Guidance

Issue 139 of Agent Update

Published 15 January 2026

© Crown copyright 2026

This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.

Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.

This publication is available at https://www.gov.uk/government/publications/agent-update-issue-139/issue-139-of-agent-update

Technical updates and reminders

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

Tax

Making tax Digital

HMRC Agent Services

Tax

New Guidelines for Compliance: essential reading for UK businesses — Imported Hybrid mismatches

Guidelines for Compliance: Help with imported hybrid mismatches — GfC16 is a must-read for UK businesses within the scope of Chapter 11 of Part 6A TIOPA 2010. HMRC provides clarity on compliance expectations and practical methodologies to reduce risk and avoid common errors.

Who should read this

This guidance is essential for:

  • tax professionals conducting compliance work for UK entities
  • UK Risk Leads responsible for reviewing tax returns and managing risk
  • Group Tax functions within multinational enterprises (MNEs)

Why it matters

Imported hybrid mismatches are complex and often misunderstood and the new guidelines:

  • clarifies key concepts such as payments, quasi-payments, reasonable to suppose, control groups, and structured arrangements
  • introduces a step-by-step methodology for identifying and analysing mismatches
  • highlights high-risk areas including mergers, restructures, partnership structures, and permanent establishments
  • provides best practice for disclosures on CT600B and evidencing compliance

Key benefits

GfC16 guidance will help to:

  • reduce uncertainty and improves transparency
  • support robust documentation and governance
  • help businesses lower risk of enquiry and penalties as well as effectively manage enquiries that may arise

All relevant teams should review the guidance and integrate its recommendations into their compliance processes. For questions or to report errors, contact HMRC through the provided email address, quoting the GfC16 as reference.

Voluntary National Insurance Contributions for periods abroad    

In Budget 2025, the government revealed that there would be updates to Voluntary National Insurance Contributions for time spent abroad.

Starting April 2026 (for tax years 2026 to 2027 onward), voluntary Class 2 National Insurance contributions for periods abroad will end. New Class 3 National Insurance contribution applications for time abroad will need 10 years of continuous UK residency or National Insurance contributions.

If you have clients who work abroad, inform them of the changes coming into effect from April 2026 and equip them with the knowledge they need to make informed decisions.

If your clients currently pay Class 2 National Insurance contributions abroad:

  • HMRC will write to them from July 2026 if they are affected
  • if they pay by Direct Debit, they should not cancel it — HMRC will collect their final payment for the 2025 to 2026 tax year on 10 July 2026

The changes do not affect the ability of anyone to purchase voluntary National Insurance contributions for tax years prior to 2026 to 2027.

HMRC encourages agents to review the latest guidance about Voluntary National Insurance contributions for periods abroad from April 2026.

In addition, further details and guidance will be published later.

These changes aim to make sure that people building a State Pension from outside the UK have a strong enough connection to the UK and are paying an appropriate, fair price. There is also a broader review of voluntary National Insurance contributions policy planned to ensure the system remains fair and effective.

Overseas Workday Relief and the character of earnings paid 

HMRC has published new guidance on Globally mobile employees: Overseas Workday Relief (OWR) and the characterisation of earnings.

Where an employee benefits from OWR in a pre-April 2025 tax year, it is necessary to determine to what extent their general earnings for that year relate to duties performed in or outside the UK, and when any overseas earnings are remitted to the UK.

The guidance clarifies how an employer may determine the composition of a payment of earnings and the extent to which tax paid by PAYE should be considered as UK or overseas earnings.

Employees will generally be able to use the same methodology they currently use, along with an approach that provides additional flexibility. Those filing or amending SA returns will want to familiarise themselves with the new guidance and apply it where relevant.

Guidelines for Compliance (GfC7) update — offshore procurement hubs and value chain analysis in transfer pricing 

HMRC has released an important update to its Guidelines for Compliance (GfC7). It has expanded its guidance on transfer pricing risk with two new subparts:

  • 2.2.8 — value chain analysis
  • 3.8 — offshore procurement hubs

These additions reflect HMRC’s evolving approach to identifying and mitigating compliance risks in increasingly complex multinational structures.

Value chain analysis — enhancing functional accuracy

Part 2.2.8 introduces value chain analysis as a best practice tool to support accurate delineation of transactions. While not mandatory, HMRC recognises value chain analysis as a valuable method for understanding how value is created across a multinational enterprise (MNE). Value chain analysis  helps clarify the economically significant functions, assets, and risks within a group.

