Tax Bites - July 2025

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

News

UK government provides response to consultation on Carried Interest

The UK government has published its response to the consultation on conditions for carried interest to avoid income-based treatment, confirming no minimum co-investment or holding periods will be introduced. The amendments are intended to improve rules for credit, secondary, and fund structures. For non-UK residents territorial scope limits apply, for example, the rules will not apply if UK services are performed by someone who has neither been UK resident nor spent 60 workdays or more in the UK for three years. Carried interest will be apportioned, based on UK workdays, with prior year income tax and National Insurance Contributions considered in the calculation of payments on account. Draft legislation will be published before the summer recess for inclusion in Finance Bill 2026.

The government's response can be read here.

HMRC concludes its consultation on multinational and domestic top-up taxes guidance 

HMRC has announced the conclusion of its consultation on draft multinational and domestic top-up tax guidance issued between June 2023 and January 2025. While HMRC will not publish a summary of responses, it confirms that feedback has been reviewed and, where appropriate, incorporated into a forthcoming HMRC guidance manual. The manual is expected to be published later this year, providing finalised guidance on these top-up tax rules.

 The consultation outcome can be read here.

HMRC publishes Spotlight 71 warning agency workers and contractors who are moved between umbrella companies

HMRC has published Spotlight 71, alerting agency workers and contractors to the risks of being moved between umbrella companies operating tax avoidance schemes which can lead to unexpected tax liabilities.

HMRC advises workers to be cautious of sudden transfers with minimal paperwork, multiple employment contracts, or payments from unfamiliar entities. It also advises workers to review employment contracts and payslips carefully and report any suspicious arrangements.

Workers may receive letters from HMRC if they are identified as potentially involved in such arrangements.

 The Guidance can be read here.

HMRC updates its Guidance on making a subject access request

HMRC has updated its Guidance on how to make a subject access request (SAR). Taxpayers can make a SAR to HMRC for personal information not already available in their personal tax account. To do so, they will need to set out the information they require, the reason for the request, as well as provide their name, NI number, date of birth and address over the last 5 years.

 The Guidance can be read here. 

Case reports

Court of Appeal confirms pre-construction costs qualify for capital allowances

In Orsted West of Duddon Sands (UK) Ltd and others v HMRC [2025] EWCA Civ 279, the Court of Appeal held that expenditure incurred in designing windfarms and on studies informing their installation, qualify for capital allowances.

Questions raised in this appeal are becoming more acute as very large infrastructure projects require extensive and costly preparatory work. This decision provides much needed clarification and guidance on the types of preparatory work that can qualify for capital allowances. Large infrastructure projects often involve many years of planning and investigation and this decision is likely to be closely scrutinised by businesses involved in such projects.

Unsurprisingly given the amount of tax at stake, HMRC has applied to the Supreme Court for permission to appeal.

You can read our commentary on this decision here.

Upper Tribunal dismisses IR 35 challenge

In George Mantides Ltd v HMRC [2025] UKUT 00124 (TCC), the Upper Tribunal (UT) dismissed the company's appeal against an income tax determination and national insurance decision. Whilst the UT set aside the decision of the First-tier Tribunal on the basis that there were errors in the assessment of the hypothetical contract, ultimately it came to the same conclusion that the hypothetical contract was one of employment resulting in income tax and national insurance liability.

The UT’s decision confirms that the Supreme Court’s guidance in HMRC v Professional Game Match Officials Ltd [2020] UKUT 147 (TCC) (PGMOL), on what constitutes an employment relationship, is pertinent to the application of IR35 and it demonstrates the way that the tax tribunals are likely to direct themselves following PGMOL.

Contractors and engagers should ensure that they have reviewed and updated, where necessary, their contracts following the decision in PGMOL decision. What may have been reliable in terms of mutuality of obligations and control, may no longer provide a robust defence to a challenge by HMRC.

You can read our commentary on this decision here.

And finally...

RPC's Taxing Matters podcast will be releasing an exciting new mini-series in July, delving into the world of corporate criminal liability and helping professionals navigate this complex and ever-changing area – watch this space...

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