review whether their overseas member entities continue to satisfy the fixed establishment test. Circumstances change. A branch that was adequate when the group was formed may not meet the standard today, and HMRC has the power to direct that a company leave a group.

For businesses planning to restructure:

 The Barclays case illustrates the risk of applying for VAT grouping before the operational substance is fully in place. HMRC can scrutinise the timing of an application and the documented rationale for it. Internal communications that describe the purpose of a restructuring will be relevant.

For partially exempt businesses: 

Financial services firms, insurers, and others that cannot fully recover input VAT face the greatest practical exposure. For these businesses, the irrecoverability of VAT on intra-group services is a real cash cost. The ability to form a VAT group is not a planning luxury but a commercial necessity.

Cross-border VAT group advice after Barclays 

The ruling comes against a backdrop of shifting HMRC policy on international VAT grouping.

In November 2025, HMRC reversed its position on cross-border VAT grouping related to EU branches, restoring what is known as the “whole establishment” principle. That change, announced at the 2025 Autumn Budget, meant that services between a UK head office and an overseas branch are once again disregarded for VAT purposes under the intra-entity rules, even if the branch belongs to a VAT group in a different country. The ICAEW confirmed this in its Budget commentary.

That was a positive development for many international groups. The Barclays decision represents a countervailing pressure, tightening the conditions on which foreign subsidiaries and group service entities can be admitted to UK VAT groups in the first place.

How Apex Accountants & Tax Advisors Can Help

The Barclays decision is a practical reminder that VAT grouping, often treated as a one-time administrative matter, requires ongoing review. Eligibility conditions can change. HMRC’s approach to those conditions is evolving. And the consequences of getting it wrong can be significant.

Apex Accountants & Tax Advisors works with businesses, including multinational groups and partially exempt organizations, to:

  • Review the fixed establishment position of overseas entities currently within or seeking to join a UK VAT group
  • Assess the protection of the revenue risk for applications where anticipated savings are substantial relative to the branch’s operational substance
  • Advise on VAT group structuring ahead of corporate restructuring, M&A, or regulatory change
  • Support responses to HMRC enquiries into existing VAT group arrangements
  • Review intra-group service contracts for VAT treatment, including where deferred payments or performance-based fees are involved
  • Provide cross-border VAT group advice on the interaction between the whole establishment rules and domestic VAT grouping 

The VAT grouping rules are among the more complex areas of indirect tax. Early UK VAT group advice, before a restructuring or application proceeds, avoids the difficulties created when operational and tax planning run on different timelines. 

Contact Apex Accountants today to review your VAT group position. Book a free consultation with one of our specialist indirect tax advisers.

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Frequently Asked Questions

What is a UK VAT group and who can join one?

 A UK VAT group allows two or more commonly controlled corporate bodies to be treated as a single taxable entity. Supplies between group members are disregarded for VAT. To join, each company must be established or have a fixed establishment in the UK and must be under common control with the other members. The rules are set out in section 43 of the Value Added Tax Act 1994. HMRC guidance is available at GOV.UK: VAT registration groups.

What is the VAT group fixed establishment test? 

A fixed establishment requires a genuine operational presence in the UK, with sufficient human and technical resources that are controlled by and available to the overseas entity. A registered branch, a Companies House filing, or premises used by a related UK company do not in themselves constitute a fixed establishment. The test is highly fact-sensitive. The Barclays ruling confirmed that resources attributed to a UK affiliate, rather than directly to the overseas branch itself, do not satisfy the requirement.

Can HMRC refuse a VAT grouping application even if conditions are met? 

Yes. Under the Value Added Tax Act 1994, HMRC has the power to refuse an application if it considers that refusal is “necessary for the protection of the revenue”. The Upper Tribunal in Barclays indicated this power could be exercised where anticipated VAT savings are large relative to the substance of the entity seeking to join and where the application appears primarily driven by tax savings rather than commercial reorganisation. This power is exercised on a reasonableness standard, meaning HMRC’s decision can be challenged but only where it could not reasonably have been satisfied that the grounds existed.

Does the Barclays ruling affect existing VAT groups? 

Not directly. The case concerned a refusal to admit a new member. However, HMRC also has powers to direct that a body leave a VAT group and can terminate grouping where it considers this necessary. Businesses with overseas entities in their VAT groups should review whether those entities continue to meet the fixed establishment test, particularly if the operational circumstances of the branch have changed since the group was formed.

What is the “protection of the revenue” power, and how far does it extend?

The protection of the revenue power allows HMRC to refuse or terminate VAT grouping where it believes a significant revenue loss would otherwise result. The Upper Tribunal’s comments in Barclays suggest that where the scale of anticipated savings is disproportionate to the substance of the applicant, this power could be exercised even where the fixed establishment test is technically met. These comments were obiter and are not legally binding, but they indicate the direction in which HMRC’s approach may develop.

What should businesses do now?

Businesses with cross-border VAT group arrangements should carry out a structured review of the fixed establishment position of any overseas members, check that operational substance is adequate and documented, and review the rationale for current grouping arrangements in light of the Barclays decision. Where a VAT group application is planned, the substance of the applicant entity should be established before the application is made, not as an anticipated future development.

Scottish Tax Advice for High Earners and the 67.5% Tax Trap

Posted on by Farazia Gillani

Scottish tax advice for high earners has become more important as Scottish taxpayers earning above £100,000 face one of the highest effective marginal income tax rates in the developed world. The figure is 67.5%. It does not appear in any legislation. It is not an official rate. But it is real; it is unavoidable unless planned around, and it is growing more relevant every year as frozen thresholds drag more earners into its range. 

What Is the 67.5% Tax Trap and Where Does It Come From?

The trap is the product of two policies colliding.

The first is a UK-wide rule. The Personal Allowance, currently £12,570, begins to taper once income exceeds £100,000. For every £2 earned above that threshold, £1 of the allowance is withdrawn. By £125,140, the allowance is gone entirely. This taper has long created a 60% effective marginal rate for higher earners in England and Wales because they pay 40% tax on the extra income and 40% on the allowance that disappears.

The second is Scotland-specific. Scotland has its own income tax rates, set by the Scottish Parliament under powers devolved through the Scotland Act 2016. In Scotland, the income between £75,001 and £125,140 falls within the Advanced Rate band, which is taxed at 45%.

The Scottish Government’s own tax-ready reckoners confirm the outcome directly: “Taxpayers earning more than £125,140 do not benefit from the Personal Allowance. These taxpayers face a marginal rate of Income taxation of 67.5% on earnings between £100,000 and £125,140.”

