Guidance

Issue 134 of Agent Update

Published 21 August 2025

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This publication is available at https://www.gov.uk/government/publications/agent-update-issue-134/issue-134-of-agent-update

Technical updates and reminders

Developments and changes to legislation and allowances relating to UK tax including:

Tax

Borders and Trade

Making tax Digital

HMRC Agent Services

Agent engagement

Latest updates from the partnership between HMRC and the main agent representative bodies:

Tax

Vaping duty and stamps — new guidance

The UK Government is introducing a Vaping Products Duty (VPD) at a flat rate of £2.20 per 10ml of vaping liquid, alongside a Vaping Duty Stamp (VDS) scheme requiring stamps to be affixed to vaping products. 

From 1 April 2026 businesses who manufacture, import or store vaping products in the UK must apply for approval for the VPD and VDS scheme, ahead of them coming into force on 1 October 2026.

HMRC has published guidance to help businesses prepare for vaping duty and the vaping duty stamps scheme covering:

  • who these duties affect
  • what vaping products are covered
  • applying for approval
  • record keeping
  • next steps and contact information

HMRC wins landmark Upper Tier Tribunal case against Mini Umbrella Company fraud

Mini umbrella company fraud is a type of fraud within the temporary labour market.

From April 2026, recruitment agencies will be responsible for ensuring the correct tax is paid on worker’s income. Where no agency is involved, the end client will be liable.

On 17 July 2025, the Upper Tier Tribunal ruled that the mini umbrella company model used in the case (1) ELPHYSIC LIMITED (2) PHYARREIDON LIMITED (3) ROSSCANA LIMITED (4) ZRAYTUMBIAX LIMITED v THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS [2025] UKUT 00236 (TCC) was fraudulent, confirming HMRC’s ability to deregister these companies from VAT.

The tribunal confirmed that these mini umbrella companies fraudulently exploit the VAT Flat Rate Scheme. This is a government incentive designed to reduce administrative burden for honest, small businesses.

They also exploit the Employment Allowance. This is a government initiative that reduces an eligible employer’s National Insurance liability. 

Richard Las, Director at HMRC’s Fraud Investigation Service, said:

‘We are pleased the tribunal agrees the mini umbrella company model used in these cases is fraudulent. Mini umbrella company fraud creates an uneven playing field for businesses who follow the rules. We continue to use our civil and criminal powers to tackle those who are facilitating this type of fraud.’

There is no standard model of mini umbrella company fraud. It typically involves separating workforces into smaller companies. This is to evade tax and exploit government incentives. 

This tribunal decision will help create fair competition for legitimate businesses. It also protects workers who unwittingly become victims of these fraudulent schemes.

HMRC has published guidance on mini umbrella company fraud. This includes specific support for workers who unwittingly fall victim to this fraud.

Any information about any type of tax fraud or avoidance can be reported to HMRC. If you suspect mini umbrella companies are involved, mention it in your referral.

HMRC introduces Time to Pay for Simple Assessment debts

Self-Serve Time to Pay has now been introduced to support customers with Simple Assessment debts. The arrangements offer customers the opportunity to set up a payment plan to pay off their debt by instalments if they have been unable to pay off the tax due by the payment deadline.

Simple Assessment letters, providing detailed calculations for any tax owed for income received between April 2024 and April 2025 are being sent to customers over the next few months.

While some customers may receive a Simple Assessment year-on-year, most will have no previous knowledge of what a Simple Assessment is, how it’s calculated or why they have underpaid tax. You may therefore start to receive queries from clients who receive one of these letters.

We want to support customers who receive a Simple Assessment letter to know what to do, how to pay or to query the calculation.

The Simple Assessment letter details exactly what customers need to do and includes information about: 

  • how much tax is owed
  • when it needs to be paid (usually by the following 31 January)
  • how to pay it, including what to do if they disagree with the assessment

There are various ways for customers to pay, including the HMRC app. You can find further information on paying a Simple Assessment tax bill on GOV.UK. 