HMRC encourages businesses to apply value chain analysis rigorously and contemporaneously, especially where the UK entity plays a strategic role in value creation. The guidance outlines seven best practice steps for conducting a value chain analysis, including mapping the value chain, identifying key value drivers, and evaluating profit attribution. Importantly, value chain analysis should be tailored to the UK entity and not rely solely on generic master file content.

Offshore procurement hubs — managing policy design risk

Part 3.8 addresses offshore procurement hubs. For UK businesses receiving procurement goods or services from an offshore connected party, the addition of part 3.8 contains a helpful view of how HMRC understands the role, value generation, rewards, and types of costs, savings and functions performed in these specific arrangements.

The Guidelines for Compliance (GfC) is helpful for business in understanding the key risks in planning, scope, pricing, structure, methodology and comparability and offers practical insights into best practice. Helping to support multinational enterprises to spot risks and take action to mitigate the risk of enquiry.  While the risk framework does not guarantee immunity from enquiries or penalties, it provides an insight into our risking process and why a business may be selected for an enquiry. 

HMRC have provided suggestions when selecting a methodology and considering economically relevant characteristics for comparability. It advises including insights about testing outcomes, records and documentation that multinationals should keep as evidence to support the arms’ s length principal included in their filed return. 

The guidance sets out high-risk indicators, such as:

  • procurement hubs located in low-tax jurisdictions with limited substance
  • flat-rate commission models that over-reward hubs based on volume alone
  • lack of performance tracking or savings measurement
  • excessive reward without corresponding functionality or risk assumption

Best practice recommendations include:

  • conducting a robust functional analysis pre- and post-restructuring
  • using Value Chain Analysis (VCA) to assess the procurement hub’s role in value creation
  • benchmarking returns against comparable independent procurement entities
  • periodically re-baselining savings and documenting allocation methods

What this means for tax agents

Tax agents should ensure clients are aware of these changes and consider whether their documentation and pricing models reflect HMRC’s expectations.

For UK businesses with offshore procurement hubs or complex value chains, early engagement with the updates, where needed seeking specialist support, will be key to managing compliance risk. 

Read more on:

Foreign Income and Gains used as collateral for loans — updated guidance

The use of Foreign Income and Gains (FIG) as collateral for loans is a specialist area within the remittance basis rules.

HMRC has received several technical questions seeking clarification on how the rules apply in practice and HMRC’s position where the value of the collateral exceeds the loan amount. In response, HMRC have reviewed our position and updated the guidance to ensure it accurately reflects the legislation.

The updated guidance provides clearer examples of how the rules operate:

The updated guidance does not reflect any change in the underlying legislation.

Making Tax Digital

Preparing customers for MTD for Income Tax: awareness letters update

Following the first batch of customer awareness letters that were sent in November 2025, HMRC will send more awareness letters in February and March 2026 to customers who have submitted their 2024 to 2025 tax return.

These awareness letters will:

  • inform customers that, based on the information they have submitted, they will need to use Making Tax Digital (MTD) for Income Tax from April 2026
  • inform customers of what they need to do to get ready
  • include a QR code linking them to GOV.UK guidance

The letters will also advise customers to contact their tax agent to discuss what they need to do. This means that your clients may contact you with questions.

Support and resources for agents — Making Tax Digital

You should start reviewing your current clients’ tax affairs and sign up those who will need to use MTD for Income Tax from April 2026. For guidance on how to prepare for and use MTD for Income Tax, make sure to visit the MTD agent step by step guide.

HMRC also provides some resources which can help you to get ready:

  • register for specialist MTD support — these sessions will give agents direct access to HMRC specialists for tailored MTD readiness agent support

  • share our communications resources — align your MTD messaging with what your clients may see from HMRC and share ready-made products 

  • sign up for a webinar — get ready for MTD by joining a webinar, which covers planning steps, actions to take now, how to sign up clients for April 2026 and Q and A 

You can also check out recorded HMRC webinars.

Make sure to check out the new ‘Ready Steady File’ newsletter

Catch up on the latest edition of Ready Steady File edition 3, for the latest news, resources, and important milestones in the Making Tax Digital for Income Tax beta testing journey.

You can find previous editions of Ready Steady File.

HMRC Agent Services

GOV.UK One Login — what agents need to know

HMRC will start to use GOV.UK One Login in Quarter 4 of 2025 to 2026 tax year, starting with a small proportion of individual customers who do not already have a Government Gateway account. 