The arithmetic works like this. On each £2 earned in this range, the Scottish taxpayer pays 45% income tax on that £2 and separately loses £1 of Personal Allowance, which is then also taxed at 45%. The result is a combined rate of 67.5% on each additional pound.

Scotland’s Six-Band System in 2026/27

To understand where the trap sits, it helps to see the full rate structure. The Scottish Government confirmed the following bands for 2026/27 at the Scottish Budget on 13 January 2026:

BandGross Income RangeRate
Starter£12,571 to £16,53719%
Basic£16,538 to £29,52620%
Intermediate£29,527 to £43,66221%
Higher£43,663 to £75,00042%
Advanced£75,001 to £125,14045%
TopAbove £125,14048%

Source: gov.scot — Scottish Income Tax rates and bands 2026/27

In this Budget, the Higher, Advanced, and Top rate thresholds all remained unchanged. Only the Starter and Basic rate thresholds were raised, by 7.4%.

Two things stand out. Scotland’s Higher Rate begins at £43,663, compared with £50,271 in England. Scottish earners, therefore, enter the 42% band nearly £7,000 earlier. The Advanced Rate of 45% interacts with the Personal Allowance taper to create the 67.5% trap, and it has no equivalent in England’s three-band structure.

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Why Scottish tax advice for high earners matters more now 

Three years ago, the trap caught a narrower group of earners. Frozen thresholds have changed that.

The UK government confirmed in the 2025 Autumn Statement that the personal allowance will remain frozen at £12,570 until at least 2030/31, as confirmed by the Scottish Government’s technical factsheet. The higher, advanced, and top-rate thresholds in Scotland will also remain frozen for the current Parliament.

As wages rise with inflation, more workers are crossing £100,000 for the first time. Professionals in medicine, law, and financial services, as well as senior public sector employees and business owners drawing salary and dividends, are increasingly being pulled into the taper range without any change in the value of what they earn in real terms.

The Institute for Fiscal Studies noted that Scotland’s marginal rate structure is “significantly more complex” than the rest of the UK, with seven effective rates once the taper is counted, and that the 67.5% rate in the £100,000 to £125,140 range exceeds England’s equivalent 60% by 7.5 percentage points.

Who Is Caught

The trap affects Scottish residents whose non-savings, non-dividend income falls between £100,000 and £125,140. This category includes:

  • Employed professionals on salaries in this range
  • Company directors drawing salary above £100,000
  • Self-employed individuals whose taxable profits cross the threshold
  • Earners who receive a bonus that pushes them over £100,000 in a single year
  • Those with combined income sources — salary, rental income, or self-employment — that together exceed the threshold

It is worth noting that National Insurance and dividend income are reserved matters and do not follow Scottish income tax rates. The trap is specific to non-savings employment and self-employment income.

Scottish income tax planning and adjusted net income 

The good news is that the 67.5% rate is avoidable. The mechanism is straightforward.

Tax advice for Scottish taxpayers often starts with adjusted net income, the figure used to calculate the personal allowance taper. This is broadly gross income minus pension contributions and Gift Aid donations. If adjusted net income can be brought below £100,000, the full personal allowance is restored, and the 67.5% rate does not apply. 

Pension contributions are the most commonly used tool for achieving this. Contributing enough to bring adjusted net income to £100,000 avoids the taper entirely. For a Scottish taxpayer at £110,000, a £10,000 pension contribution achieves this goal. Because the contribution attracts 45% tax relief and restores the personal allowance, the effective rate of relief for a Scottish advanced rate taxpayer in this band is the 67.5% rate itself.

Salary sacrifice is more efficient still. Contributions made through a salary sacrifice arrangement reduce gross pay before tax and National Insurance are calculated. This means both income tax and National Insurance are saved, rather than income tax alone. The employer will typically also save on employer National Insurance, and some employers pass this saving back into the employee’s pension.

Carry-forward allows unused pension annual allowances from the three previous tax years to be used in the current year. This option can be valuable for an earner who has received an unusually large bonus or has seen income spike above £100,000 for the first time.

Gift Aid donations also reduce adjusted net income. A qualifying donation of £10,000 under Gift Aid has the same effect as a pension contribution of the same amount in reducing the taper exposure.

The current pension Annual Allowance is £60,000 for most taxpayers in 2026/27, as confirmed by HMRC’s pension scheme rates guidance. High earners with adjusted income above £260,000 face a tapered reduction in their allowance, which is relevant for those looking to use huge contributions to navigate the taper.

What Happens If Nothing Is Done

For an earner with no planning who moves from £99,999 to £125,140 of income, the effective rate on that entire additional slice is 67.5%. A pay rise of £25,141 yields just £8,171 in additional take-home pay. The remaining £16,970 goes to HMRC.

This is not an avoidance scheme. It is the intended consequence of the Personal Allowance taper combined with Scotland’s Advanced Rate. Planning to reduce adjusted net income below £100,000 is lawful, HMRC-acknowledged, and widely recommended by professional bodies.

How tax advice from Apex Accountants for Scottish taxpayers can help 

The 67.5% trap often creates demand for Scottish tax advice for high earners among people who are unaware of it until they receive their tax bill. It also catches earners who believe they have planned around it but have miscalculated their adjusted net income. 

Apex Accountants & Tax Advisors works with Scottish residents, professionals, and business owners to:

  • Calculate adjusted net income accurately, including all relevant income sources and deductions
  • Model pension contribution strategies to bring income below £100,000 efficiently
  • Advise on salary sacrifice arrangements, including the interaction with employer National Insurance
  • Review carry-forward positions from previous years to identify additional headroom
  • Assess the impact of bonuses or one-off income events and plan for them in advance
  • Structure dividend and salary remuneration for Scottish company directors to minimise exposure to the taper
  • Advise on Gift Aid and other legitimate deductions that reduce adjusted net income

Scottish income tax planning is most effective earlier in the tax year, when more options are available. If you review your position after the year has ended, you will limit what you can do. 

Contact Apex Accountants today for tax advice for Scottish taxpayers and a review of your Scottish income tax position. Book a free consultation with one of our specialist tax advisers. 

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Frequently Asked Questions

What is the 67.5% tax trap in Scotland? 