Customers can watch the following video for further information and guidance:Simple Assessment — a step-by-step guide.

A common reason for a Simple Assessment is to pay tax on their State Pension. Customers can use our interactive tool check if you need to pay tax on your pension to see if this is likely to apply to them.

In these circumstances customers can also watch the following videos: 

How increases to the State Pension can affect the tax you pay

How you pay any tax due on your State Pension if it’s more than your Personal Allowance

Customers who owe tax from Bank, Building Society interest or both may receive two Simple Assessment letters in the same tax year.

When this happens the second letter will include the total tax figure owed for the year — including the amount that was set out on the first letter — even if the customer has paid that back to HMRC. If the customer has already paid the first amount back, they will owe the amount set out in the second letter minus what they have already paid.

If a customer receives a Simple Assessment, but they have already registered for Self Assessment or filed their tax return for the year to which this assessment relates, they or their agent can call HMRC on 0300 200 3300 to have their Simple Assessment withdrawn.  

Research and Development tax reliefs

As explained in the March edition of Agent Update, the Finance Act 2025 made changes to the enhanced relief for loss-making research and development (R&D), Intensive SME (small or medium-sized) companies.

Enhanced Research and Development Intensive Relief (ERIS) is a Corporation Tax (CT) relief that can be claimed by such companies. These changes apply to companies that have a registered office in Northern Ireland. They took effect for claims to ERIS made on or after 30 October 2024. 

For these companies, the additional benefit provided by ERIS, over and above the benefit of a claim under the other Research and Development relief, the Research and Development expenditure credit (RDEC), is state aid. This means that the claimants must comply with limits on the amount of state aid received in a 3-year period and that HMRC must issue them with a state aid notification, which they must keep as part of their business records. This information will be shared on an EU database from January 2026.

 All companies claiming either of the Research and Development reliefs must supply HMRC with information about the claim using an online form. The form for ERIS companies in Northern Ireland has now been updated so that the amount of state aid received can be identified and HMRC can supply the notification. 

Alcohol Duty Reforms

Now that the Manage your Alcohol Duty online service has bedded in with users since its launch on 1 March 2025, HMRC will introduce late payment interest for Alcohol Duty from 1 September 2025.

HMRC also intends to introduce repayment interest for Alcohol Duty from 1 September 2025. These provisions aim to strengthen confidence in the tax system by providing certainty and consistency to producers. 

Late payment interest 

All approved producers must pay Alcohol Duty by the 25th day of the month. From 1 September 2025, under The Finance Act 2009 (Section 101) (Alcohol Duty) (Appointed Day) Order 2025, late payment interest will apply to overdue Alcohol Duty. 

This means if a producer pays Alcohol Duty after the 25th day of the month, they will be asked to pay late payment interest on the amount outstanding from the first day payment is overdue to the day it is paid in full. Currently late payment interest will be calculated at the Bank of England base rate plus 4%.

The late payment interest rate encourages prompt payment and ensures fairness for those who pay their tax on time.

Repayment interest 

From 1 September, under The Alcoholic Products (Repayment Interest Rate) (Alcohol Duty) Regulations 2025, HMRC intends to introduce repayment interest. This means HMRC can pay repayment interest to businesses in certain circumstances. These circumstances include where alcohol duty has been paid due to an error by the Commissioners or where the Commissioners have delayed a repayment of alcohol duty that is due. It also applies where a tribunal finds that under an assessment to alcohol duty a producer has overpaid duty as it was not due.

The repayment interest rate compensates taxpayers fairly, when they overpay, for loss of use of their money.

Further information

Read more information about:

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Spotlight 71 — warning for agency workers and contractors who are moved between umbrella companies

Some umbrella companies encourage agency workers and contractors to use tax avoidance schemes. These schemes do not follow UK tax rules. They often move workers between different umbrella companies to hide the tax avoidance from HMRC.

HMRC has issued Spotlight 71 to help those working through umbrella companies to spot the signs of tax avoidance, particularly those that are unknowingly moved between umbrella companies.

