10 October 2025
HMRC update their guidance on National Insurance for Internationally Mobile Employees
HMRC have updated their guidance for internationally mobile employees (IMEs) who are not covered by international social security agreements, clarifying how they expect UK domestic law on National Insurance Contributions (NICs) to be applied to them in the context of any trailing reward (e.g. bonuses or other incentives taxed as earnings). The key question is whether the liability to NICs should be determined as an all or nothing charge, depending on whether payment was within or outside the UK-insured period, or whether an apportioned liability should be applied, regardless of whether the employee was within scope of NICs at the date of payment. While different treatments have been applied and accepted by HMRC in the past, the updated guidance indicates that apportionment is and always has been the correct interpretation of the law in HMRC’s view and should be applied. Where employers find that NICs for IMEs have been over or underpaid in light of the update, HMRC are advising them to make any corrections needed through Real Time Information (RTI).
HMRC publish guidance on PAYE rules for labour supply chains including umbrella companies from 6 April 2026
HMRC have published a new guidance page titled PAYE rules for labour supply chains that include umbrella companies from 6 April 2026, relating to new rules included in draft legislation published by HMRC on L-Day. Under these rules, from 6 April 2026, recruitment agencies (or, in their absence, end clients) would be jointly and severally liable for PAYE on payments to workers supplied through umbrella companies. HMRC state that there will be updates to reflect changes made before the draft legislation becomes law. HMRC have also updated their Employment Status Manual (ESM2400+).
HMRC one-to-many campaign – management expenses
HMRC have launched a ‘one-to-many’ letter campaign, aimed at holding companies for overseas subsidiaries that have claimed ‘management expenses’. The letter aims to raise awareness of common issues relating to management expenses, which arise in relation to expenses benefiting connected parties. Where this is the case, HMRC state that it is often found that expenses should not have been deducted, or a transaction should have been recognised in accordance with the arm’s length principle. HMRC also highlight the distinction between such expenses and ‘shareholder costs’. The letter invites businesses to review their position against the guidance set out in the letter and HMRC’s manuals, and sets out next steps where inaccuracies are identified.
One-to-many campaign – patent box claims
The ICAEW has reported that HMRC have launched a ‘one-to-many’ letter campaign, aimed at companies that have claimed a patent box deduction. The letter asks recipients to read Guidelines for Compliance 9 (GfC9) – Help with Patent Box computations, focussing on the ‘information to include with your return’ and ‘record keeping’ sections. It requests that companies making patent box claims include any supporting information and calculations with their corporation tax computations, or in a patent box report as a PDF document, when they submit their next company tax return. The letter states that while GfC9 is “guidance only”, HMRC are asking companies to do this “voluntarily” and that by doing so the company will help HMRC to process deductions more quickly and avoid delaying any tax repayments due.
HMRC publish Guidelines for Compliance on Freeports
HMRC have published the latest in their Guidelines for Compliance (GfC) series. New GfC14, Help with Freeports, sets out the tax reliefs and customs benefits of Freeports. GfC14 explains how to qualify for the tax reliefs and customs benefits, highlights common errors, and advises what records should be kept. HMRC state that their policy has not changed and that the guidelines should be read alongside their published guidance.
HMRC restart direct recovery of debts
HMRC have announced that they have restarted their use of direct recovery of debts (DRD) “in a ‘test and learn’ phase”, in line with the government’s announcement at Spring Statement 2025. DRD allows HMRC to recover debts of £1,000 or more directly from debtors’ bank accounts and cash ISAs, subject to a number of safeguards. HMRC state that DRD “is used when an individual or business can afford to pay what they owe but are choosing not to” and note that it was only used 19 times in two years, before the mechanism was paused during the COVID-19 pandemic.
Scottish budget date confirmed and Welsh Budget timing
Scottish Cabinet Secretary for Finance and Local Government (Shona Robison MSP) has confirmed, in a letter published by the Finance and Public Administration Committee of the Scottish Parliament, that the Scottish Government will publish the 2026-27 Scottish Budget and associated documents on Tuesday 13 January 2026.
An outline draft Welsh Budget is due to be published on Tuesday 14 October 2025, with a more detailed draft Budget published on 3 November 2025. The final Welsh Budget is due to be published on 20 January 2026 and debated on 27 January 2026.
Hippodrome Casino Ltd: Input tax apportionment methodology
The Hippodrome in Leicester Square has casinos, bars and restaurants, and a theatre. In 2022, the First-tier Tribunal (FTT) agreed with Hippodrome Casino Ltd (HCL) that a floorspace-based standard method override (which improved HCL’s input tax recovery) was a better reflection of the use of HCL’s costs than the standard method, based on turnover. This was essentially on the basis that there was little crossover between the casinos (VAT exempt) on one hand, and the bars, restaurants, and theatre (taxable) on the other. The Upper Tribunal (UT) overturned this decision. The Court of Appeal (CA) has now upheld the UT’s decision unanimously.
The CA found that the UT was correct to find material error in the FTT’s decision, and to set it aside. The CA considered that the FTT had failed to address HMRC’s core argument; that the areas designated as relating to taxable activity in HCL’s override calculation had a dual use, that is, the bar, restaurant, and theatre areas also economically supported and promoted gaming. The CA went on to find that, having set aside the FTT’s decision, the UT was also correct to remake the decision in HMRC’s favour. The standard method can only be overridden by another method that gives rise to a more precise result. The UT correctly identified this as the issue, and concluded that the floorspace method was not a more precise measure than the standard method. The CA also rejected HCL’s argument that UT should have “left [the door] open for further argument” if it was not persuaded by the floorspace method. The standard method applied by default, and HCL had failed to displace it. Finally, the CA agreed with HMRC that the input tax restriction on business entertainment expenditure must be applied to the pot of residual input tax, before the standard method is applied. The CA dismissed HCL’s appeal, thereby confirming the application of the standard method apportionment.
EMEA Dbriefs webcasts
We have five Dbriefs tax webcasts over the next month: European snapshot: Major tax changes in key European markets for your mobile workers – are you ready? (16 October 2025); Global trade update (20 October 2025); Understanding US listings (23 October 2025); The UK's new R&D tax reliefs - what do you need to know? (28 October 2025); and UK Social Security - updated (NIC) guidance for apportioning earnings for Internationally Mobile Employees (29 October 2025). Please visit our Dbriefs website for more information, and to view any other recent webcasts on demand.