It is the effective marginal income tax rate that applies to Scottish taxpayers earning between £100,000 and £125,140. It arises from the combination of Scotland’s 45% Advanced Rate of income tax and the UK-wide Personal Allowance taper, which withdraws £1 of the £12,570 allowance for every £2 earned above £100,000. The Scottish Government’s own ready reckoners confirm this rate. See gov.scot: Scottish Budget 2026/27 Tax Ready Reckoners.

Does the 67.5% rate apply if I earn dividends or savings income above £100,000? 

No. The Scottish income tax rates apply only to non-savings, non-dividend income such as employment income, self-employment profits, and rental income. Dividend income and savings interest are taxed at UK-wide rates regardless of where you live. However, dividend income does count toward your adjusted net income, which determines whether the Personal Allowance taper applies. See GOV.UK: Scottish Income Tax.

How do pension contributions help avoid the tax trap? 

Pension contributions reduce your adjusted net income, which is the figure HMRC uses to calculate the Personal Allowance taper. If a contribution brings your adjusted net income below £100,000, your full personal allowance of £12,570 is restored. The effective tax relief on contributions made within the taper range is 67.5% for Scottish Advanced Rate taxpayers, because the contribution both avoids the 45% charge and restores the tax-free allowance.

What is the pension annual allowance in 2026/27? 

The standard annual allowance for most taxpayers is £60,000 for 2026/27, or 100% of earnings if lower. This figure covers contributions from all sources, including employer contributions. High earners with threshold income above £200,000 and adjusted income above £260,000 face a tapered reduction in their allowance. Unused allowance from the three previous tax years can be carried forward. See HMRC: Pension Scheme Rates.

Does the trap affect Scottish taxpayers who work in England? 

Yes. Scottish taxpayer status is determined by where you live, not where you work. If your main residence is in Scotland, you pay Scottish income tax rates regardless of where your employer is based or where you work each day. Your employer should apply an S-prefix tax code to your PAYE. 

Were there any changes to the £100,000 threshold in the 2026/27 Scottish Budget? 

No. The Scottish Government confirmed at the Scottish Budget on 13 January 2026 that the higher, advanced, and top-rate thresholds would remain unchanged. Only the starter and basic rate thresholds increased. The UK government, not the Scottish Parliament, sets the £100,000 personal allowance taper threshold, which remains frozen.

BADR Tax Advice for Company Sales as HMRC Scrutiny Rises

Posted on by Sidra

Founders planning to sell their businesses increasingly need BADR tax advice for company sales as HMRC expands its review of how proceeds are structured and taxed. Particular attention is falling on arrangements where payments to founders may reflect ongoing work rather than the value of shares sold. 

The shift is not limited to obvious avoidance. Tax advisers are reporting that commercially driven transactions are now subject to greater documentation requests, especially where payments are tied to a founder’s post-sale involvement.

Why BADR tax advice for company sales matters now 

The context is straightforward. Business Asset Disposal Relief (BADR), which replaced Entrepreneurs’ Relief in 2020, offers a reduced Capital Gains Tax (CGT) rate on qualifying business disposals. The rate has risen sharply recently.

Under current rules confirmed by GOV.UK:

  • BADR applied at 10% until 5 April 2025
  • It rose to 14% from 6 April 2025
  • It rose again to 18% from 6 April 2026
  • The relief is capped at a lifetime limit of £1 million in qualifying gains

Without BADR, gains on share disposals are taxed at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. The relief remains valuable. However, HMRC is increasingly scrutinising whether what founders call sale proceeds are, in substance, payments for future services.

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What Triggers an HMRC Challenge

The classification of payments in a business sale matters significantly. There are two very different tax outcomes depending on how a payment is treated:

Payment TypeTax TreatmentRate (2026/27)
Capital proceeds (sale of shares)Capital Gains Tax, eligible for BADR18% on qualifying gains up to £1m
Income / remunerationIncome Tax and National InsuranceUp to 45% income tax plus NICs

HMRC’s concern is that some payments labelled as capital proceeds are, in substance, earnings. Three structures are drawing the most attention.

Earn-out arrangements:

An earn-out allows a seller to receive additional payments after completion if the business hits agreed targets. These are commercially common, particularly where buyer and seller disagree on valuation. However, where earn-out payments depend heavily on the founder remaining employed and meeting personal performance criteria, HMRC may classify them as remuneration rather than deferred sale proceeds. If that happens, income tax and NICs apply rather than CGT.

Consultancy and retention fees:

Buyers often want founders to stay post-completion. Payments for this period need careful structuring. If a retention fee is, in effect, disguised salary, it will be taxed as employment income regardless of what the sale agreement calls it.

Transactions in Securities rules:

HMRC’s internal guidance gives it powers under the Transactions in Securities rules to reclassify what appears to be a capital receipt as income, where it believes a main purpose of the transaction is obtaining an income tax advantage. These rules are not new, but advisers report they are being applied more broadly.

The One-to-Many Campaign: What Has Already Started

HMRC’s stepped-up activity is not just a future risk. A formal compliance campaign is already under way.

From December 2025, HMRC’s Wealthy Team began issuing one-to-many letters to taxpayers who claimed BADR in their 2024/25 self-assessment returns and may have exceeded the £1 million lifetime limit. ICAEW confirmed that recipients fell into two categories:

  • Those who had already exhausted the lifetime limit before their 2024/25 claim
  • Those whose 2024/25 claim pushed total lifetime gains above £1 million

The campaign has since extended to a second tranche of letters covering 2024/25 returns. Recipients are asked to amend their returns or contact HMRC to explain why their position is correct. Failure to respond may result in HMRC amending the return directly or opening a formal compliance check.

The lifetime limit complexity is real. The limit was reduced from £10 million to £1 million in March 2020. Founders who claimed substantial relief before that date may have inadvertently exhausted their allowance without realising it affects future claims.

Founder earn-out tax advice and the earn-out risk 

For founders negotiating deals now, the earn-out question deserves particular attention. The key test HMRC applies is whether the additional payment reflects the value of what was sold or whether it reflects what the founder will do after the sale.

Payments linked to post-completion service periods, personal retention, or individual performance targets are more likely to be treated as income. Payments genuinely tied to the underlying business performance, independent of the founder’s continued involvement, have stronger grounds for capital treatment.

The distinction is not always clean. Deal lawyers and tax advisers should be involved before heads of terms are agreed, not afterwards. HMRC may not accept an earn-out restructuring after the fact, and it is difficult to do.