Spotlight 71 provides information on what some of the signs of tax avoidance are and where you and your clients should look to identify them. The spotlight also provides examples of what you and your clients might be told by those operating tax avoidance schemes when contacting them about potential avoidance.

If you think you or one of your customers are already involved in this type of arrangement and want to get out, HMRC can help.

HMRC offers a range of support to help people get back on track or avoid being caught out in the first place. Contact HMRC to find out how to get out of a tax avoidance scheme if you have any concerns.

You can report tax fraud and tax avoidance arrangements, schemes, and the person offering them to HMRC by using our online form to report tax fraud.

VAT Registration — Effective Date of Registration (EDR) amendment request changes

A request to amend the date a business registers for VAT voluntarily does not carry a right of appeal or review.

A business chooses the date they become VAT registered when registering voluntarily. If a mistake is made when choosing this date, and it affects the businesses pre-registration cost calculations, this cannot be changed later. Customers must fully consider their choice of registration date before making it.

HMRC may accept a request to retrospectively amend an EDR in exceptional circumstances. Customers would still have the option of challenging HMRC through Judicial Review should they feel our decision is unfair or unreasonable.

Guidance and the VAT registration manual have been updated to better support customers in getting their EDR correct at the point of registration and the circumstances in which they can request an amendment if needed.

The VAT Registration Estimator is a digital tool designed to help businesses understand VAT registration and estimate what registering for VAT may mean for them. This tool is useful for businesses operating below the threshold and considering voluntary registration.

HMRC provide more information about registering for VAT voluntarily and choosing the date a business becomes registered at section 3.9 VAT Notice 700/1.

Borders and Trade

Changes to customs special procedures usage

From 16 July 2025, you can use ‘authorisation by declaration’ up to 10 times per procedure within a rolling 12-month period for the following customs special procedures:

  • inward processing
  • outward processing
  • authorised use (end-use in Northern Ireland)

The £500,000 value limit per use remains unchanged. Each procedure operates on its own 12-month timeline.

Read more on customs special procedures and outward processing that allow you to suspend, pay less or pay no duty on goods you import or export.

Using ICS2 for goods movements by road or rail from Great Britain to Northern Ireland — important update

As you and your customers may be aware, the system for submitting safety and security declarations, known as Entry Summary (ENS) Declarations, for the movement of goods from Great Britain (England, Scotland and Wales) to Northern Ireland is changing. Import Control System Northern Ireland (ICSNI) is being replaced by Import Control System 2 (ICS2) and businesses were asked to move to ICS2 by 1 September 2025. This was highlighted in Agent Update issue 133.

If you and your customers are already using ICS2 you should both continue to do so, or if you expect to be ready to migrate to ICS2 by 1 September 2025, you should both continue preparations and migrate as planned.

However, we are aware of readiness issues with the wider implementation across ICS2 territories, and for those moving goods into Northern Ireland, with preparing to migrate to ICS2 by 1 September.

We are exploring options to support those who will not be ready, by allowing extra time to prepare. If you and your customers need more time to prepare, you should continue to work with your supply chain to ensure you are ready as soon as possible. If you are not ready to use ICS2 by 1 September, you should continue to submit ENS declarations through ICSNI until the latest date on which you must start using ICS2. We will confirm the latest date as soon as possible, but it will be no later than the end of December 2025.

ENS declarations are not required for parcels moving to and from consumers (such as private individuals) in Northern Ireland.

When physically moving goods from Great Britain to Northern Ireland

If you currently use the Trader Support Service (TSS) you can continue to submit ENS declarations using ICSNI or the new ICS2 dataset if you are ready to do so. You do not need to register to use ICS2 as TSS will do this for you.  

If you do not use TSS to submit ENS declarations, you will have to register to use the EU Shared Trader Interface (also known as the EU Customs Trader Portal) to submit declarations into ICS2. Visit GOV.UK for more information on how to register: GOV.UK Register to use the Import Control System 2.

