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Corporate tax update – August 2026

Written by Zoe Thomas and Ami Jack

19 August 2026

Welcome to our August corporate tax update

Our corporate tax update focuses on the developments that matter most to businesses, including HMRC activity, policy changes and recent case law. We explain what they mean in practice and where businesses may need to take action.

A note from Zoe Thomas, Partner and head of corporate tax

Our August update covers a range of developments affecting businesses and employers, including HMRC’s updated guidance on the mandatory registration of tax advisers, publication of our response to the International Controlled Transactions Schedule (ICTS) consultation and important developments in relation to capital allowances, tax residence and group relief.

We also highlight changes affecting employers, including new employment related securities reporting requirements and the UK-India social security agreement.

Finally, with the next Budget now scheduled for 28 October 2026, we explain how we will help businesses keep abreast of the announcements most relevant to them.

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 – August 2026

Budget 2026 date announced

The Chancellor has confirmed that the next Budget will take place on 28 October 2026. The Budget is expected to include a range of tax and fiscal announcements affecting businesses, employers and individuals.

Following the Budget, Saffery will publish a concise summary of the announcements most relevant to businesses and circulate it to subscribers to our Business Tax Updates communications.

Mandatory registration of tax advisers: important clarification for in-house tax teams and complex structures

HMRC’s new mandatory registration regime for tax advisers is now in force. Broadly, the regime is designed to ensure that businesses providing tax services meet minimum standards.

A business may need to register if, in the course of its business, it is paid to assist others with their tax affairs and interacts with HMRC in relation to those tax affairs. Interaction with HMRC includes activities such as filing returns, making claims, corresponding with HMRC and acting as an agent. Tax advisers that are required to register but fail to do so may ultimately be prevented from interacting with HMRC on behalf of clients and may be liable to penalties.

HMRC’s recently published guidance provides an important clarification: mandatory registration is only intended to apply where there is a genuine third-party adviser relationship. As a result, in-house tax teams acting solely for their employer are outside the regime, reducing concerns that many groups with complex structures may have been caught by the rules.

HMRC has also clarified that registration is not intended to apply to a number of arrangements involving joint ventures, investment structures, SPVs, partnerships or trusts and, in addition, is not intended to apply to some M&A arrangements. HMRC’s guidance provides examples of how common organisational structures will be treated for the purposes of registration. Businesses that have relied on HMRC’s published guidance in good faith should be treated as compliant if HMRC later clarifies that registration is required.

HMRC has also confirmed that existing Agent Services Account (ASA) holders became subject to the ongoing registration conditions and sanctions framework from 18 August 2026, meaning that the ongoing compliance requirements now apply. Where HMRC requires further information to determine whether those conditions are met, it will contact the tax adviser through its ASA.

Key takeaway

The latest guidance provides greater clarity on how the registration rules are intended to apply in practice, particularly in relation to complex organisational structures. Businesses with shared service arrangements, joint ventures or other complex structures should review their position carefully against HMRC’s latest guidance and applicable registration conditions.

International Controlled Transactions Schedule (ICTS): Saffery consultation response

In our July update, we highlighted HMRC’s consultation on the proposed International Controlled Transactions Schedule (ICTS), a new reporting requirement for accounting periods beginning on or after 1 January 2027. The consultation closed on 31 July 2026 and our response has now been published.

While we understand HMRC’s objective of improving transfer pricing risk assessment through more data-driven approaches, our response questions whether the proposed regime is sufficiently targeted. In our view, the ICTS would require detailed information from a broad population of taxpayers, rather than focusing enhanced reporting on those businesses and transactions posing the greatest transfer pricing risk.

We are particularly concerned about the impact on businesses that cannot claim the small and medium-sized enterprise (SME) exemption but are below the Country-by-Country Reporting (CbCR) threshold. While these businesses are already subject to transfer pricing, many do not currently prepare transfer pricing analyses and documentation at the level of detail required to populate the ICTS. The proposed disclosures would therefore place greater scrutiny on existing transfer pricing positions and require these businesses to significantly enhance their transfer pricing processes and documentation.

Our response also raises concerns over the low disclosure thresholds for individual transactions, and the requirement that information reported must be ‘accurate’ and a penalty regime for inaccurate returns where reporting may depend on reasonable judgement and assumptions. We welcome simplifications compared with earlier proposals, including revised aggregation rules and a more targeted approach to financing disclosures, but continue to believe a more proportionate and risk-focused regime is required.

