Compliance
Staying Compliant Under the UK Business Rates & VAT Reforms
With widespread changes to business rates multipliers, VAT treatment of private hire and duties on vaping products, UK businesses must act now to remain compliant and avoid penalties.
By NomadicTax Research Team • 5-8 min read • April 11, 2026
## Major Reforms to Business Rates & VAT
- **Business Rates Revaluation and Multipliers (2026/27):** From **1 April 2026**, new rateable values will apply to all non-domestic properties in England. New Business Rates multipliers will be in force nationally, including **lower multipliers for Retail, Hospitality & Leisure (RHL)** properties and a **higher multiplier for high value properties**. Reliefs like Transitional Relief and Supporting Small Business schemes help phase-in increases or decreases for ratepayers. ([leeds.gov.uk](https://www.leeds.gov.uk/business-rates/changes-to-business-rates-from-2026?utm_source=openai))
- **Tour Operators’ Margin Scheme exclusion for private hire journeys**: Effective **2 January 2026**, if your company provides private hire or taxi journeys alone, you cannot apply the tour operator treatment unless bundled with other travel services. Ensures correct VAT treatment for travel sectors. ([gov.uk](https://www.gov.uk/government/publications/budget-2025-overview-of-tax-legislation-and-rates-ootlar/budget-2025-overview-of-tax-legislation-and-rates-ootlar?utm_source=openai))
- **Vaping Products Duty (VPD) & Stamps (VDS)**: Coming into force **1 October 2026**, with registration from **1 April 2026**. All vaping liquids will be taxed at a flat rate of £2.20 per 10ml; a duty stamp will be required on all final retail packaging. For businesses in that supply chain, these are mandatory compliance measures. ([gov.uk](https://www.gov.uk/government/publications/agent-update-issue-140/issue-140-of-agent-update?utm_source=openai))
## Practical Compliance Checklists
Businesses should now carry out the following to avoid mis-reporting or penalties:
1. **Review your rateable value**
- Check the VOA’s updated property value and classification;
- Verify whether your property qualifies as RHL (Retail, Hospitality, Leisure) or high-value;
- Understand any reliefs and transitional restrictions for your locale. |
2. **VAT obligations**
- If providing private hire / taxi journeys, assess whether you must exit the Tour Operators’ Margin Scheme and switch VAT accounting methods.
- For entities making donations to charities, verify items are within value thresholds and not excluded excise goods. |
3. **Duty obligations for vaping and excise goods**
- If producing, importing, distributing vaping liquids, register for VPD/VDS from 1 April 2026;
- Ensure packaging displays required stamps; anticipate compliance processes in supply chain logistics. |
4. **Payroll & HR adjustments**
- From 6 April 2026, NICs apply on pension contributions made via salary sacrifice above £2,000 per year;
- Review existing salary sacrifice arrangements; update employee benefit policies and communication. |
5. **Maintain robust record-keeping**
- Keep documents for VAT reliefs, property value instruments, foreign income and gains (if relevant under non-dom regime), benefits received from trusts, etc.;
- Use software or systems that integrate the new regulations to avoid misclassifications. |
## Risks of Non-Compliance & Penalties
- Misapplying VAT (e.g. using Margin Scheme when excluded) can lead to underpaid tax and interest plus penalties. |
- Failing to register correctly for VPD/VDS or mislabelling packaging could invoke customs or excise penalties. |
- Underpaying business rates due to incorrect classification or forgetting reliefs can result in back taxes. |
- Salary sacrifice miscalculations can result in unexpected NIC charges billed retrospectively. |
## Case Example
**“Lazy Cafe Ltd”**, a hospitality business owning two pubs with rateable values of £400,000 and £550,000:
- The pub with RV £400,000 qualifies under RHL standard categories and benefits from lower multipliers and perhaps transitional relief keeping bill increases gentle.
- The property increase at £550,000 puts it into high-value multiplier band (≥£500,000) with **higher rate**, making bills significantly higher; strategic planning needed (restructure, reliefs, or passing cost to customers). |
- If Lazy Cafe Ltd provides occasional private-hire transport (e.g. shuttle for patrons), from Jan 2026 that service would be excluded from the Tour Operators’ Margin Scheme unless bundled with other travel services; if they incorrectly stay in scheme they risk VAT compliance failures. |
## What to Do Now
- Early audit of your business property classifications & reliefs. |
- Engage with HMRC guidance, training or seek professional advice for sectors severely touched (e.g. vaping, private hire, hospitality). |
- Communicate with staff about NIC changes affecting benefits. |
- Ensure your accounting and tax teams are aware of the deadlines: 1 April 2026 (business rates, VPD registration), 2 January 2026 (VAT Margin Scheme changes). |
**Bottom line**: UK businesses face a wave of reforms that reshape the compliance landscape. Staying ahead through early action, clear record-keeping, and sector-specific attention will help avoid penalties and take advantage of reliefs.