You do not need to do anything if you are already using ICS2, or you will be ready to do so by 1 September, when moving goods by road (including roll-on roll-off movements) from Great Britain to Northern Ireland.

When sending or receiving goods moving from Great Britain to Northern Ireland

If you or your customer are a business that sends or receives goods that move from Great Britain to Northern Ireland, it is important to:

  • speak with those who are physically moving your goods on your behalf, such as your haulier, freight forwarder or express operator
  • ensure your supply chain has the correct information, at the correct time, to keep your goods moving as smoothly and efficiently as possible

Read more information on:

Making Tax Digital

Getting your Agent Services Account ready for Making Tax Digital for Income Tax

If you have clients who are sole traders or landlords with gross income (before expenses and tax are deducted) from self-employment, property or both, they will be legally required to use Making Tax Digital (MTD) for Income Tax from:

  • April 2026, if their qualifying income is more than £50,000 in the 2024 to 2025 tax year
  • April 2027, if their qualifying income is more than £30,000 in the 2025 to 2026 tax year
  • April 2028, if their qualifying income is more than £20,000 in the 2026 to 2027 tax year — the government has set out plans to introduce legislation to lower the qualifying income threshold to this level

The qualifying income is the gross income (before expenses and tax are deducted) that sole traders and landlords receive in a tax year from self-employment and property combined.

Get ready for MTD step by step

Agents can get ready for MTD by following the MTD agent step by step guide and our agent toolkit

To sign up your clients for MTD you will need an Agent Services Account (ASA). If you do not currently have an ASA, you can create an ASA now

If you already have an ASA, you can use it for MTD for Income Tax.

Add your Self Assessment client authorisations to your ASA

You must have authorisation to act for your client in your ASA before you can sign them up to MTD for Income Tax.

You can add your existing Self Assessment authorisations in bulk to your ASA by transferring them from your HMRC Online Services for Agents account. This can be done either during registration for an ASA or from a link on the ASA dashboard under the ‘client authorisation’ section.

Adding existing client authorisations allows you to act on behalf of your clients for MTD without the need to reauthorise. Adding your authorisations will not remove any access from your current Self Assessment for Agents Service.

To add your existing client authorisations to your ASA:

  1. Compile details of all the Government Gateway credentials you use for filing your clients’ Self Assessment returns.
  2. Head to the client authorisation section of your Agent Services Account homepage and select ‘add existing Self Assessment authorisations to this account’. Follow the instructions.
  3. Repeat this process for each Self Assessment code you use — only one Government Gateway per code needs to be added. That will add all existing Self Assessment client authorisations under the code.

If you are not already authorised to act for a client you can authorise them within your ASA using the digital handshake process — this can be as either a main or a supporting agent. Once you have added your client authorisations to your ASA, you can sign them up to MTD for Income Tax

Sign up

We encourage you to sign up early to make sure you and your clients are ready. We have already received over 1,400 first quarter updates from those who are part of the testing phase.

It is important to use the correct sign-up link.

Registering for testing will give you and your clients exclusive access to HMRC’s dedicated MTD Customer Support Team. The team will help you and your registered clients with any questions about the service, and other Income Tax queries.

If you have clients that must join MTD in April 2026 but do not want to join testing, you can sign them up now for an April 2026 start using the sign-up links.

Resources and timelines

As mentioned in the July Agent Update, we have communications resources you can share with your clients, alongside a high-level timeline for our external communications.

HMRC Agent Services

Finance Bill 2025-26 — draft legislation and tax documents

On 21 July 2025, the government published draft legislation for the Finance Bill 2025-26, outlining an ambitious package aimed at closing the tax gap and modernising tax administration.  

Thge main measures of interest to agents include:

File early to make Self Assessment easier — tools to help you get ahead 

Over 1 million tax returns have already been submitted by agents.

Join them in realising the benefits of filing early and make sure you’re signed up to the services that are designed to support agents:

Agent Update 131 includes a reminder of the benefits of filing early and useful tips.

Live Webinar — changes to Overseas Workday Relief   

From 6 April 2025, the previous rules for non-domiciled status ended and have been replaced by a system based on tax residence.  