Company sale tax planning for founders before completion 

Regardless of deal size, founders approaching a sale should take the following steps:

  • Check lifetime BADR usage. Total claims across all previous disposals must remain within £1 million. This includes disposals made before March 2020.
  • Audit the deal structure early. Earn-outs, retention fees, and consultancy arrangements all need to be reviewed before the terms are finalised.
  • Document commercial rationale. HMRC is requesting more documentation. Evidence of how payments were valued and why structures were chosen is essential.
  • Review BADR eligibility conditions. The founder must have held at least 5% of the company’s shares and votes for at least two years before disposal. Changes in share structure during a funding round can disrupt these conditions.
  • Confirm trading company status. BADR only applies to genuine trading companies. Investment activity or non-trading income above a certain level can disqualify a company from the relief.
  • Understand anti-forestalling rules. Unconditional contracts signed before a rate change date are generally protected. However, conditions remaining at the time of the rate change can invalidate this protection.

How Apex Accountants & Tax Advisors Can Help

Founders face a more demanding compliance environment than existed even two years ago. HMRC has more data, more campaign activity, and clearer powers to reclassify payments made in connection with a company sale.

Apex Accountants & Tax Advisors provides BADR tax advice for company sales to business owners, shareholders, and company directors considering exits, including: 

  • Pre-sale BADR eligibility reviews, covering shareholding structure, employment status, and trading conditions
  • Earn-out and deferred consideration analysis, to assess the risk of income reclassification before terms are signed
  • Lifetime limit calculations for founders with multiple previous disposals
  • Documentation support to evidence the commercial rationale behind deal structures
  • Self Assessment compliance, including amending returns where an HMRC letter has been received
  • Succession and exit planning, covering Management Buyouts, Employee Ownership Trusts, and third-party sales

Acting early is essential. Once you sign a deal, your restructuring options narrow significantly.

Contact Apex Accountants today to discuss your business exit position. Book a free consultation with one of our specialist tax advisers before you agree to heads of terms.

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Frequently Asked Questions

What is BADR and does it still apply to company sales?

 Business Asset Disposal Relief (BADR) reduces the CGT rate on qualifying business disposals. It currently applies at 18% (from 6 April 2026) to the first £1 million of qualifying lifetime gains. To qualify on a share sale, you must hold at least 5% of the company’s shares and voting rights. and have been an officer or employee of the company throughout a qualifying two-year period. Full details are available at GOV.UK: Business Asset Disposal Relief.

What is the BADR lifetime limit, and why does it matter?

 BADR is capped at a cumulative lifetime limit of £1 million in qualifying gains. This limit applies across all disposals in your lifetime, not per transaction. It was reduced from £10 million in March 2020. Founders who claimed substantial relief before that date may have less remaining allowance than they expect. Exceeding the limit means any surplus gains are taxed at the standard CGT rate of 24% for higher-rate taxpayers.

Can HMRC reclassify my earn-out payment as employment income? 

Yes. HMRC can challenge the tax treatment of earn-out payments if they appear to reflect remuneration for future services rather than the value of shares sold. Where payments are conditional on the founder remaining employed and meeting personal performance targets, there is a meaningful risk of reclassification as employment income. This would remove eligibility for BADR and trigger income tax and National Insurance instead. Structuring earn-outs correctly from the outset is essential.

What happens if I receive one of HMRC’s BADR compliance letters?

 HMRC is writing to taxpayers who may have exceeded the £1 million lifetime limit. If you receive a letter, you should review your cumulative lifetime BADR claims across all previous disposals. Should you exceed the limit, amending your Self Assessment return and paying any additional tax owed will be necessary. Interest will apply on late payment. If you believe your claim is correct, you should contact HMRC to explain your position rather than ignoring the letter.

Does founder earn-out tax advice matter for deferred consideration? 

 It can, but the timing and structure matter. BADR eligibility generally depends on whether the conditions are met at the time of disposal. Earn-outs that qualify as genuine deferred consideration, tied to the value of the business rather than to personal future performance, may be eligible. Those linked to continued employment or personal targets are more vulnerable to HMRC challenge.

When should company sale tax planning for founders begin? 

Tax planning for a business exit should begin well before formal sale discussions start, ideally at least two years in advance. This allows time to ensure BADR qualifying conditions are met, to review shareholding structures, and to consider whether deal features such as earn-outs or retention arrangements need to be structured differently. Leaving these matters to the due diligence stage significantly reduces the options available.

Digital Border Checks Expose Holiday Home Owners to Potential UK Holiday Home Tax Advice 

Posted on by Maliha Javaid

A system designed to count days rather than passports

The European Union’s new Entry/Exit System (EES) quietly changes how border officials record visits by non‑EU nationals, highlighting the need for clear UK holiday home tax advice for property owners. 

Since 12 October 2025, the system has replaced manual passport stamping with a digital record of your arrival and departure. When a UK passport holder enters the Schengen area, biometric data – fingerprints and a photograph – are captured and stored for three years. The rationale is better security and to stop visitors overstaying. For holiday home owners who used to cross borders with few questions asked, the new system means the authorities will know exactly how long they have been in the EU.

EES applies only to Schengen members – a group of 27 continental countries – and does not include the Republic of Ireland or Cyprus. Registration is automatic at the border, costs nothing and takes place on arrival. However, the process can lengthen queues, as travellers must submit fingerprints and have their photograph taken. After completion, the digital record replaces passport stamps and is used each time you enter or exit the Schengen area.

Why counting days matters for UK holiday home tax advice 

EES is a border security tool, but it also makes it easier for tax authorities to police residency rules. Under the Schengen “90‑days in any 180‑day period” rule, UK visitors cannot spend more than three months in the bloc without obtaining a visa. The digital record provides an irrefutable log of days spent in each country and can be cross‑referenced with local tax systems. 

For example, Spain, France and Portugal treat anyone who spends more than half of the year in their territory as a tax resident. Previously, holiday home owners could argue about precise arrival dates when challenged; now, the system holds that information centrally.

For UK tax purposes, the statutory residence test is equally sensitive to day‑counting. HM Revenue & Customs (HMRC) says you are normally UK resident if you spend 183 or more days in the UK during the tax year, or if your only home was in the UK for 91 days or more and you stayed there at least 30 days. 

Conversely, you are usually a non-resident if you spend fewer than 16 days in the UK or if you work abroad full-time and spend fewer than 91 days in the UK. Residency determines whether you pay UK tax on your worldwide income or just on your UK income. EES data will make it harder to argue residency status if your personal records do not align with your digital travel history, emphasising the importance of UK holiday home tax advice. 