What agents need to know

The changes to the log-in process means that:

  • existing customers will continue using their Government Gateway as normal
  • only new-to-HMRC customers without a Government Gateway will be asked to create a GOV.UK One Login
  • the rollout will be gradual, starting with a small number of new registrations before gradually increasing
  • HMRC changed their sign-in pages for in November 2025 to introduce an additional option: GOV.UK One Login, alongside the existing Government Gateway account

If clients ask about GOV.UK One Login, advise them that if they have an existing Government Gateway account, they do not need to do anything differently to access HMRC services until prompted. Agent accounts will move to GOV.UK One Login at a much later stage.

Key points to remember

Key points in this section are:

  • customers should choose to sign-in with the Government Gateway option to continue to sign-in with their Government Gateway details like they normally do
  • customers who do not already have a Government Gateway account or a GOV.UK One Login should select new user option and will be guided to create the appropriate account
  • you can read more information on GOV.UK One Login and the sign-in options

Self Assessment deadline — act now

As we step into 2026, it serves as a timely reminder that the Self Assessment (SA) deadline is fast approaching.   

We are urging customers and tax agents not to leave it until the last minute, and to file well ahead of the deadline on Saturday 31 January 2026.

Here are some important things to remember:

  • registrations and reactivations — make sure your client is registered for SA, or if they have filed before but did not last year, that their SA account is reactivated before submitting their tax return, you can find out how to do this in our top tips for Self assessment published in Agent Update 137 

  • file now — filing now means you will have to time to get the support, if needed, during the weekdays in the lead up to the deadline by doing so you will also avoid the deadline rush and can relax knowing your client’s tax affairs are sorted 

  • deadline day — on Saturday 31 January, we will be running an enhanced webchat service for customers and tax agents from 8am to 4pm

More advisers will be available to answer your webchat queries and offer real-time support. The webchat service on deadline day is available for queries about 2024 to 2025 tax returns and payment, online services and  bereavement. There is a call-back process for vulnerable customers needing extra support or complex case team assistance.

The Self Assessment Helpline and Agent Dedicated Line will close on Friday 30 January 2026 and reopen on Monday 2 February 2026. Our online agent services, GOV.UK website, Digital Assistant and HMRC YouTube videos are available 24/7.

Filing well ahead of the deadline means less stress and more time to get help if you need it.

Providing feedback on HMRC Manuals

HMRC manuals contain technical guidance for HMRC staff and tax professionals. Their primary purpose is to explain HMRC’s interpretation of relevant legislation, which is the basis on which the department makes decisions.

All pages on GOV.UK contain feedback routes in the footer of each page as well as the contact GOV.UK form that allows you to tell us whether a page is useful, suggest improvements or report a problem with a page.

The HMRC Manuals Team review all items of feedback on our manuals from internal and external users. You can submit feedback on HMRC manuals technical guidance. We received 1,690 feedback comments within the last 12 months and 65% led to guidance improvements. However, the volume is still low compared to the overall usage, help us improve the content by providing feedback even if it is to indicate a page is useful.

Overpayment relief claims — top tips for making a valid claim

We have recently updated our online guidance so individuals and agents can clearly see what information to include when submitting an overpayment relief claim.

The two top reasons for an overpayment relief claim being rejected are:

  • the claim does not state whether, or not, the claimant has previously made an appeal in connection with the payment or assessment — the term “appeal” must be used
  • the declaration that the claim is correct and complete is not signed by the correct person — it must be signed by the customer or an officer of a company (if claimant is a company) and not a tax agent

As a reminder, overpayment relief claims must be made in writing, and must state:

  • that the claim is for overpayment relief
  • the tax year for which the claimant thinks they have paid too much tax, or too much tax has been assessed
  • why too much tax has been paid or assessed
  • how much has been overpaid or over assessed
  • if an appeal has, or has not, been previously made for the same payment or assessment — the term “appeal” must be used

The claim must also include a declaration saying the details given are correct and complete to the best of the information and belief of the person making the claim.

The declaration must be signed by:

  • the customer, not a tax agent, if the claim is for an individual
  • a company officer, not a tax agent, if the claim is in respect of a limited company
  • the nominated partner, if the claim is in respect of a partnership

If the claim is for repayment of tax, then there must be documentary proof of the tax deducted as HMRC may ask for this later.

If a claim does not include all this information, it will be rejected, and the individual or agent would have to re-submit a new claim.

Further information

Read more about changing a Self Assessment tax return and how to claim overpayment relief.

Contact Information for professional and representative bodies

Back to top