Keeping up with tax and regulatory change is no small task, and this quarter brings more than most. As part of the UHY Hacker Young Group, we’re pleased to share this edition of “In the know: tax,” bringing together the developments our clients across Manchester, Liverpool and the wider North West most need to be aware of right now – from tighter company compliance rules and VAT developments to reforms affecting employees, pensions and Statutory Sick Pay.
In this edition, we cover:
- Companies House shake-up: what companies need to know now
- Compliance with VAT error correction rules
- Understanding the new AEOI registration requirements for trusts and companies
- New VAT treatment for business donations to charity
- Low value exports to the EU: new rules
- Facts and myths about Making Tax Digital
- Tax relief for employees
- State Pension age: what employers should be doing now
- New era for Statutory Sick Pay
- Divorce and your pension
- Tax codes explained: why it pays to check yours
Companies House shake-up: what companies need to know now
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) is introducing significant changes to Companies House requirements, with a particular focus on identity verification and company compliance.
Identity verification. The ECCTA makes it a legal requirement for company directors, people with significant control (PSCs), and some others to verify their identity with Companies House. Requirements are being phased in over time, with company secretaries, limited partnerships, corporate directors and officers of corporate PSCs joining the requirement later. The rules will also impact limited liability partnerships, both individual and corporate members.
For directors and PSCs, verification must be completed within 12 months from 18 November 2025, and it will not be possible to file the confirmation statement until all directors have verified their identity. Continuing to act as a director or PSC without verification is an offence, and the company could be in breach of the law. Verification can be carried out via GOV.UK One Login or through an Authorised Corporate Service Provider, and results in a personal Companies House code that should be kept securely.
Filing accounts: latest position. The requirement for all accounts to be filed via commercial software, alongside new filing requirements for micro entities and small companies and the removal of abridged accounts, was due to take effect from April 2027. That timescale is now under review, with a final decision expected shortly and at least 21 months’ notice to be given once confirmed.
Late filing. Penalties for late filing of Corporation Tax returns have effectively doubled for returns with filing dates from 1 April 2026 onwards — from £100 to £200 for a late return, and from £200 to £400 where filing is more than three months late. With a consultation also underway on prescribed formats for Corporation Tax returns, change to company admin is very much the order of the day for North West businesses.
Compliance with VAT error correction rules
VAT accounting errors arise for all sorts of reasons – one-off oversight, processing mistakes, staff training gaps or misunderstanding of the rules. Whatever the cause, errors must be corrected properly and promptly.
Since 2025, HMRC has removed the option to disclose VAT errors using Form 652. Corrections must now go through the business’s Government Gateway account or a written error correction letter – agents can also submit corrections on a client’s behalf, subject to the usual 64-8 authorisation.
Careless net VAT errors below £10,000 (or below £50,000 and under 1% of total sales) can be adjusted within the VAT return itself, but HMRC’s guidance stresses the importance of separately disclosing all careless errors in writing, regardless of size — adjusting the return alone doesn’t count as notifying HMRC for penalty-mitigation purposes. Deliberate inaccuracies must always be fully disclosed and cannot simply be adjusted through the return.
Without written disclosure, a careless error picked up during an HMRC visit or enquiry is treated as “prompted,” attracting penalties of 15–30% of the VAT due. Correcting the return and separately notifying HMRC in writing, by contrast, is treated as “unprompted,” typically reducing the penalty. Deliberate inaccuracies attract civil penalties, with HMRC pursuing criminal investigation in the most serious cases.
The line between careless, non-careless and deliberate can be a fine one, and HMRC is highly likely to probe the VAT error position during any review. Given the potential for financial, commercial and reputational impact, it’s worth ensuring your records are accurate and your notification obligations fully met — full detail sits in paragraph 4.6 of HMRC’s Notice 700/45. Talk to our specialist VAT advisers if you’d like guidance on your position.
Understanding the new AEOI registration requirements for trusts and companies
HMRC’s Automatic Exchange of Information (AEOI) registration is now mandatory for many trusts and entities classed as UK reporting financial institutions or UK trustee-documented trusts – and the scope is wider than many realise, potentially catching family investment companies, employee ownership trusts and employee benefit trusts too.
Under HMRC’s guidance, structures most likely to fall within scope include:
- Financial institutions – where more than 50% of a trust’s income derives from financial assets managed by a fund manager under a discretionary mandate
- Trustee-documented trusts – professionally managed by a financial institution, which carries out due diligence and reporting on the trust’s behalf
AEOI registration is separate from, and additional to, the Trust Registration Service – being registered on TRS does not remove the AEOI obligation.
