Corporate tax update – July 2026

Welcome to our July corporate tax update

In this update we highlight key developments in corporate tax, focusing on what matters in practice for businesses, where we are seeing HMRC activity and where policy change or case law may 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 Zoe Thomas, Partner and head of corporate tax

Our July update covers a range of developments across corporate and employment taxes, including the government’s consultation on modernising the distributions framework, L-Day announcements, proposed new transfer pricing reporting requirements through the International Controlled Transactions Schedule (ICTS) and further developments in relation to Pillar 2 reporting.

We also highlight the Supreme Court’s important decision in BlueCrest on the LLP salaried member rules, changes to the quarterly instalment payment regime and preparations for the introduction of mandatory payrolling of benefits.

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 – July 2026

• Modernising the distributions framework: major consultation launched
• Corporation tax quarterly instalment payments: expenditure credits excluded from profit thresholds
• Transfer pricing: technical consultation into the January 2027 International Controlled Transactions Schedule (ICTS)
• Pillar 2 reporting developments
• Creative industries tax reliefs: HMRC signals increased compliance activity
• Construction Industry Scheme developments

Tax update 2026: key government announcements for businesses

The government published a package of tax measures on 23 June 2026 focused on simplifying and modernising the tax system, improving administration and promoting fairness. A collection of all published items is available on GOV.UK.

Taken together, the announcements point towards greater digitalisation, increased reporting obligations, enhanced data collection by HMRC and continued review of long-standing areas of the tax system.

The key announcements relevant to businesses include:

Modernising distribution rules: consultation on dividends, capital returns and demergers

The government has published a wide-ranging consultation on modernising the taxation of distributions and repayments of capital from companies to shareholders who are individuals or trusts.

The distributions rules are fundamental to the corporate tax system but have remained largely unchanged since 1965. The consultation considers whether they still operate as intended, particularly where similar transactions can give rise to different tax outcomes (for example, income versus capital treatment).

The proposals span a wide range of areas, including:

• The treatment of returns of capital, including arrangements involving reductions of share capital
• Reform of the statutory demerger rules, alongside the potential removal of non-statutory routes
• Aligning the tax treatment of distributions from non-UK resident companies with UK rules
• The interaction between the distributions regime and loans to participators
• Extending the loans to participators regime to certain non-UK resident companies
• Changes to the purchase of own shares rules
• Modernisation or replacement of the transactions in securities (TIS) anti-avoidance rules

Given the breadth of the proposals, the potential impact is significant for owner-managed businesses, corporate restructurings, demergers, private equity and cross-border structures. At this stage no legislative changes have been proposed and the consultation is seeking views on a range of options.

Key takeaway

This is one of the most significant tax consultations currently underway. Businesses involved in shareholder transactions, demergers, reorganisations or cross-border structures should consider how the potential changes could impact them.

The consultation closes on 14 September 2026. Saffery will be responding and a copy of our response will be available on our website.

Corporation tax quarterly instalment payments (QIP): rules excluding expenditure credits from profit thresholds from 2027

Large and very large companies are generally required to pay corporation tax through quarterly instalment payments (QIPs), rather than in a single payment after the end of their accounting period. Whether a company falls within the QIP regime depends on the level of its profits.

The government will introduce secondary legislation to amend the definition of augmented profits for the purposes of the QIP regime.

From April 2027, Research and Development Expenditure Credits, Audio-Visual Expenditure Credits and Video Games Expenditure Credits will no longer be taken into account when determining whether a company falls within QIP.

This is intended to ensure that companies are not brought within the QIP regime solely as a result of receiving these credits, reducing administrative burdens and potential cashflow pressures.

While this change is welcome, our Film, TV & Video Games team is speaking with HMRC about the extent to which the issue is expected to continue to affect some of our clients.

Key takeaway

The change should reduce the risk of companies being brought into quarterly instalment payments solely because they receive expenditure credits. However, businesses should continue to monitor their position carefully particularly where associated company rules significantly reduce the relevant profit thresholds.

Land remediation relief (LRR) update: government consultation response and new consultation launched.

Land remediation relief (LRR) provides enhanced corporation tax relief for companies that incur qualifying costs in cleaning up contaminated or derelict land, with the aim of helping to support redevelopment of contaminated and brownfield sites.

The government has published a summary of responses to its consultation on Land Remediation Relief, providing an update on the evidence gathered and its initial assessment of the relief. The firm’s contribution to the consultation is on our website.

The government considers that LRR is not fully meeting its objective of incentivising the remediation of contaminated and brownfield land. However, it recognises that the relief can provide meaningful support in certain cases, particularly for more heavily contaminated sites or those with marginal viability.

