Tax Bites - December 2025

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

News

News item 1

HMRC has updated its Guidance for financial institutions who report information using the Automatic Exchange of Information

HMRC has updated its Guidance on how financial institutions should report information to HMRC under the Automatic Exchange of Information (AEOI) program.

There are currently two AEOI regimes that apply to the UK:

1. the United States Foreign Account Tax Compliance Act (FATCA), which requires UK financial institutions to report to HMRC on US customers that hold accounts with them; and;
2. the Common Reporting Standard (CRS) which provides for automatic exchange of financial account information within the Organisation for Economic Co-operation and Development (OECD).

From 1 January 2027, financial institutions will not be able to use HMRC's combined CRS and FATCA schema. Instead, they must provide separate reports using:

• the amended CRS Extensible Markup Language schema published by the OECD; and
• the Internal Revenue Service FATCA schema.

News item 2

HMRC has updated its Guidance for the CIS

HMRC has updated its Guidance on the Construction Industry Scheme (CIS).

Specifically, HMRC has made the following changes:

1. Section 1.8 has been updated to confirm that employment status for CIS purposes is determined in accordance with common law.
2. Section 2.12 now includes clearer guidance on when agencies are treated as subcontractors and new material on the application of the off-payroll working rules to agencies.
3. Section 2.13 has been revised to provide further clarity on the rules for agency workers, including an added section on how off-payroll working applies to those workers.
4. A new section 2.14 has been introduced, setting out when agencies may be regarded as contractors under the CIS.

News item 3

HMRC has updated its International Exchange of Information Manual

HMRC has updated its International Exchange of Information Manual with a new chapter on the crypto-assets reporting framework (CARF).

The CARF comes into effect in the UK on 1 January 2026 and will require certain crypto-asset service providers to undertake due diligence on their users and report tax-relevant crypto-asset data to HMRC.

The new chapter is designed to help relevant crypto-asset service providers prepare for the CARF and put in place any systems and procedures required to meet their obligations under the new rules.

News item 4

HMRC has issued a policy paper which warns employment agencies and employers of new tax fraud models

HMRC has issued a policy paper warning employers and recruitment agencies about new fraudulent payroll models that claim to reduce employment tax liabilities.

HMRC reports that businesses are being approached by organisations who claim they can acquire companies with existing tax credits on file with HMRC. These organisations claim the tax credits can be used to offset employment taxes, including PAYE and National Insurance.

The paper explains how these arrangements are marketed, why HMRC consider them to constitute tax evasion, and the risks for businesses that use them, including liability for unpaid tax, interest and penalties. It also sets out the signs HMRC say businesses should look for when such models are being promoted and advises businesses to undertake robust due diligence and seek appropriate independent professional advice.

Case reports

Case 1

Tribunal allows expat's appeal confirming that SIPP withdrawals were not subject to UK tax

In Trevor John Masters v HMRC [2025] UKFTT 967 (TC), the First-tier Tribunal (FTT) allowed the taxpayer's appeal, finding that withdrawals from a self-invested personal pension (SIPP), by a non-UK resident, were not taxable in the UK, under the terms of the UK-Portugal Double Tax Convention (DTC). This decision provides important guidance on the application of double tax treaties to pension transfers and withdrawals. The case confirms that a transfer to a SIPP will not necessarily break the employment link for treaty purposes and provides a degree of clarity for expatriate taxpayers and their advisers on the interaction between UK pension rules and DTCs.

The case is also a reminder of the complexities and potential pitfalls that can arise when transferring or consolidating pension arrangements, particularly where a change in tax residence is involved. Small differences in structure, timing, or contribution history, can have significant tax implications in both jurisdictions. Individuals should seek specialist advice before transferring pensions or drawing benefits overseas, as missteps can inadvertently forfeit treaty relief, or trigger unexpected UK tax liabilities.

You can read our commentary on the decision here.

Case 2

Tribunal confirms caregiver living with parents is eligible for principal private residence relief

In Mark Campbell v HMRC [2025] UKFTT 00867, the FTT allowed the taxpayer’s appeal and confirmed that principal private residence (PPR) relief was available on the disposal of multiple properties as the taxpayer qualified under the job-related accommodation rules whilst residing at his parents’ home in order to care for his father.

The taxpayer's appeal was initially dismissed by the FTT but was allowed by the Upper Tribunal (UT) who found there had been multiple material errors of law and remitted the outstanding issues back to a reconstituted FTT.

This case provides some important practical lessons for taxpayers and their advisers in relation to PPR relief claims, particularly, where a taxpayer has multiple properties or unusual living arrangements, such as living with family members due to caregiving responsibilities. 

The UT confirmed that a taxpayer’s intention at the time of acquisition is critical in establishing whether a property was their only or main residence. Taxpayers should ensure they retain contemporaneous evidence, such as correspondence, property searches or personal notes, to support their intentions.

The reconstituted FTT also clarified the correct application of the job-related accommodation rules. Accommodation must be occupied by reason of employment, not simply due to convenience or family ties. Taxpayers should assess the necessity of the living arrangement and its connection to the taxpayer’s duties, rather than simply relying on general assumptions.

Finally, with regard to penalties, the UT made it clear that findings of deliberate behaviour must be supported by clear and specific reasoning from HMRC. A generic conclusion will not suffice.

You can read our commentary on the decision here.

Case 3

Taxpayer recovers almost £2m in successful SDLT appeal

In Christian Peter Candy v HMRC [2025] UKFTT 416 (TC), the FTT confirmed that the taxpayer was entitled to bring a claim for repayment of stamp duty land tax (SDLT) outside the usual 12-month window for amending a return, by relying on paragraph 34, Schedule 10, Finance Act 2003.

The FTT's interpretation of paragraph 34 will be welcomed by taxpayers who are in a similar position to Mr Candy and who are seeking to claim SDLT relief outside the 12-month amendment window.

The FTT's analysis of paragraph 34 may also have broader application to taxpayers who are seeking overpayment relief in relation to other taxes.

You can read our commentary on the decision here.

And finally …

Check out our Taxing Matters podcast, that explores complex tax issues and recent developments in tax law.

In Season 4, Episode 2:

We discuss top tips for tax litigation with Jonathan Davey KC of Wilberforce Chambers. The podcast and transcript can be found here.

In Season 4, Episode 3:

We speak with Rebecca Sheldon of Old Square Tax Chambers, about the Court of Appeal’s recent decision in A Taxpayer v HMRC, in which Rebecca was instructed on behalf of the taxpayer. The podcast and transcript can be found here.