Tax Matters October 2026

On 14 October 2026 the Government published a new consultation – Make Work Pay: employment status reform and protections for the self-employed.

The consultation follows a recent representation from the Association of Taxation Technicians (ATT), calling for a single common statutory framework for employment status in the UK. The ATT proposed a framework providing consistent treatment for tax and employment rights purposes. It also called for the overhaul of the existing HMRC Check employment status for tax tool to reflect the new statutory framework.

It seems that the Government is not looking to adopt a single common statutory framework at this time. The consultation is clear that the proposals set out in it are concerned only with the employment status framework for employment rights, not the employment status framework for tax.

What this means for business

The consultation on employment status represents a significant development in the employment rights landscape, with potential consequences for:

• workforce models
• contractor relationships
• supply chain arrangements.

Although changes to employment status for employment rights purposes will not automatically apply to the employment tax framework, the interaction between any reforms to the employment rights framework and the IR35/off-payroll working regime will be important to monitor. Businesses relying on flexible, contractor or platform-based workforces should review the proposals and consider reviewing their current worker classification practices and contractual arrangements. If reform follows, businesses with well-documented and genuinely compliant arrangements will be in a stronger position.

HMRC has issued new interim guidance on the mandatory payrolling of benefits in kind and expenses from 6 April 2027. There are two important updates:

• Employers will have the option to voluntarily exclude globally mobile employees from mandatory payrolling from 6 April 2027 through a new service that will be available from November 2026. HMRC has not yet provided a definition of "globally mobile employees", but one is expected in November.
• Employers choosing to voluntarily payroll benefits that are not mandated during phase 1 of the implementation process must also payroll any associated Class 1A National Insurance contributions in real time from 6 April 2027.

Read the full interim guidance on Mandatory payrolling of benefits in kind and expenses here.

What employers should do now

Time is running short. HR, payroll and tax functions should work together now to decide whether or not to voluntarily exclude globally mobile employees from mandatory payrolling, and to get the necessary systems, processes and communications in place.

Key actions:

1. Register for the new voluntary exclusion service, which opens in November 2026, once the definition of 'globally mobile employee' is published.
2. Identify any benefits currently reported on P11D forms that will need to be moved onto the payroll.
3. Assess whether payroll systems can handle real-time Class 1A NIC reporting.
4. Communicate the change to affected employees.

Proposed draft legislation would impose a new statutory obligation on taxpayers to correct inaccuracies in their tax returns and other associated documents once they become aware of them. Where a taxpayer becomes aware of an inaccuracy and fails to take reasonable steps to correct it or notify HMRC, the inaccuracy will be treated as deliberate. This could attract higher penalties and extended assessment time limits.

The draft legislation raises several practical questions, including:

• what constitutes an "inaccuracy"
• when a taxpayer "becomes aware" of an inaccuracy
• what constitutes "reasonable steps" to secure a correction.

The answers to these questions are likely to be addressed during the consultation process.

What this means for boards and tax leaders

For boards, CFOs and heads of tax, the proposals reinforce the importance of good tax governance. Businesses should review their internal processes for identifying and escalating tax inaccuracies. This should include establishing:

• who has authority to make disclosures to HMRC
• at what point the awareness threshold may be crossed
• how any known uncertainties in filed returns are monitored and actively managed.

Rebecca Arthur explores the proposals and why boards should be focusing on them, in this analysis.

HMRC has published Revenue and Customs Brief 9 (2026), updating its position on the VAT treatment of education supplies from alternative providers following the Court of Appeal's decision in St Patrick's International College and Others Ltd v The Commissioners for HMRC.

The Court of Appeal held that certain supplies by non-eligible bodies are exempt from VAT.

HMRC maintains that its long-standing policy, that such supplies are subject to the standard rate, remains correct, and has been granted permission to appeal to the Supreme Court. Pending the outcome of the appeal, alternative providers that consider themselves in the same position as St Patrick's International College may submit a protective VAT refund claim.

Read Revenue and Customs Brief 9 (2026) here.

What this means for alternative education providers

The outcome of the appeal could have significant financial consequences for the higher and further education sector. Affected providers in the same position as St Patrick's International College should not wait for the outcome of the Supreme Court appeal and should take advice on whether to lodge a protective claim now. The VAT at stake can be material, so early engagement with advisers is strongly recommended.

HMRC has published new guidance on the anti-avoidance information notice (AAIN) regime. The regime allows HMRC to obtain information and documents from persons HMRC reasonably suspects are connected with the promotion or facilitation of tax avoidance. The guidance confirms that an AAIN is "an information-gathering tool", rather than an enforcement mechanism, and that an AAIN does not require proof of tax loss or a finding that arrangements are ineffective.

The broad definition of "connected person" is notable. It includes someone HMRC reasonably suspects is, or has been, connected to arrangements that led to the contravention of an anti-avoidance enactment. It could extend the regime to tax advisers, accountants and insurers involved in the design, implementation, administration or promotion of arrangements.

What this means for businesses

Businesses involved in complex tax structuring, or whose advisers or insurers have been involved, should not assume the regime will not apply to them.

We recommend they:

• identify which tax arrangements they have entered into in recent years involved third-party advisers, promoters or insurers;
• identify where relevant documentation is held;
• consider their legal professional privilege position in advance;
• consider whether they have a clear internal protocol for responding to an AAIN.

In this update, Rebecca Arthur explores who may be a "connected person", the implications for advisers and professional firms and the safeguards for legal professional privilege and statutory auditors. This is ultimately a tax governance and risk management issue, not just a technical one.