Key takeaway

The ICTS is the most significant new transfer pricing compliance requirement in recent years. Businesses with international operations (both transfer pricing and permanent establishments) should assess whether they can identify, analyse and report the required transaction-level data, particularly where they do not currently prepare local file documentation. The proposals also reinforce HMRC’s continued move towards automated, data-led transfer pricing compliance and risk assessment.

For more on ICTS generally see our article.

HMRC updates Non-Statutory Clearance Service guidance

HMRC’s Non-Statutory Clearance Service allows taxpayers and their advisers to seek HMRC’s views where there is genuine uncertainty about how tax legislation applies to a particular transaction or set of circumstances where insufficient published guidance exists or where no statutory clearance procedure is available.

HMRC has updated its guidance on the service, including clarification about when applications will and will not be accepted. The revised guidance emphasises that the service is not a confirmation service and cannot be used simply to confirm that a taxpayer’s interpretation of legislation is correct. HMRC will also not give a clearance on matters of fact, for example if certain activities constitute a business. Instead, HMRC will only provide advice where there is genuine uncertainty about how legislation applies to a particular set of facts.

HMRC has also clarified that where it requests additional information, the information must be provided within 30 days. Applications may be closed and not considered further if the requested information is not received within that period.

Key takeaway

Businesses considering a non-statutory clearance application should ensure that genuine uncertainty exists, review whether a statutory clearance procedure is available and be prepared to respond promptly if HMRC requests further information.

Corporate tax residence: Bermudian company found resident in the UK

Case: Cogefin (Bermuda) Ltd & Anor v HMRC [2026] UKFTT 1108

A company’s tax residence is important because it helps determine where the company is subject to corporation tax and can affect the availability of reliefs, the application of double tax treaties and its wider tax compliance obligations.

The First-tier Tribunal considered the tax residence of a Bermudian company established to hold and manage investments on behalf of a family trust. One of the key factors in determining a company’s tax residence is where its central management and control (CMC) is exercised. HMRC argued that, despite the company having Bermudian-resident directors, its CMC was exercised from the UK by the trust’s economic settlor and beneficiary.

The company argued that its directors made the relevant decisions in Bermuda after considering investment recommendations. HMRC argued that the individual in question was in fact directing the company’s investments and other significant transactions from the UK, with the directors simply implementing decisions that had already been made.

The FTT found that the strategic, high-level decision-making rested with the beneficiary, and that the directors generally treated his proposals as instructions rather than recommendations requiring independent consideration. The tribunal concluded that the directors had effectively abdicated decision-making, undertaking administrative functions and, at most, carrying out a ‘sense check’ of proposals rather than exercising the level of strategic decision-making required for CMC. The company was therefore resident in the UK, rather than Bermuda, throughout the periods under appeal.

Key takeaway

The judgement is a reminder that more weight is given to where strategic decisions are made in practice than where board meetings take place or documents are signed. It also highlights that while the appointment of professional offshore governance arrangements is helpful, they are not a substitute for genuine offshore decision-making.

Capital allowances: HMRC updates guidance following Supreme Court Orsted/Gunfleet Sands decision on pre-development costs

HMRC has added new guidance to its Capital Allowances Manual at CA95010 following the Supreme Court decision in Orsted West of Duddon Sands (UK) Ltd v HMRC. The decision considered the availability of capital allowances for certain pre-development expenditure connected with an offshore wind farm project. The new guidance sets out HMRC’s interpretation of the decision. Related guidance at CA20060 (restricted meaning of ‘on’ and ‘on the provision of’) and CA20070 (professional fees and preliminaries) has also been updated to reflect the decision and HMRC’s view of its implications.

The guidance was published shortly before the government launched its consultation on the tax treatment of pre-development costs, which we’ll shortly be responding to.

For more on the decision see our article: Supreme Court decision on capital allowances for offshore windfarm surveys and studies.

Key takeaway

Businesses undertaking major capital projects should consider whether HMRC’s revised guidance affects the treatment of pre-development costs incurred before assets are brought into use. The strongest capital allowances claims are likely to be those which can demonstrate a direct link between the cost incurred and the acquisition, construction, transport or installation of specific plant or machinery.