The registration deadline passed on 31 December 2025, with no extension being granted. Penalties for non-compliance start at up to £1,000 for late registration, rising by £300 per day if the failure continues after the initial penalty notice, though a reasonable excuse may be considered on a case-by-case basis. Registration is completed through HMRC’s dedicated AEOI portal. If you’re unsure whether your trust, company structure or investment vehicle falls within scope, get in touch with your usual UHY adviser.
New VAT treatment for business donations to charity
From 1 April 2026, businesses donating goods to registered charities – for onward distribution, use by another charity, or the charity’s non-business activities – no longer need to account for VAT on those items. Previously, such donations were typically subject to VAT at 20%, an anomaly given the existing relief for donated goods intended for charity resale.
It’s good news, but not unqualified. HMRC’s updated VAT Notice 701/1 (section 5.5) sets conditions: the goods must be eligible, donated for an eligible use, given to a properly registered charity, and supported by evidence that the donation took place.
Value caps apply – £200 per item for household appliances, furniture, flooring, and computers/tablets/mobile phones; £100 for anything else. Excise goods (alcohol, tobacco, vaping products) are excluded, and the relief doesn’t extend to community interest companies, social enterprises, or small charities not required to register with HMRC.
Donor businesses need a proper audit trail: written evidence of the recipient’s charitable status, a signed statement on intended use, and records of what was donated, its value, the donation date, and proof of dispatch or collection. Our specialist VAT team can help you get the paperwork right.
Low value exports to the EU: new rules
From 1 July 2026, new rules affect low value consignments entering the EU – relevant to any North West e-commerce business selling into Europe.
Currently, parcels valued under EUR 150 enter the EU duty-free, but concerns over undervaluation (estimated at up to 65% of small parcels), fraud, and unfair competition – particularly from Chinese online retailers – have prompted reform. The EU intends to remove the exemption altogether, with an interim scheme running from 1 July 2026 to 1 July 2028: goods under EUR 150 entering via sellers registered in the EU’s import one-stop shop (IOSS) will face a flat rate customs duty of EUR 3 per item category, stacking where a parcel contains multiple categories.
For example, a parcel containing one silk blouse and two wool blouses spans two tariff sub-headings, attracting EUR 6 in duty. A handling fee is under discussion, potentially from November 2026. Longer term, a new EU customs data hub is due to go live in 2028, at which point the interim duty will be replaced by normal customs tariffs.
Facts and myths about Making Tax Digital
Since April 2026, HMRC has been rolling out Making Tax Digital for income tax (MTD for IT), and confusion remains widespread. Here’s what’s actually true.
The facts:
MTD for IT is mandatory this year for self-employed individuals and landlords with income above £50,000, dropping to £30,000 and then £20,000 over the following two years. Digital record-keeping via compatible software is required, quarterly summaries must be submitted, and an End of Period Statement plus final declaration are still needed after the tax year ends – much as with the current annual return.
The myths:
“MTD means paying tax more often”- you’ll still pay in January and July, just with more frequent updates in between
“You must use expensive software” – free and low-cost MTD-compliant options exist
“MTD is only for VAT” – it’s extending to income tax, with more taxpayers joining over time
“Spreadsheets are banned” – they’re fine, provided they’re linked to MTD-compatible submission software
“All taxpayers are affected immediately” – the rollout is staged, so not everyone is caught straight away
Whether you’re just over the £50,000 threshold or have time before the lower thresholds bite, understanding the rules now saves stress later. Talk to your usual UHY adviser about choosing the right software and setting up your digital records.
Tax relief for employees
The good news: from 6 April 2026, new tax exemptions apply where employers reimburse or provide costs relating to accommodation, supplies or services used in performing employment duties (such as homeworking equipment), flu vaccinations, and eye tests or corrective appliances. Previously, relief only applied where employers provided these directly or via non-cash voucher – reimbursement after the employee paid didn’t qualify. The rules now level that up.
The less good news: also from 6 April 2026, tax relief is being scrapped for unreimbursed homeworking expenses. Employees could previously claim relief directly from HMRC – actual costs or a flat £6 per week – but concerns over non-compliant claims mean this route is being withdrawn. Employers can still choose to reimburse tax-free; if they don’t, employees will no longer have a fallback claim route.
