Corporate tax update – November 2026

Welcome to our November corporate tax update.

Our corporate tax update highlights key developments in corporate tax, focusing on what matters in practice for businesses, where we’re seeing HMRC activity and where policy change or case law have an impact. Our aim is to provide a concise, practical overview to help you stay up to date and identify areas where you may want to take action.

A note from Hilary Clelland, corporate tax partner

The Autumn Budget 2026 has understandably dominated the tax agenda over the last few weeks. While there were no fundamental changes to the corporate tax system, the Chancellor announced a range of measures affecting businesses and launched several consultations on potential changes. Our detailed analysis of what the announcements mean for businesses and our related podcast are available on the Saffery website.

Away from the Budget, this update covers several important developments for businesses. These include a Supreme Court decision on the deductibility of regulatory redress payments, two First-tier Tribunal decisions on R&D tax relief and HMRC’s increasing use of data.

If you’d like to discuss any of the issues raised, please speak to your usual Saffery contact or use the Get in Touch form at the bottom of the page and an appropriate person will contact you.

Key UK corporate tax updates – November 2026

• Autumn Budget 2026: key changes for businesses
• Supreme Court finds regulatory redress payments not deductible
• R&D tax relief: two tribunal decisions
• HMRC’s increasing use of data: what tax and finance leaders should consider

Autumn Budget 2026: key corporate tax changes for businesses

The Chancellor delivered the Autumn Budget 2026 on 28 October. Rather than major changes to the business tax system, the Budget contained a broad package of targeted measures affecting business investment, corporate transactions and tax administration.

Among the corporate tax measures are changes to capital allowances, including an increase in the first-year allowance for qualifying expenditure from 40% to 50% and a reduction in the main writing down allowance from 14% to 12%. The government also confirmed changes including making the foreign branch exemption mandatory and reform of the taxation of company distributions and repayments of capital.

The Budget also included a number of tax administration and simplification measures, including removal of the R&D claim notification requirement, simplification of the Additional Information Form and further changes as HMRC moves towards greater use of digital reporting, data and AI.

Key takeaway

Businesses should consider how the announcements affect planned investment and transactions as well as future compliance requirements. Our Autumn Budget hub brings together our full Budget coverage.

Corporate tax simplification for business investment: engagement opportunity

The government has launched a consultation to identify areas of the corporate tax system where targeted simplification could improve certainty and support business investment, growth and competitiveness.

The consultation will consider potential changes across three broad areas:

1. Financing and international activity, including treaty relief for interest, the controlled foreign company and anti-hybrid rules, and the rules governing the deductibility of finance costs.
2. Investment and innovation.
3. The administration of corporation tax.

The government intends to work with businesses, advisers and representative bodies to refine and prioritise the issues, develop possible solutions and test emerging approaches. This will include stakeholder working groups, roundtables and technical discussions, followed by more detailed proposals for the highest-priority areas.

Key takeaway

This is an opportunity to help shape potential simplification of some complex and longstanding areas of the corporate tax system.

Expressions of interest in participating must be submitted by 21 November 2026. Saffery will volunteer to take part in the engagement programme.

Modernising corporation tax administration: HMRC call for evidence

HMRC has published a call for evidence on corporation tax administration and how it could be made simpler, more efficient and better aligned with modern business practices.

It considers how technology, software and improved information flows could reduce duplication, help businesses get their tax affairs right first time and provide more integrated services.

The call for evidence also examines whether administration should be tailored more closely to the differing needs of smaller companies, growing businesses and large or complex groups.

Key takeaway

Businesses have an opportunity to identify where current corporation tax processes create duplication, unnecessary work or difficulty and to help shape how companies and their advisers interact with HMRC in future.

The call for evidence closes on 20 January 2027. Saffery will be responding and a copy of our response will be available on our website.

E-invoicing digital reporting: consultation opened

From 1 April 2029, businesses will be required to issue VAT invoices in a specified electronic format. The government has opened a consultation on E-invoicing digital reporting, looking at whether selected data created through e-invoicing could also be shared with, or made accessible to, HMRC for clearly defined purposes.

Possible uses include identifying errors earlier, reducing separate requests for information, improving the speed and targeting of VAT repayment checks and reducing duplicated reporting. The consultation also considers the potential use of existing infrastructure such as Peppol, together with the costs, data-security risks and safeguards that would be required.

Key takeaway

Although digital reporting is still at an early stage, the proposals could affect businesses’ invoicing systems, tax data, controls and interactions with HMRC.

The consultation closes on 20 January 2027. Saffery will be responding and a copy of our response will be available on our website.

Modernising the taxation of foreign sovereign investments: consultation opened

The government is consulting on a new statutory sovereign tax status regime, which will replace the current non-statutory sovereign immunity from direct tax regime from 1 January 2029.

Foreign sovereign investors would generally become subject to UK tax in the same way as other non-resident investors, except where a specific exemption applies. The principal change is expected to be that sovereign investors will become taxable on income and gains from directly held UK real estate, as well as UK trading income in limited circumstances.