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Overseas property income is treated separately

UK residents must pay income tax on foreign rental income. HMRC’s property income manual explains that rent and other receipts from properties outside the UK are taxed as the profits of an overseas property business. Profits or losses are calculated like those of a UK property business, but they are taxed separately: losses from one cannot be set against the other. 

The profits are chargeable to income tax only if the business is carried on by a UK resident. Before April 2025 some non‑domiciled individuals could elect to be taxed only on income remitted to the UK, but the Foreign Income and Gains (FIG) regime now generally subjects all UK residents to tax on their worldwide income.

HMRC guidance also notes that while most foreign income is taxed like UK income, there are special rules for pensions, certain employment and rent from property. If you have multiple overseas properties, you can offset losses between them but not against UK properties. 

All foreign rental income must be reported in the foreign section of your Self Assessment tax return, following UK property tax guidance for overseas homes. If you owe tax, you must register for Self Assessment by 5 October following the end of the tax year. The return must include income already taxed abroad if you plan to claim foreign tax credit relief.

Risks for holiday home owners

Holiday home owners in Spain, Portugal or France often spend months at a time enjoying the sun or refurbishing their property. With EES registering each entry and exit, EU authorities can easily check when a visitor has surpassed the 90‑day limit. Some governments are expected to use this data to identify individuals who may be inadvertently meeting their domestic residency thresholds. If you stay in a country for more than 183 days, you may owe income tax there on your worldwide income. EES will also highlight repeated stays that may signal an undeclared holiday letting business.

From a UK perspective, lengthy stays abroad can complicate your residence status. Spending long periods in Spain or France reduces your days in the UK and could result in your becoming non‑resident, which would normally mean you pay UK tax only on your UK income. But even if you become a non‑resident, your overseas property profits may still be taxed in the country where the property is located. Meanwhile, UK‑resident owners must continue to pay UK tax on those profits. Coordinating tax obligations across two jurisdictions becomes more complex, and mistakes can trigger penalties or interest.

Another risk is failing to report the rental income of a foreign holiday home, which is why UK property tax guidance for overseas homes is essential. HMRC’s guidance makes clear that you must include foreign rental income on your tax return and cannot offset losses against your UK property business. The digital record created by EES, combined with data‑sharing agreements across Europe, makes it easier for tax authorities to match property ownership with travel patterns and identify unreported income. Those who have relied on the low visibility of short‑term lets may find themselves subject to scrutiny.

Practical steps and tax planning for holiday home owners 

To reduce the risk of investigation, holiday home owners should do the following:

  • Track time spent in the EU – Keep a personal log of entries and exits that matches the EES record, which supports tax planning for holiday home owners. Plan trips to stay within the 90‑day‑in‑180‑day limit and ensure you do not inadvertently create tax residence in the country where your property is located.
  • Review your UK residency status – Use the statutory residence test as guidance. Remember that 183 days in the UK usually makes you resident, while fewer than 16 days normally means you are non‑resident.
  • Declare all foreign rental income – Register for Self Assessment if you have any foreign income. Use the foreign section of your tax return to report rents, even if tax was deducted overseas.
  • Keep separate accounts for overseas properties – because overseas property profits cannot be netted against UK property profits, you should maintain clear records of income, expenses and any tax paid abroad.
  • Monitor upcoming changes – The EU’s travel authorisation system (ETIAS) is expected to start in late 2026. Check the official guidance and ensure you obtain authorisation when required.

How Apex Accountants can help

Holiday home ownership brings lifestyle rewards and tax complexities. Apex Accountants & Tax Advisors combine expertise in UK tax law with an understanding of EU residency rules. We help clients evaluate how EES data may affect their tax residency, plan their time abroad to stay within the 90‑day rule, and organise their affairs to avoid dual‑taxation pitfalls. Our advisory services include:

  • Residence status reviews – We analyse your travel patterns and family ties to determine your UK tax residence and advise you on the implications.
  • Foreign income reporting – Our team prepares Self Assessment returns, ensuring that we correctly report overseas rental income and claim foreign tax credits where available.
  • Cross‑border tax planning – We work with partner firms in the EU to coordinate tax obligations, so you comply with both UK and local laws and avoid penalties.

Whether you are purchasing a holiday home, already own one, or plan to spend more time abroad in retirement, Apex Accountants can provide tailored advice to help you stay compliant with changing border and tax rules. Contact us today to discuss your circumstances and plan with confidence.

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Frequently asked questions

What is the EU Entry/Exit System, and when did it start?
The EU’s Entry/Exit System is a digital border record. From 12 October 2025, UK passport holders are required to provide fingerprints and a photograph at their first entry into the Schengen area. The system replaces passport stamps and stores your travel data for three years.

How long can UK citizens stay in the Schengen area without a visa?
You can stay for up to 90 days in any 180‑day period. The EES makes it easier to enforce this rule, and there is a penalty approach for exceeding it.

Do UK residents pay tax on income from overseas holiday homes?
Yes. If you are a UK resident, you normally pay UK income tax on foreign rental income. The profits from an overseas property business are calculated like a UK property business but taxed separately.

How do I know if I’m a UK resident for tax?
HMRC uses a statutory residence test based on the number of days you spend in the UK. Spending 183 days or more in the UK usually makes you resident, while fewer than 16 days usually makes you non‑resident. Other factors, such as having your only home in the UK or working full time here, can also make you resident.

What steps should I take if I rent my holiday home?
You must register for self-assessment and report your overseas rental income in the foreign section of your tax return. Keep detailed records of rents and expenses and seek advice on claiming any foreign tax credits.

Will the EES information be shared with HMRC?
 The EES is operated by the EU for immigration control. While there is no public statement that data will be directly shared with HMRC, tax authorities across Europe are increasingly using digital records to enforce residency rules. Holiday home owners should therefore assume that HMRC may use their travel data to verify tax status.

Bingo duty in the UK stays the same – and is about to vanish

Posted on by Nida Umair

With the UK government reshaping gambling duties, the most striking feature of the Autumn Budget 2025 for bingo halls is what didn’t happen: the bingo tax wasn’t raised. At 10% on bingo promotion profits, the duty has remained unchanged since Chancellor George Osborne halved it in 2014. That steady rate now stands on the brink of abolition; legislation in the Finance Bill 2025‑26 will repeal the duty from 1 April 2026. In other words, bingo duty UK stays the same for one final year before it disappears – a decision that reflects both the Treasury’s revenue strategy and the social role of bingo.