Subject to transitional arrangements, customers eligible for foreign income and gains relief will also be eligible for relief on relevant employment income which relates to duties performed outside the UK.

This is known as Overseas Workday Relief. 

This is the link to register for the OWR live event

The live webinar on Overseas Workday Relief takes place on 16 September 2025.  

This webinar will help you understand the main changes you need to be aware of, including:  

  • how overseas workday relief has changed
  • new financial limits
  • the transitional arrangements
  • customer record keeping requirements

UK businesses in Climate Change Agreements to report 2024 annual tax subsidy awards to HMRC by 30 September 2025

In July 2025, HMRC confirmed the launch of the subsidy data collection exercise for the calendar year 2024 (1 January to 31 December 2024). 

As part of transparency obligations, HMRC is required to collect and publish details of annual tax subsidies awarded to UK businesses in Climate Change Agreements (CCA) that are over a defined threshold.

This is a reminder that if your business is in a CCA and has received annual subsidies exceeding £100,000 from Climate Change Levy (CCL) for calendar year 2024, you must report this information to HMRC by 30 September 2025.

You should report your CCL subsidy award using the online form on GOV.UK. You can find more guidance on working out when to report Climate Change Levy subsidies.

If your business is registered in Northern Ireland and trades in goods or the wholesale electricity market, you will need to report your annual CCA subsidy award if it exceeds 100,000 euros (£84,825 when converted to British pounds for calendar year 2024). Read more information on which businesses are in scope and climate change agreements information to report.

If you are reporting as a VAT group, you should report the representative member’s name only and apply the threshold requirements at the group level.

You do not need to do anything else if you are above the defined threshold for the calendar year 2024 and have already reported this to HMRC.

For any queries, contact energy.taxes@hmrc.gov.uk

Help Improve HMRC’s digital services — get involved in user research

In Agent Update Issue133, we informed you that we are looking to build a pool of agents we can invite to take part in user research to help shape the future of HMRC’s digital services.

We would like to hear from you, and if you are interested in helping, register with us.

Once registered we will reach out to you to obtain further information to make sure that any research activities we invite you to take part in, are relevant to you.

The survey is quick to complete and helps ensure we are gathering a wide range of voices.

By sharing your experiences, you will help us create a better and more inclusive services for agents everywhere.

Supporting your clients’ retirement planning with the HMRC app

Get ready for Pension Awareness Week (September 15 to September 19) by helping your clients take control of their retirement planning with the HMRC app.

The app makes managing money and tax easier, providing information that can help with retirement planning decisions. Through the app, your clients can:

  • access their State Pension forecast 

  • view their projected pension age

  • make voluntary National Insurance payments if it will increase their State Pension

The HMRC app is free to download and provides your clients with 24/7 access to their pension information.

HMRC has also launched guidance to help check if you have to pay tax on your pension. Consider recommending the HMRC app and checker tool as part of your ongoing client support and put pension planning power in your clients’ hands.

Agent Engagement

Capital Gains Tax Adjustment 2024 to 2025 reminder

Issue 130 of Agent Update included an article about Capital Gains Tax and the tax return for the year 2024 to 2025.

For the 2024 to 2025 tax year, the return will not automatically calculate at the new rates.

Customers and agents will need to take additional steps to ensure the correct tax is accounted for. The previous article set out the steps that must be followed where disposals of certain assets were made on or after 30 October 2024.

Any extra Capital Gains Tax due must be declared in the relevant adjustment boxes, which are:

  • Box 51 of the Capital gains summary page (SA108)
  • Boxes 5.8B, 5.17B or 5.37A of the Trust and Estates Capital gains (SA905)
  • Box 6.7A Tax Return for Trustees of Registered Pension Schemes (SA970)

An adjustment tool to work out the capital gains tax adjustment is available to support individuals, trustees, personal representatives and agents.

Further guidance is given in the SA returns and the accompanying summary pages:

Contact Information for professional and representative bodies

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