The proposals include continued exemption for UK-source interest and an exemption for investment management activities undertaken by UK investment offices for sovereign investors. Sovereign investors would also receive bespoke access to the Real Estate Investment Trust regime, allowing them to control a UK REIT through a UK company while obtaining a 15% tax rate on relevant property income distributions. Transitional measures are proposed to allow affected investors to restructure existing holdings, with assets newly brought within the charge to capital gains tax rebased to market value at 1 January 2029.

Key takeaway

Sovereign investors with direct or indirect UK real estate interests should assess how the proposed regime could affect their existing structures and whether restructuring may be needed before January 2029.

The consultation closes on 20 January 2027. Saffery will be responding and a copy of our response will be available on our website.

Supreme Court finds regulatory redress payments not deductible

Case: ScottishPower (SCPL) Ltd & Ors v HMRC [2026] UKSC 35

The Supreme Court considered whether £28 million of payments made to customers and charities under settlement agreements with the energy regulator were deductible in calculating trading profits for corporation tax purposes. The payments followed breaches of regulatory obligations and were made in circumstances where substantial penalties would otherwise have been imposed. Under each settlement only a nominal £1 penalty was imposed.

The Supreme Court held that penalties are not deductible because they are not incurred wholly and exclusively for the purposes of the trade under s54(1)(a) Corporation Tax Act 2009. The redress payments were sufficiently akin to penalties because they were made to avoid the substantial penalties that would otherwise have been imposed. They were therefore also not incurred for the purposes of the trade.

The fact that the payments were made to customers and charities rather than paid as fines did not change their nature. This applied to the whole settlement package, including £554,013 paid directly to customers affected by mis-selling. The Supreme Court allowed HMRC’s appeal and restored the decision of the Upper Tribunal.

Key takeaway

The decision confirms that the deductibility of regulatory settlement payments depends on their substance rather than how they are labelled or to whom they are paid. Businesses negotiating regulatory settlements should therefore consider carefully whether payments made instead of, or as part of arrangements to avoid, regulatory penalties are deductible.

R&D tax relief: what two recent tribunal decisions mean for claims

Two recent First-tier Tribunal (FTT) cases provide further guidance on the distinction between commercial or operational innovation and qualifying research and development (R&D) for tax purposes.

Waste-handling projects

Case: Environmental Services Ltd v HMRC [2026] UKFTT 1301 (TC)

The FTT considered whether two projects undertaken by a waste collection and transport business qualified for R&D tax relief. The projects involved modifications to waste collection vehicles, storage tanks and agitation systems intended to improve the handling, transportation and separation of waste materials. HMRC denied the company’s claims for enhanced R&D relief and R&D tax credits for the accounting periods ended 31 July 2020 and 31 July 2021.

The company argued that the projects involved technological uncertainty and systematic experimentation to develop improved methods of handling waste. The FTT accepted that the company had undertaken genuine work to improve its operations, that one of its employees was a ‘competent professional’ with extensive practical experience and that the company had followed a method or plan, albeit one that was not written down. It also accepted that the projects involved experimentation, testing and trial and error.

However, the FTT concluded that the projects and plans were directed at solving practical operational and commercial problems rather than achieving an advance in overall knowledge or capability in a field of science or technology.

The activities therefore did not constitute R&D for tax purposes.

Comment

The decision illustrates the distinction between innovative problem-solving and R&D for tax purposes. Experimentation, trial and error and commercially valuable improvements are not sufficient on their own. A claimant must identify the relevant field of science or technology, the existing baseline, the advance sought and the scientific or technological uncertainties addressed.

Crucially, the project must seek an advance in overall knowledge or capability in that field, rather than simply improving the company’s own operational capability or developing solutions for its business.

Canned wine project

Case: RDM Wines Ltd v HMRC [2026] UKFTT 1348 (TC)

The FTT considered whether a wine importer and distributor was entitled to R&D tax relief for a project involving the canning of fine wines. The company said that it had worked with a South African wine producer to develop a high-quality wine in recyclable packaging, including testing different can sizes, linings and gases. HMRC disallowed the claim.

The company claimed that an iterative testing process had begun in 2021. However, the FTT found that the evidence was consistent with its relationship with the South African producer beginning in or shortly before November 2022. The company had not provided emails, invoices, contracts or other contemporaneous records supporting its account of earlier testing or staff involvement.

Further, the company’s sole witness accepted that he lacked the requisite scientific or technological expertise to qualify as a competent professional capable of substantiating the claim that the project sought an advance in science or technology. Moreover, the individuals and organisations identified as competent professionals within the claim did not provide witness evidence for the Tribunal to assess either their qualifications or the relevant technological baseline against which any purported advance should be evaluated.

Based on the activities the company had proved, the FTT found no systematic approach amounting to a project conducted according to a method or plan. It also concluded that the work was directed towards finding a commercial solution to packaging and distribution challenges rather than achieving an advance in science or technology. The company had not demonstrated any advance in overall knowledge or capability beyond that already available or readily deducible by a competent professional in the wine industry.