Bingo halls are more than a revenue stream

Bingo may evoke flashing lights and cash prizes, but for many communities it remains a social anchor. A House of Commons briefing observed that around 400 bingo clubs operated across the UK and that the sector raised £75 million in bingo duty in 2012/13. Those halls support jobs and provide social space for older and lower‑income customers, and successive governments have acknowledged that value. When ministers cut the duty from 20% to 10% in 2014, the official policy papers noted that “bingo halls play an important role in their local communities” and that the reduction was intended to support them. Hansard records show then‑Chancellor Osborne telling MPs that bingo duty would be halved to “protect jobs and protect communities”.

The cut had a marked effect: the duty has remained at 10% ever since, even as other gambling taxes rose or were reformed. Industry lobbying and the perception of bingo as a low‑harm, socially embedded activity helped maintain that stability. Contrast that with the introduction of machine games duty, remote gaming duty and other levies in the last decade, which targeted forms of gambling seen as more harmful or more profitable. In that context, the government’s choice to leave bingo duty untouched in the latest Budget was not inertia but deliberate policy.

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A tax that stayed the same for a decade

Understanding the stability of the bingo duty requires a brief history. Until 2003, bingo duty was charged on total stakes and added prize money; it then shifted to a gross profits tax at 15%. Financial pressures on the industry saw the rate raised to 22% in 2009 before lobbying prompted a cut to 20 per cent a year later. The 2014 Budget made a bolder move, reducing the rate to 10 per cent from June 2014. That change, justified by the sector’s community role, cost the Exchequer about £30 million in the first year.

Since then, the duty has generated a modest but stable stream of revenue. HMRC guidance sets out that bingo promoters must pay 10% of their bingo promotion profits – receipts from participation fees and stakes minus winnings – for each accounting period, forming part of the wider tax rules for bingo halls UK. This applies only to in‑person bingo; remote or online gaming is taxed under separate regimes. The persistence of the 10 percent rate stands out when compared with the shift towards taxing remote gambling. Remote gaming duty, introduced at 15% in 2007, will jump from 21% to 40% from April 2026, while a new 25% rate for remote betting arrives in 2027.

Autumn Budget 2025: no change today, abolition tomorrow

The government’s consultation on remote gambling concluded that the duty system needed modernisation but should be differentiated between high-risk and low-risk activities. The summary of responses emphasised that bingo is a “lower risk gambling activity that supports communities across the UK”. As a result, ministers decided to preserve the duty unchanged for 2025/26 and abolish it entirely from 1 April 2026. The same policy paper notes that repealing bingo duty will simplify the system by removing one of seven gambling duties.

This decision sits alongside a significant tax hike for online gambling. By raising remote gaming duty to 40% and introducing a remote betting duty of 25%, the Treasury aims to extract revenue from sectors with lower overheads and higher perceived harm. Bingo halls, with their physical premises and local employment, are spared this increase. Maintaining the 10% duty for another year ensures continuity for operators and prevents a cliff‑edge reduction in receipts before the duty’s abolition.

What the status quo means for bingo operators under bingo duty UK

For UK bingo promoters, the immediate message is: keep paying the duty until 31 March 2026. HMRC’s excise notice requires promoters to calculate bingo receipts, deduct winnings, and remit 10% of the resulting profits under bingo duty UK. Returns must continue to be filed on the usual schedule, and operators should keep detailed records of receipts and payouts. Small‑scale bingo at travelling fairs or in societies remains exempt, but commercial halls and clubs are not.

As the abolition approaches, there are practical points to consider:

  • Final duty return – the last duty accounting period before 1 April 2026 will need a final return. Ensure systems can separate periods before and after abolition.
  • Cash flow planning – freed‑up cash from the removal of duty could support refurbishment, marketing or staff training. Preparing a budget now helps maximise the benefit.
  • Remote operations – online bingo sites may be taxed as remote gaming; under the new rules, remote gaming duty at 40% could apply. Operators offering both in‑person and online games should review their product mix and corporate structures.
  • Compliance with other duties – bingo halls often operate gaming machines that are subject to machine games duty, which forms part of wider bingo halls tax compliance UK obligations. Abolition of bingo duty does not affect these obligations.

Beyond bingo: a wider gamble on tax policy

The differentiation between land‑based bingo and remote gambling illustrates a broader shift. The government’s consultation response stresses that remote gambling has grown by over 60% since 2015/16 while land‑based gambling has declined. By targeting online gaming, ministers hope to discourage harmful behaviour and harness revenue from a growing digital sector. Abolishing bingo duty, on the other hand, signals support for leisure activities that encourage face‑to‑face socialising. Businesses in the broader leisure and hospitality sector should note this policy trajectory: low‑harm, community‑based activities may find a friend in future Budgets, while digital or high‑risk operations face tougher tax regimes.

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How Apex Accountants & Tax Advisors can help

Navigating the end of bingo duty requires more than simply waiting for 1 April 2026. Our specialist tax team can assist with:

  • Compliance reviews – supporting strong bingo halls tax compliance UK by ensuring accounting systems accurately calculate bingo promotion profits and file final duty returns.
  • Cash‑flow and investment planning – projecting the financial impact of duty abolition and modelling how to reinvest savings.
  • Classification advice – determining whether online bingo products fall under remote gaming or betting duties and optimising your business structure accordingly.
  • Indirect tax strategy – assessing exposure to machine games duty, VAT and other indirect taxes to avoid surprises.

With decades of experience advising leisure and hospitality businesses, Apex Accountants can offer tailored support through this transition. Contact us today to arrange a consultation.

Frequently asked questions

What is the current rate of bingo tax?

The duty on in‑person bingo remains at 10% of bingo promotion profits. The rate has been unchanged since June 2014.

When will the bingo duty change?

The Finance Bill 2025‑26 repeals bingo duty from 1 April 2026. Operators must continue to file and pay the 10 per cent duty until then under the current tax rules for bingo halls UK.

Who has to pay bingo duty?

Any bingo promoter running commercial games on licensed premises must register and pay bingo duty. Small-scale bingo organised by societies, travelling fairs, or at home remains exempt.

How do I calculate bingo duty?

Any bingo promoter running commercial games in licensed premises must register and pay bingo duty. Small-scale bingo organised by societies, travelling fairs, or at home remains exempt.

How do I calculate bingo duty?

HMRC requires promoters to add up bingo receipts (participation fees and stakes), deduct winnings, and apply the 10 per cent rate to the resulting profit. Detailed records must be kept.