The rules on employee benefits are genuinely complex – talk to us about structuring a tax-efficient package that helps you attract the talent your business needs.
State Pension age: what employers should be doing now
State Pension age is rising from 66 to 67, phased in over two years from 6 April 2026. Anyone born between 6 April 1960 and 5 March 1961 reaches their individual State Pension age at 66 plus a specified number of months – GOV.UK’s State Pension age calculator gives individual dates.
Employers should:
- Update payroll – employees stop paying National Insurance at State Pension age (though employers still pay secondary Class 1 contributions), so payroll needs the National Insurance category letter changed to ‘C’ from the first payment date after the milestone is reached
- Keep the paperwork – proof of age (birth certificate, passport, or a CA4140 certificate of age exception if the employee already holds one) is needed
- Communicate early – employees starting to claim their State Pension are likely to receive a new tax code, since State Pension is taxable but not taxed at source; flagging this in advance helps manage queries
Divorce and your pension
Pensions are often among the most valuable assets a couple owns, yet the Money and Pensions Service has found only four in ten UK adults realise a pension can form part of a divorce settlement – a gap that matters particularly given the gender pay gap and its effect on women’s pension provision.
Options include a pension sharing order (transferring part of one pension to the other party), offsetting (one party keeps their pension while the other takes a larger share of other assets, such as the home), or pension attachment/earmarking (each party receives an agreed share of income in due course). Unmarried couples and those outside civil partnerships have fewer legal rights, and Scottish law can differ from the rest of the UK – we can advise further on both.
Specialist valuation advice matters here, since a pension’s worth involves more than its cash equivalent transfer value – likely retirement income and tax-free lump sum treatment both need proper appraisal.
New era for Statutory Sick Pay
Changes to Statutory Sick Pay (SSP) under the Employment Rights Act 2025, effective 6 April 2026, are – according to an Acas poll – likely to be among the most significant workplace changes for employers and workers this year.
What’s changed:
- More workers in scope – up to 1.3 million previously-ineligible low paid employees now qualify, UK-wide including Northern Ireland
- No Lower Earnings Limit – all eligible employees now qualify for SSP regardless of earnings
- Day one entitlement – SSP is now payable from the first full day of sickness absence, with no four-day waiting period
What to pay: the lower of 80% of average weekly earnings or the new flat rate of £123.25 per week – so someone with £100 average weekly earnings would be entitled to £80 per week. Employers can still choose to pay more generously via occupational schemes.
Eligibility conditions are otherwise unchanged – an employment contract and work done under it, extending to worker status including agency, part-time, temporary and casual staff.
What employers should check now: payroll systems, sickness policies, contracts and handbooks should all be updated to drop references to earnings thresholds or waiting periods, and absence notification processes need to flag payroll promptly. Estimates put the cost at around £15 per employee, so budgeting matters too.
One further reason to get this right: the new Fair Work Agency (FWA) is now operational, with a remit covering agency worker protections, gangmaster licensing and (currently via HMRC on contract until 2027) Minimum Wage enforcement – with holiday pay and SSP due to be added to its scope in due course. The FWA can investigate breaches, issue civil penalties, and act on labour exploitation, and employees can refer concerns directly. Reviewing compliance with requirements such as adequate holiday pay and annual leave record-keeping is a sensible priority.
Tax codes explained: why it pays to check yours
Some 5.6 million PAYE taxpayers overpaid HMRC last year – £3.5 billion in total, according to a freedom of information disclosure – and over 730,000 tax refunds went unclaimed, averaging £855 each.
Overpayment usually stems from an incorrect tax code, and checking it is the taxpayer’s responsibility, not the employer’s or HMRC’s. As part of the 2026/27 annual coding notice process, HMRC is removing employment expenses over £120 and Gift Aid higher rate relief from tax codes where it believes these may no longer apply – if you believe you’re still entitled, a claim to correct the position can be submitted.
HMRC no longer issues automatic end-of-year refunds for most PAYE taxpayers; instead, a text or letter will flag that a refund is due, and the quickest way to claim it is via the HMRC app’s PAYE section, where a green “Claim your refund” button appears if one is owed.
Tax isn’t just about deadlines and returns – it’s about making informed decisions that support your long-term goals, whether you’re navigating complex compliance changes, adjusting your personal tax strategy, or exploring future-proofing options for your business.
If anything in this edition raises questions, get in touch with your usual UHY Williamson & Croft adviser.
Download your copy
Shared with permission from the UHY Hacker Young Group.