The FTT dismissed the appeal.

Comment

The decision demonstrates that for an R&D claim to be successful a claimant must be able to demonstrate both that the relevant activities took place and that they formed part of a methodical project seeking an advance in science or technology.

Specifically, the case highlights the critical importance of maintaining robust contemporaneous evidence. The FTT placed little weight on retrospective explanations and witness evidence that were not supported by records created at the time the work was undertaken.

In addition, the decision also emphasises the need for claimant companies to rely on a competent professional who can clearly establish the relevant technological baseline and demonstrate why the sought-after knowledge or capability was not readily available within the field.

OECD publishes latest Model Tax Convention

The OECD has published the 11th edition of the full version of the Model Tax Convention on Income and on Capital, a key reference used as a basis for negotiating, applying and interpreting bilateral tax treaties. The new edition contains the full text of the OECD Model as it read on 18 November 2025.

The changes reflected in the latest edition include updated commentary on Article 5, providing further guidance on when cross-border remote working may give rise to a fixed place of business permanent establishment.

Key takeaway

Businesses with employees working remotely across borders should consider the updated commentary when assessing whether working arrangements could create a permanent establishment and associated tax obligations.

HMRC publishes new Special Measures Manual for large businesses

HMRC has published a new Special Measures Manual setting out how the special measures regime for large businesses in Part 3 of Schedule 19 Finance Act 2016 operates in practice. The regime is intended to apply to a small number of large businesses that persistently fail to engage with HMRC in a collaborative and transparent way.

The new manual covers the criteria and process for businesses entering the regime, the consequences of being placed into special measures and the process for exiting it.

Its publication follows recent scrutiny of the regime by the Public Accounts Committee, which noted that no business has yet been placed into special measures. The government has accepted the committee’s recommendation that HMRC review the regime, including whether the threshold for entry should change.

Key takeaway

The new guidance provides greater clarity around a regime that has so far never been used. Large businesses should continue to monitor developments as HMRC reviews whether changes are needed to make the regime more effective.

HMRC’s data-led approach to tax compliance: what tax and finance leaders should consider

HMRC continues to invest in data, digital services, AI and compliance capability, giving it greater ability to connect information from different sources, identify inconsistencies and target compliance activity.

For businesses, this means tax compliance is increasingly about more than ensuring individual returns are accurate and filed on time. Corporation tax, VAT, employment taxes and other obligations may be managed through separate processes, but HMRC’s increasing use of data means discrepancies between those different sources of information may become easier to identify.

Businesses should therefore consider whether they have sufficient visibility over their tax data as a whole and can explain differences between returns, underlying records and previous periods. This is particularly relevant given HMRC’s wider focus on tax governance, systems, controls and audit trails.

Key takeaway

Tax and finance leaders should consider whether their processes allow them to identify and explain inconsistencies before HMRC does. This doesn’t necessarily require a major transformation project. Targeted reconciliations across material taxes, clear ownership of tax data and effective monitoring can help businesses identify risks earlier and provide stronger evidence for their tax positions.

Read our article: What HMRC’s data-led approach means for tax and finance leaders.

Gift Aid and charitable memberships: HMRC clarifies the refund rules

There has been some uncertainty over the interaction between the Digital Markets, Competition and Consumers Act (DMCCA) and Gift Aid for charitable membership schemes. In particular, there was concern that a right to a refund arising under consumer protection law could amount to a ‘condition as to repayment’, which would prevent a payment from qualifying for Gift Aid even where no refund was actually made. A Gift Aid donation must not be subject to a condition as to repayment.

HMRC has now clarified its interim position in its Gift Aid guidance (at 3.13.4). Where consumer protection law requires a charity to provide a full or partial refund, HMRC does not consider this in itself to be a condition as to repayment for Gift Aid purposes. If a full refund is subsequently made, the donation ceases to qualify for Gift Aid. If only part is refunded, the amount retained may still qualify, provided it meets the usual Gift Aid requirements, including the donor benefit rules.

The Department for Business, Innovation, Science and Trade (DBIST) is expected to publish further guidance on how the DMCCA subscription rules apply, including the exclusion for certain charitable memberships relating to attending performances, seeing collections and visiting places.

PAYE RTI errors: new HMRC guidance for employers

HMRC has published new Guidelines for Compliance on preventing common payroll errors that can result in PAYE Real Time Information (RTI) disputed charges.

The guidance covers issues including duplicate employee records, PAYE mergers and successions, submissions and payments made using the wrong PAYE reference and incorrect National Insurance category letters. It also explains how to correct errors and resolve discrepancies with HMRC.

Key takeaway

Employers should consider the guidance as part of reviewing their payroll processes and controls. Identifying and correcting issues early can help avoid discrepancies in HMRC’s records and the time and cost involved in resolving disputed PAYE charges.

How Saffery can help businesses manage tax compliance and planning

If any of the topics covered in this update are relevant to your business, or you would like to discuss the potential impact, please get in touch with your usual Saffery contact or use the Get in Touch form.