What happens to online bingo under the new regime?

Online or remote bingo may fall within remote gaming duty, which will increase to 40% from April 2026. Businesses offering remote games should seek advice to ensure correct classification and compliance.

Does the abolition of the bingo duty affect any other gambling taxes?

No. Machine game duty, gaming duty at casinos, and general betting duty remain in force. Remote gaming and betting duties will rise sharply, while land‑based betting duty stays at 15 per cent.

Surrey Adviser Banned for Abusive Phoenixism and £120,000 Tax Debts

Posted on by Maliha Javaid

A Surrey management consultant has been banned from acting as a company director for five years after his latest consultancy went into liquidation, owing more than £120,000 in unpaid corporation tax and VAT due to abusive phoenixism in the UK. Richard Beal, also known as Dr Beal, was the sole director of Larter Beal Ltd. HM Revenue & Customs (HMRC) petitioned to wind up the company after it accumulated £74,640 in unpaid corporation tax and £51,214 in outstanding VAT. The insolvency service accepted a disqualification undertaking; Mr. Beal is barred from forming, promoting, or managing a company until 2031.

This latest ban is Mr Beal’s second. In 2015 he received a three‑and‑a‑half‑year disqualification after his previous consultancy, Bretteal Ltd, also failed to pay corporation tax and VAT. However, he incorporated Larter Beal Ltd in December 2018, less than two months after his first disqualification ended, and quickly fell back into old habits. Corporation tax returns for 2019 and 2020 were filed late, and payments were consistently behind schedule. By 2021 and 2022, the returns were filed on time, but no tax was paid. VAT compliance was similarly poor: the company’s first VAT return in 2019 was late and underpaid; only one of the next 17 returns was filed on time, and just five were paid in full. Despite those failures, Beal paid himself £53,687 between July 2022 and the company’s liquidation in June 2024.

Abusive Phoenixism UK: Repeated Misconduct and its Consequences

The Insolvency Service described Mr. Beal’s behaviour as “abusive phoenixism”—the practice of winding up a company and transferring its business to a new entity to avoid liabilities. Kevin Read, chief investigator at the Insolvency Service, noted that Beal “repeated the same misconduct that saw him banned in the first place, leaving HMRC owing more than £120,000 in unpaid tax.” Richard Hopwood, head of insolvency at HMRC, emphasised that enforcement against phoenixism is crucial to helping honest businesses thrive.

Phoenix companies are not always illegal. Government guidance explains that phoenixing occurs when the same directors trade successively through multiple companies that liquidate or dissolve, leaving debts unpaid. Abusive phoenixism arises when individuals use new companies deliberately to evade debts or for fraudulent purposes. HMRC’s internal manuals describe phoenixism as converting what would otherwise be dividends into capital receipts by winding up a company and continuing the same trade; the new company “rises from the ashes” of the old. Personal liability notices are sometimes used to hold directors personally liable when PAYE and National Insurance contributions (NICs) are deliberately left unpaid.

The scale of the problem is not trivial. Tax specialists estimate that abuse of phoenix structures cost HMRC around £836 million in the 2022/23 tax year, representing almost a fifth of HMRC’s total tax losses. Only seven directors were disqualified for abusive phoenixism between 2018 and 2024. That low level of intervention is prompting calls for greater use of personal liability notices and tougher sanctions.

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Compliance obligations every director should know

While phoenixism garners headlines, the underlying problem in this case is basic tax compliance. Company directors must:

File corporation tax returns on time

HMRC requires the company tax return to be filed within 12 months of the end of the accounting period. The corporation tax bill is generally payable nine months and one day after the period ends. Failure to meet these deadlines triggers penalties and interest.

Submit and pay VAT returns promptly

Businesses registered for VAT must submit a return every three months, even if there is no VAT to pay. The return and payment are normally due one calendar month and seven days after the end of each accounting period.

Keep accurate records and avoid insolvent trading

Directors who allow a company to trade while unable to pay its debts, fail to keep proper records or use company money for personal benefit can be disqualified. Disqualification orders can last up to 15 years, and breaching a ban is a criminal offence that can lead to fines or imprisonment.

Understand anti‑phoenix rules

The Targeted Anti‑Avoidance Rule (TAAR) treats distributions on winding up as dividends (taxable at income rates) when four conditions are met: the individual holds at least 5% of shares, the company was a close company within two years of winding up, the individual resumes a similar trade within two years, and one of the main purposes is to avoid income tax. This denies the favourable capital gains tax treatment and removes the tax advantage of phoenixing.

Directors who ignore these obligations risk personal liability and directors disqualification UK, which can last up to 15 years for serious misconduct. In Mr. Beal’s case, his disqualification obligation prevents him from being involved in the promotion, formation, or management of any company without court permission. He joins a growing list of directors subject to bans under the Insolvency Act 1986.

Practical lessons for UK businesses

The Beal case underscores several practical lessons for directors and business owners, particularly around HMRC tax compliance for directors.

Don’t treat limited liability as a personal shield

The Insolvency Service can pierce the corporate veil by issuing personal liability notices when directors repeatedly leave NIC or PAYE debts outstanding. Abusive phoenixism is viewed as tax evasion, not clever tax planning.

Maintain robust governance. 

Filing late or incomplete returns, ignoring payment deadlines and paying yourself while neglecting tax debts are hallmarks of unfit conduct. Directors must ensure accounting systems capture all VAT and corporation tax obligations and build cash reserves to meet them.

Seek early advice when a company is distressed

Liquidation need not end a director’s career, but restarting a similar business too soon may trigger the TAAR or breach Insolvency Act restrictions. Professional advisers can help directors navigate legitimate pre‑pack administrations and avoid inadvertently breaching anti‑phoenix rules.

Expect tougher enforcement

HMRC, Companies House and the Insolvency Service have launched joint initiatives to tackle phoenixism, including enhanced identity verification and data sharing. Directors should expect increased scrutiny of repeat insolvency and be ready to defend any re-use of company names or assets.