The publication confirms that the government will continue to engage with industry to explore whether targeted reforms could improve the effectiveness of the relief. In this respect on 13 July 2026 (L-Day) the government launched a second consultation on potential options to reform LRR. The consultation asks for views making LRR more accessible, better targeted and more closely aligned with the practical realities of brownfield development. These include options to align the relief more closely with planning processes, update the treatment of derelict land, and address the timing mismatch between when expenditure is incurred and when relief is obtained for developers.

Key takeaway

Businesses involved in brownfield development and remediation projects should continue to monitor developments as further reform of the relief remains possible.

PAYE Settlement Agreements review: changes to employer tax reporting under consultation

The government has published a call for evidence on PAYE Settlement Agreements (PSAs), which allow employers to settle the tax and Class 1B National Insurance contributions due on certain benefits and expenses on behalf of employees.

The call for evidence seeks to understand how PSAs operate in practice, including how employers decide which items to include, how PSAs are used alongside payroll and P11D reporting, and the extent of any complexity or uncertainty in applying the current rules. It also considers the administrative processes involved in agreeing, managing and calculating PSAs, and whether these remain appropriate.

The review comes at a time when employer reporting obligations are already changing through the introduction of mandatory payrolling of benefits. Future changes may therefore form part of a wider simplification of employee tax reporting.

The call for evidence closes on 15 September 2026.

Key takeaway

Employers that use PSAs should monitor developments closely. Any future reform could affect how benefits and expenses are reported and taxed.

UK e-invoicing 2029: Peppol rollout and how businesses should prepare now

E-invoicing involves invoices being issued, exchanged and processed in a structured digital format, allowing data to move automatically between systems without manual intervention. The government intends to introduce mandatory e-invoicing in the UK from 2029.

HMRC has confirmed that Peppol will be the core interoperability network for the UK’s planned 2029 e-invoicing mandate. While expected, given its existing use in the public sector, this announcement provides important clarity. A decentralised, four-corner model aligned to global standards enables businesses, software providers and advisers to begin planning with confidence.

Peppol is the most widely used global network for the standardised exchange of electronic business documents. It works on a four-corner model basis, in which businesses exchange e-invoices through their service providers, who then communicate with each other, which is what allows for interoperability and flexibility. Multinational businesses and accounting software providers will likely be familiar with it as it is already used in many EU countries and beyond.

For more about e-invoicing see our web article.

Key takeaway

Businesses should start preparing now by:

• Assessing the quality of VAT-critical data, including VAT numbers and invoice data
• Engaging with software providers to understand their Peppol readiness and roadmap
• Ensuring finance, tax and IT teams are aligned on e-invoicing requirements
• Mapping invoicing processes to identify where data is created, transformed or lost

HMRC small business review: improving end-to-end taxpayer journey

The government will undertake a review of the end‑to‑end taxpayer journey for small businesses, looking at how businesses interact with HMRC from start‑up through to ongoing compliance.

Key takeaway

The review will focus on identifying pain points in current processes and opportunities to simplify guidance, improve services and support businesses to meet their tax obligations more easily.

New criminal offence for reckless untrue statements in direct tax

The government has published a consultation on introducing a new criminal offence for making reckless untrue statements or declarations in relation to direct tax.

Currently, such an offence exists for indirect taxes, but not for direct taxes. This means that in direct tax cases, HMRC must generally prove dishonesty to secure a criminal conviction. The proposed change would introduce an offence where a person makes a statement that is untrue and is aware of the risk that it may be incorrect, aligning the position across tax regimes.

The new offence is intended to address cases of serious non‑compliance where behaviour is more culpable than carelessness but may not meet the threshold for dishonesty. The proposed sanctions include a potential two-year custodial sentence and/or an unlimited fine.

The proposal is not targeted at inadvertent errors. Rather, it is intended to address situations where a person acts with conscious disregard as to whether a tax statement is correct.

The consultation closes on 16 August 2026.

L-Day: Finance Bill 2026-27 draft legislation published

On 13 July 2026, HMRC published draft legislation, accompanying explanatory notes and Tax Information and Impact Notes (TIINs) for Finance Bill 2026-27 as part of its annual Legislation Day (L-Day) package.

The draft corporate tax legislation covers:

• The introduction of the Side-by-Side package and amendments to Multinational Top-up Tax and Domestic Top-up Tax
• Reform of the foreign permanent establishment exemption
• Securities Transfer Tax – modernisation of the Stamp Taxes on Shares Framework

Alongside the draft legislation, HMRC has launched several new consultations, including into:

• Reforming Land Remediation Relief (see above)
• Simplifying treaty relief from withholding tax on interest paid overseas
• The tax treatment of pre-development costs

Key takeaway

The publication provides the first detailed look at some of the measures expected to be included in Finance Bill 2026-27.

