Tax E-News – May 2026

Welcome to the May 2026 edition of Tax E-News. We hope that you find this informative. Please contact us if you wish to discuss any matters in more detail.

MAKING TAX DIGITAL FOR INCOME TAX IS NOW LIVE

Making Tax Digital (MTD) for Income Tax is now live – most self-employed individuals and landlords with turnover above £50,000 in 2024/25 were mandated into the regime from 6 April 2026.

Under MTD for Income Tax, individuals will keep digital records and send updates to HMRC every quarter using compatible software. This will require in-year record keeping, rather than everything being dealt with after the year ends. For those already mandated, the deadline for the first quarterly update in 2026/27 is 7 August 2026 […]

LOANS TO PARTICIPATORS (COMPANY SHAREHOLDERS)

When a close company makes a loan to a participator (in most cases, this means a company’s shareholder), and it is not repaid in the same accounting period, a corporation tax charge can arise. This is sometimes referred to as a ‘Section 455’ or ‘s.455’ charge.

For loans advanced on or after 6 April 2026, the percentage charged increased to 35.75% (previously, this was 33.75%) […]

ANOTHER BITE OF THE MARSHMALLOW!

In 2025, the Court of Appeal sent the case of Innovative Bites Ltd v HMRC to the First-tier Tribunal (FTT), telling them to determine whether ‘Mega Marshmallows’ are a “sweetened prepared food which is normally eaten with the fingers”.

The VAT legislation zero‑rates food, but this excludes “confectionery”. Confectionery is defined as “any item of sweetened prepared food which is normally eaten with the fingers” […]

WHAT QUALIFIES FOR CAPITAL ALLOWANCES?

In Orsted West of Duddon Sands (UK) Limited & Ors v HMRC, the Supreme Court considered whether major pre‑construction costs could qualify for tax relief as capital allowances. The case arose from offshore wind projects where the companies spent significant amounts on environmental surveys, seabed studies and technical investigations before any turbines were built. The companies argued that these costs were an essential part of creating bespoke assets and should therefore attract tax relief. HMRC disagreed, and the Supreme Court ultimately sided with HMRC  […]

APRIL 2026 CHANGES TO THE CONSTRUCTION INDUSTRY SCHEME (CIS)

As outlined in Autumn Budget 2025, several changes took place on 6 April that may affect those who use the Construction Industry Scheme.

From April 2026, contractors are required by law to either:

• file a CIS return every month, including nil returns in months where they have not used a subcontractor; or
• inform HMRC in advance that they will not pay subcontractors that month by submitting an inactivity request.[…]

STAMP DUTY LAND TAX (SDLT): WHAT IS ‘MIXED USE’?

When buying property in England, Stamp Duty Land Tax (SDLT) often represents a significant cost. One crucial distinction is whether a property is treated as purely residential or mixed‑use. Mixed‑use property includes both residential and non‑residential elements, such as a house with farmland, commercial buildings, or genuinely non‑residential land, and it is taxed at lower SDLT rates than residential property.

This makes mixed‑use classification attractive, but it is also an area closely scrutinised by HMRC. That was highlighted in HMRC v Christopher Brzezicki [2026] UKUT 00125, a recent Upper Tribunal decision. Mr Brzezicki bought a large house together with a fishing stream and an island and claimed the purchase was mixed‑use. While the First‑tier Tribunal initially agreed, the Upper Tribunal overturned that decision and ruled that the entire property was residential, because the stream and island formed part of the house’s “grounds” rather than being genuinely non‑residential land. Although the stream bred trout naturally, it was not being run on a commercial basis when the property was purchased […]

DIARY OF MAIN TAX EVENTS

MAY  / JUNE 2026