Tax investigations and disputes newsletter - April 2026

Spring has arrived, and with it a fresh burst of activity from HMRC and the Tax Tribunals. 

HMRC's compliance toolkit continues to expand, with proposals to widen the uncertain tax treatment notification regime which would draw significantly more taxpayers into scope. At the same time, we are seeing HMRC take an increasingly aggressive stance in practice (see, for example, our article below on recent activity involving HMRC’s interpretation of the disguised remuneration rules). There are also clear signs of a harder line being taken towards penalties, which will undoubtedly be bolstered by the Upper Tribunal’s recent decision in New Claire Wines that HMRC need not plead dishonesty in order to establish deliberate behaviour - effectively lowering the bar for the most serious penalty categories.

The direction of travel is clear: earlier disclosure obligations, wider reporting requirements, and a shrinking space for taxpayers to hold a different view of the law from HMRC.

Yet just as new growth follows a long winter, so too are new avenues of challenge opening up for taxpayers. Developments in the case law around disclosure and the duty of candour in First-tier Tribunal (FTT) proceedings offer welcome shoots of progress, and the OECD's overhauled Mutual Agreement Procedure (MAP) manual provides renewed hope for those caught in cross-border disputes.

We round up these and other recent developments below.

Can we be candid? Public law arguments in the FTT

Recent developments in the case law have seen an increased appetite to pursue public law arguments (which are typically restricted to judicial review proceedings) before the FTT. A key question arising from this trend is how disclosure operates in a tax appeal involving public law arguments, given that the disclosure obligation in tax appeals is more limited than the wider duty of candour that applies in a judicial review. In the recent case of Natural Balance Foods Limited v HMRC [2025] UKFTT 01555 (TC) the FTT found that the duty of candour applies to HMRC where public law arguments are raised in a tax appeal. This is a helpful development for taxpayers seeking to ensure that HMRC are equally forthcoming with relevant information in FTT proceedings. Gideon Sanitt and Sophie Rhind consider the decision.

Mixing it up - the Upper Tribunal's decision in Boston Consulting Group

The Upper Tribunal has overturned the decision of the FTT in the long-running Boston Consulting Group dispute, finding that the Mixed Member Rules (MMRs) applied to profit sharing arrangements operated by the group. The decision expands the potential reach of the MMRs and limits the scope for taxpayers to defend mixed member structures on the basis that an alternative commercial arrangement would have been implemented. On the procedural side, the Upper Tribunal also found that the LLP's carelessness could be attributed to the individual members because the LLP had acted on their behalf in instructing advisers - thereby enabling HMRC to rely on extended time limits for discovery assessments. Gideon Sanitt, Kate Ison, Bezhan Salehy, and Victoria Braid consider the decision and its practical implications.

Three’s a crowd: third parties and the disguised remuneration rules

HMRC have increasingly been deploying the "disguised remuneration" rules in Part 7A ITEPA 2003 against what many would consider relatively conventional employee share arrangements, simply owing to the fact that the arrangements in some way involve the participation of a third party. This is a notable extension of legislation originally aimed at employee benefit trusts and similar structures designed to shelter earnings from income tax and NICs. Gideon Sanitt, Robert Collard, and Jackelyn West provide their observations on the approach being adopted by HMRC. 

ReMAPping international tax disputes

The MAP is an important tool for taxpayers to seek resolution between states on matters involving the application of a tax treaty to their affairs. The OECD has published the first major overhaul of its Manual on Effective Mutual Agreement Procedures (MEMAP) since the original edition in 2007. The updated manual offers a practical roadmap covering the full life of a MAP case, from early prevention measures through to bilateral negotiations and arbitration. For UK taxpayers, the update is particularly relevant: HMRC resolved 115 MAP cases in 2024/25, with an average resolution time of 24.8 months, outperforming the OECD's 30.9-month average for transfer pricing cases. Encouragingly, the OECD's own figures show that around 73% of cases are fully resolved, with just 4% closing without any form of agreement - so whilst the process is lengthy, patience pays off. Sarah Ling, Wai Wan, and Bahar Eken explore the key features of the revised manual and what they mean for taxpayers.

Consultation on the uncertain tax treatment regime

The Government has published a consultation on its proposals to significantly expand the scope of the existing notification regime for “uncertain tax treatments”, which aims to address the portion of the “tax gap” caused by the taxpayer taking a different interpretation of the law from that of HMRC. The proposals seek to bring a broader range of taxpayers and taxes into scope, and to introduce an additional trigger for notification. A significant extension to the regime is not surprising given the Government’s continued focus on early tax compliance measures and closing the tax gap, but it will have a wide-reaching impact on taxpayers and their advisors. Paul Hardwick, Robin Vos, and Clare Wilson discuss the details of the proposals.

When does a trade begin? The Upper Tribunal's decision in Putney Power 

In Putney Power Ltd and another v Revenue and Customs Commissioners [2026] UKUT 105 (TCC), the Upper Tribunal found that the FTT had made a material error of law in its approach to determining whether a trade had “began to be carried on” by Putney Power Limited and Piston Heating Services Limited, for the purposes of qualifying for Enterprise Investment Scheme (EIS) relief under Part 5 of the Income Tax Act 2007. The UT set aside the FTT’s decision on the basis that the FTT had sought to apply a principles-based test to the question, which did not exist as a matter of law. The correct approach requires a multi-factorial evaluation of all the circumstances. Applying that approach, the UT ultimately reached the same conclusion that neither company had commenced trading by the relevant date. The decision is significant because it confirms that there is no strict legal test for when a trade commences: the question remains highly fact-sensitive and will be determined by reference to the particular circumstances of each case. Read the full decision. 

This newsletter was written by Jackelyn West, a Senior Associate in the Litigation, Arbitration and Investigations team.