Capital allowances: relief available despite pre-arranged onward asset sale

Case: Perenco UK Ltd v HMRC [2026] UKFTT 1096

The First-tier Tribunal allowed a taxpayer’s claim to capital allowances on plant and machinery acquired as part of an oil and gas transaction and sold shortly afterwards under a pre-existing agreement.

HMRC argued that the expenditure did not qualify for relief because, by the time the assets were acquired, the taxpayer had already committed to the onward sale and that the arrangements were designed to secure a capital allowances advantage.

The Tribunal disagreed, finding that the taxpayer had genuinely acquired and owned the assets before the onward sale. It held that a pre-arranged disposal did not change the character of the expenditure as expenditure on the provision of plant and machinery, nor did it prevent the taxpayer from meeting the statutory conditions for capital allowances. The Tribunal also rejected HMRC’s argument that an intention to sell constituted a separate use of the assets.

The Tribunal also found that, although the arrangements produced a favourable capital allowances outcome through a section 198 election, obtaining that tax advantage was not a main purpose of the arrangements. Instead, the structure had been adopted for wider commercial reasons.

Key takeaway

The decision confirms that a pre-arranged onward sale does not necessarily prevent capital allowances being available, and a tax-efficient outcome does not, by itself, trigger anti-avoidance provisions where the arrangements are driven by genuine commercial objectives.

Group relief and distributable reserves: key risks for corporate groups

Group relief is a long-established feature of the corporation tax system that allows losses to be surrendered between qualifying group companies. Recent commentary has raised questions about how the group relief rules interact with company law distributable reserve requirements in specific circumstances. Concerns can arise where losses are surrendered for no consideration, for consideration below book value or for non-arm’s length consideration to a parent or sister company, creating a risk that the surrender could be treated as a distribution.

Where a deferred tax asset has been recognised, the losses will have a positive book value, and the surrendering company will generally need sufficient distributable reserves to support any unpaid element of the surrender. In cases where the surrendering company, or an intermediate company through which the distribution flows, has insufficient distributable reserves, there is a risk that an unlawful distribution could arise absent sufficient consideration being paid.

The issue is attracting increasing attention, including from auditors.

Key takeaway

Groups making use of group relief should ensure that distributable reserve implications have been considered. Existing arrangements may merit review, particularly where losses are surrendered without full consideration.

Pillar 2: HMRC publishes guidance on payment allocation

Pillar 2 introduces a global minimum effective tax rate of 15% for large multinational groups and brings with it significant new reporting and compliance obligations. HMRC has continued to update its guidance on how the regime operates in practice.

HMRC has added new guidance to its Multinational Top-up Tax and Domestic Top-up Tax Manual at MTT54110. The new page summarises the order in which HMRC allocates payments where a group has not paid its Multinational Top-up Tax (MTT) and/or Domestic Top-up Tax (DTT) liabilities in full by the due date.

Key takeaway

Groups within the Pillar 2 regime should ensure that payment obligations are monitored carefully and that any cash flow pressures are identified early, particularly where multiple top-up tax liabilities may arise.

Employment related securities reporting changes from April 2027

In Employment related securities bulletin 67 (July 2026), HMRC has confirmed the timetable and practical details for previously announced changes to employment related securities (ERS) end of year return templates.

HMRC has confirmed that the underlying ERS reporting requirements are not changing. However, from 6 April 2027 employers will be required to use updated ERS end-of-year return templates, and returns submitted using older versions will be rejected.

New templates, technical notes and guidance are due to be published on 2 November 2026, with updates to HMRC’s ERS checking service planned for 1 February 2027 to allow employers to check the new versions of the ERS end of year return templates. The changes are intended to improve accessibility and will include revised template formats, updated terminology and changes to the associated guidance and technical notes.

Key takeaway

Employers operating share plans or other ERS arrangements should ensure that internal processes and software providers are ready to adopt the updated templates well before the 2027 filing season.

UK-India social security agreement now in force

The UK-India social security agreement entered into force on 15 July 2026. The agreement is intended to prevent employees and employers having to pay social security contributions in both countries simultaneously where individuals work temporarily across the UK and India.

HMRC has published guidance explaining how the agreement applies to various categories of worker, including detached workers, internationally mobile employees and other cross-border situations.

Key takeaway

Businesses with internationally mobile employees working between the UK and India should consider whether the agreement may reduce social security costs or simplify compliance obligations.

You may also find the following recent Saffery insights helpful

How we can help with corporate 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.