How Apex Accountants & Tax Advisors Can Help with Directors Disqualification UK

Apex Accountants has been monitoring the government’s crackdown on phoenixism and the expanding enforcement toolkit. We help directors to remain compliant and avoid the pitfalls that caught Richard Beal:

  • Compliance monitoring and reporting. Our team prepares corporation tax and VAT returns well ahead of statutory deadlines, ensuring payments are made on time and mitigating late‑filing penalties.
  • Restructuring and insolvency guidance. When businesses face genuine financial distress, we advise on legitimate rescue options and manage pre‑pack administrations to avoid triggering TAAR conditions or breaching director disqualification rules.
  • HMRC investigations and personal liability mitigation. We liaise with HMRC on behalf of clients during tax investigations, defend against unwarranted personal liability notices and ensure directors understand their responsibilities.
  • Governance and director coaching. Our consultants help directors establish robust governance frameworks, including internal controls and record‑keeping, so that tax obligations do not fall through the cracks.

If your business is facing cash‑flow challenges or you are considering a restructure, contact Apex Accountants today. Early intervention is often the difference between a fresh start and a multi‑year ban.

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Frequently asked questions

What is abusive phoenixism?

‘Phoenixism’ describes trading through successive companies that are wound up leaving debts unpaid. Abusive phoenixism occurs when directors deliberately use the process to evade tax and other liabilities. HMRC treats abusive phoenixism as tax evasion and can seek director disqualification.

How long can a director be disqualified?

For unfit conduct such as failing to pay tax or allowing insolvent trading, the Insolvency Service can seek a disqualification order of up to 15 years. Orders under five years are typical for less serious offences; repeated or fraudulent behaviour attracts longer bans.

What triggers the Targeted Anti‑Avoidance Rule (TAAR)?

HMRC’s TAAR applies when an individual owns at least 5 % of a close company, winds it up, then resumes the same or a similar trade within two years and a main purpose is to avoid income tax. Distributions on winding up are then taxed as dividends rather than capital gains, removing the tax advantage.

What are the deadlines for corporation tax and VAT?

A company tax return must be filed within 12 months of the end of the accounting period, and corporation tax must be paid nine months and one day after that period. VAT returns and payments are due one calendar month and seven days after each accounting period.

How can directors avoid personal liability for tax debts?

Maintain accurate records, submit returns on time, and pay liabilities promptly to ensure HMRC tax compliance for directors. Avoid transferring a business to a new company without settling outstanding taxes, and seek professional advice before winding up a company. HMRC can issue personal liability notices where there is evidence of deliberate non‑payment of PAYE or NICs.

What steps are authorities taking against phoenixism?

HMRC and the Insolvency Service are enhancing enforcement through the TAAR, joint and several liability notices, director disqualification and collaboration with Companies House. Tax specialists estimate phoenixism cost HMRC £836 million in 2022/23, prompting calls for tougher action.

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

Posted on 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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Supreme Court Ruling on VAT Recovery on Share Sale

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.

Cloud Accounting for Illustration Studios to Improve Cash Flow and Efficiency

Posted on by Waheed Ahmed

Managing finances can be challenging for creative teams balancing deadlines, client work, and irregular payments. With projects often overlapping and income arriving from different sources, it’s easy for accounting to become time-consuming and confusing. That’s why cloud accounting for illustration studios has become an essential tool for creative professionals. It helps track income, monitor expenses, and manage cash flow — all in real time. By automating tasks and giving instant financial visibility, it allows illustrators to focus more on creativity and less on paperwork. At Apex Accountants, we help studios across the UK adopt smart cloud accounting solutions that simplify financial management and support business growth.

What is Cloud Accounting?

Cloud accounting stores your financial data online instead of on one computer. This means you can access your accounts from any device, anywhere, at any time. In simple terms, it works like online banking—safe, quick, and always available.

Why Illustration Studios Should Use Cloud Accounting

Creative studios face unique challenges: variable project costs, multi-currency invoices, and remote collaboration. Traditional accounting software makes it hard to track expenses or cash flow in real time.

Switching to digital accounting for illustration companies gives you real-time financial visibility and automated updates. This saves hours of manual work and makes decision-making easier for both small teams and larger studios.

Key Benefits of Cloud Accounting for Illustration Studios

Cloud accounting platforms bring flexibility and control to creative businesses. Here’s how:

  • Improved cash flow control: Automated invoicing and reminders help track payments and prevent late invoices.
  • Less admin and paperwork: Scan receipts and link your bank account directly to reduce manual work.
  • Instant access to data: Check your income, expenses, and profit margins anytime, on any device.
  • Easy collaboration: Share access securely with your accountant or finance partner for instant advice.
  • User-friendly systems: Most cloud tools are designed for creatives, not accountants.
  • High-level data security: Encryption and two-factor authentication keep your financial data safe.
  • Tax and VAT compliance: Stay aligned with HMRC’s Making Tax Digital rules.
  • Flexible subscription costs: Pay monthly and scale up as your studio grows.

Best Practices for Adopting Cloud Accounting

Adopting cloud accounting isn’t just about software—it’s about creating smarter financial habits.

  1. Select the right software: Compare Xero, QuickBooks, and Sage for creative-friendly features. The best accounting software for creative businesses should handle project-based invoicing, client management, and expense tracking with ease.
  2. Plan your data migration: Move existing data carefully and automate recurring tasks.
  3. Prioritise security: Use strong passwords and access controls to protect sensitive information.
  4. Verify compliance: Choose UK-based providers that meet data protection standards.
  5. Integrate other tools: Sync project management and payment apps for smoother workflow.
  6. Stay HMRC-ready: Regularly review VAT records and digital links for compliance.
  7. Collaborate with professionals: Let your accountant handle forecasting, expenses, and reporting.

How Apex Accountants Support Illustration Studios

At Apex Accountants, we specialise in helping UK-based illustration studios move confidently to cloud accounting systems that fit their creative workflows. Our experts set up digital platforms, migrate financial data securely, and design easy-to-follow reporting dashboards that simplify cash flow, project costing, and tax planning. We also provide ongoing guidance so your team always stays compliant with HMRC’s Making Tax Digital rules. 

Beyond setup, we help you choose and manage the most efficient accounting software for creative businesses, ensuring it integrates smoothly with your existing tools and automates day-to-day bookkeeping. Whether you’re a small creative agency or a growing studio, Apex Accountants gives you clarity, control, and confidence in your financial management.

Conclusion

Adopting digital accounting for illustration companies is more than a modern upgrade — it’s a smarter way to manage finances, stay compliant, and focus on creativity. Cloud-based tools simplify invoicing, automate bookkeeping, and give studios real-time insights into their financial performance. For illustration teams looking to work efficiently and stay ahead of changing tax requirements, expert guidance makes all the difference. 

Contact Apex Accountants today to discover how our tailored cloud accounting solutions can help your studio grow with confidence.

Book a Free Consultation