Tax Bites - August 2025

Welcome to the latest edition of RPC's Tax Bites – providing monthly bite-sized updates from the tax world.

News

HMRC updates its International Manual regarding cost contribution arrangements within advance pricing agreements

HMRC has updated its International Manual regarding the use of advance pricing agreements (APAs) to confirm valid participation in cost contribution arrangements (CCAs). A new sample APA has also been published. The manual outlines when HMRC may accept unilateral APA applications to provide certainty that it will not challenge CCA participation on transfer pricing grounds, provided the arrangement is commercially viable. Longer APA terms may be allowed in “exceptional circumstances” and coverage may include open enquiry periods. Bilateral APAs remain available for broader pricing issues. Annual reporting on key assumptions will be required.

You can view the updated International Manual here.

UK implements updated Common Reporting Standard and new cryptoasset reporting rules

The UK has enacted two sets of regulations: the International Tax Compliance (Amendment) Regulations 2025, updating the Common Reporting Standard (CRS), and the Reporting Cryptoasset Service Providers Regulations 2025, implementing the OECD’s Cryptoasset Reporting Framework (CARF). The CRS changes include mandatory registration for financial institutions, updated penalty provisions and expanded reporting to cover e-money and central bank digital currencies. The CARF rules introduce due diligence and reporting duties for cryptoasset service providers, effective from 1 January 2026. These measures aim to ensure alignment between CRS and CARF, and to improve tax transparency in cryptoasset transactions.

You can view the International Tax Compliance Regulations here and the Cryptoasset Regulations here.

UK updates its Pillar 2 top‑up tax reporting service

HMRC has updated its “Report Pillar 2 top‑up taxes” guidance and clarified who must register and which entities the registration covers.

Groups that have at least one UK entity and annual consolidated revenues of €750 million or more, in at least two of the previous four years, must register, even if no tax is payable. Registration must occur within six months of the first accounting period beginning on or after 31 December 2023. Both domestic and multinational top‑up tax groups must register collectively via their filing member—usually the ultimate parent—using an organisation gateway ID.

The registration will cover all UK entities that are part of the group, so there is no need to register each entity individually.

You can view the updated guidance note here.

UK and G7 agree to exclude US groups from global minimum tax rules

The Treasury has announced a G7-wide common understanding to exclude US-parented groups from the income inclusion rule (IIR) and undertaxed profits rule (UTPR), under global minimum tax regimes, including the UK’s multinational top-up tax. This reflects the US 'side-by-side' system proposal and follows the US’s withdrawal of retaliatory measures. The understanding will be developed further within the OECD Inclusive Framework, with potential simplifications and a review of tax credit treatment. However, no implementation timeline has been provided and uncertainty remains over how this agreement will be finalised and whether it will preserve policy objectives.

You can view the government's press release here.

Case reports

HMRC directed to issue closure notices

In Refinitiv Ltd and others v HMRC [2025] UKFTT 415 (TC), the First-tier Tribunal (FTT) directed HMRC to issue closure notices on the basis it had failed to establish that there were "reasonable grounds" for not issuing such notices as ongoing judicial review proceedings did not constitute "reasonable grounds".

One of the keenest areas of contention between HMRC and taxpayers is the length of time that enquiries can take before they are concluded. Unfortunately, there is no time limit by which HMRC is required to conclude an enquiry and, sadly, it is not uncommon for enquiries to go on for many years, as was the position in this case. Increasingly, taxpayers are seeking an appropriate direction from the FTT requiring HMRC to issue a closure notice within a specified period of time and in appropriate cases the FTT has shown itself to be sympathetic to such applications, as in this instance.

You can read our commentary on the decision here.

Tribunal accepts taxpayers' Ramsay argument and allows their appeals

In The Vaccine Research Ltd Partnership & Anor v HMRC [2025] UKFTT 402 (TC), the FTT decided in favour of the taxpayers, concluding that licence fees received under a circular financing arrangement intended to generate income tax losses were neither annual payments nor income, for the purposes of sections 683 and 687, Income Tax (Trading & Other Income) Act 2005.

This case is noteworthy because it was the taxpayers, rather than HMRC, who successfully relied on the Ramsay principle of statutory interpretation by persuading the FTT that the scheme should be viewed as a composite transaction. The FTT's decision confirms that the Ramsay principle is not the exclusive preserve of HMRC. The key issue in this case was the economic reality of the transactions under consideration. Despite the appearance of licence fee payments, the circular flow of funds meant that no income had been generated.

The FTT’s approach in this case can be contrasted with its recent decision in Lynch v HMRC [2025] UKFTT 300 (TC), where the FTT found that part of a composite transaction could be taxed notwithstanding that the scheme, as a whole, was ineffective. While both decisions involve the application of the Ramsay principle, there are slight differences in the legal reasoning of the FTT and the application of the principle, in each case. Any taxpayer seeking to invoke the Ramsay principle as an aid to statutory interpretation, will no doubt wish to consider both decisions carefully.

You can read our commentary on the decision here.

Tribunal allows taxpayer's appeal in respect of overdrawn director's loan account

In Quillan v HMRC [2025] UKFTT 421 (TC), the FTT allowed the taxpayer's appeal against a closure notice issued under section 28A, Taxes Management Act 1970, for the 2018/19 tax year, assessing income tax under section 415(1), Income Tax (Trading & Other Income) Act 2005, in respect of an overdrawn director's loan account, as the director's loan was neither written off nor released, in the absence of a formal acknowledgment from the company's liquidator.

This decision confirms that a loan to a participator that is unlikely to be repaid at the time of liquidation is not necessarily written off, and attention must be paid to the formal processes available to the liquidator.

The decision runs contrary to HMRC's guidance (CTM61560), which currently states:

"Equally, where the liquidator does not write off or release the loan balance, but, on a balanced view of the facts, it is clear that the company and/or liquidator are not intending to pursue the outstanding loan, e.g. where they are not making any attempts to collect it or have given up any attempts to do so, then we should argue that the loan has been written off and that S415 ITTOIA05 should apply to the relevant amount..".

You can read our commentary on the decision here.

And finally …

The countdown to failure to prevent fraud is on

From 1 September 2025, the new failure to prevent fraud offence will come into effect under the Economic Crime and Corporate Transparency Act 2023. Statutory guidance issued by the Home Office sets out the framework that large organisations should implement by September 2025, to ensure they have in place reasonable fraud prevention procedures.

In a three-part special of RPC's Taxing Matters podcast, RPC's Tom Jenkins joins Alexis Armitage to discuss the new offence and its potential impact on businesses, and other developments relevant to the law of corporate criminal liability.

• Part 1: A recap on corporate criminal liability – Listen here

• Part 2: What is failure to prevent fraud? – Listen here

• Part 3: Looking ahead: further developments for corporate criminal liability – Listen here

 If you would like to discuss any of the topics covered in this update, please contact Adam Craggs or Daniel Williams.