Public Accounts Committee report: large business tax compliance

The Public Accounts Committee has published a report on large business tax compliance following its recent hearing with HMRC officials. The report broadly recognises the success of HMRC’s co-operative compliance model but raises concerns about the length of some tax disputes, the complexity of the tax system and HMRC’s use of certain enforcement powers.

The report makes several recommendations, including improving transparency around compliance activity, reducing the time taken to resolve disputes and ensuring HMRC has the resources and technology needed to manage large business tax risks effectively.

You can read our thoughts on this report and HMRC’s recently released Large Business Customer Survey 2025 here.

Key takeaway

The report highlights continued scrutiny of HMRC’s approach to large business compliance. Large businesses should expect continued scrutiny of HMRC’s large business compliance approach, alongside ongoing focus on improving compliance and increasing transparency.

Mandatory payrolling of benefits: phased introduction in 2027 and 2028

Employers currently report most taxable benefits and expenses to HMRC after the end of the tax year through forms P11D. Mandatory payrolling will instead require certain benefits to be reported and taxed through payroll as they are provided.

HMRC has announced that mandatory payrolling of benefits in kind will be introduced in phases, rather than applying to almost all benefits from April 2027 as previously planned.

From 6 April 2027 (phase one), mandatory payrolling will apply to company cars, car fuel, vans, van fuel and employer-provided medical benefits, with most other benefits brought within scope from April 2028 (phase two). Employment-related loans and living accommodation will remain voluntary until a later stage.

In practice, the benefits included in the first phase account for the vast majority of those reported on forms P11D, so for many employers the decision to phase implementation may have little or no practical impact.

The draft legislation for the mandatory payrolling of benefits, together with the relating explanatory note and TIIN were published on L-Day.

Key takeaway

Employers who provide company cars, car fuel, vans, van fuel and employer-provided medical benefits should ensure they’re ready for the changes. Key actions include:

• Reviewing payroll systems to ensure they can handle real‑time benefit reporting,
• Identifying additional data requirements and planning how to collect, validate, and report this information,
• Communicating with employees about changes to payslips, tax codes and self-assessment obligations,
• Modelling cash‑flow implications of paying Class 1A NICs throughout the year, and
• Planning for complexities, such as:
  • Fluctuating benefits
  • Joiners and leavers
  • Globally mobile employees

Transfer pricing January 2027 reporting changes: ICTS consultation

Transfer pricing rules require multinational groups to price transactions between connected parties on arm’s length terms. HMRC continues to increase its focus on transfer pricing compliance and is increasingly seeking additional data to support risk assessment in this area.

The government has published a technical consultation on introducing the International Controlled Transactions Schedule (ICTS). The ICTS is expected to require in-scope groups to provide detailed information on material cross-border related-party transactions, supplementing information currently disclosed through corporation tax returns and transfer pricing documentation. The ICTS is intended to support HMRC’s use of data-led risk assessment, enabling more targeted identification of transfer pricing risk.

The requirement is intended to apply for accounting periods beginning on or after 1 January 2027.

For more information on the consultation see our article: International Controlled Transactions Schedule (ICTS): HMRC launches consultation on 16 June 2026.

Key takeaway

Although the ICTS remains subject to consultation, in-scope groups should begin assessing what additional transaction-level data may need to be reported and whether existing finance, tax and ERP systems can capture the required information. The new reporting requirements are likely to increase HMRC’s ability to identify and target transfer pricing risks, making robust transfer pricing governance and documentation increasingly important.

The consultation on ICTS closes on 31 July 2026. Saffery will be responding and a copy of our response will be available on our website.

Pillar 2 UK update: HMRC filing rules, deadlines and penalty guidance

Pillar 2 introduces a global minimum effective tax rate of 15% for large multinational groups and creates significant new reporting and compliance obligations. It is based on the OECD’s Global Anti-Base Erosion (GloBE) rules, which underpin the international minimum tax framework.

HMRC has published Notice 3: Pillar 2 top-up taxes submission of returns. The notice contains statutory guidance with legal effect for Multinational Top-up Tax and Domestic Top-up Tax. The notice sets out the requirements for self-assessment returns, below-threshold notifications, overseas return notifications and GloBE Information Returns, including the information that must be provided, filing procedures and amendments.

A GloBE Information Return, or GIR, is the standardised information return used to report a group’s global Pillar 2 calculations and relevant jurisdictional information. Where a GIR has been filed in another jurisdiction and specific conditions are met, groups can notify HMRC through an overseas return notification, removing the need to submit the GIR directly to HMRC.

The standard deadline for Pillar 2 returns and notifications is 18 months after the end of the group’s first accounting period within scope, and 15 months after the end of the accounting period for subsequent periods. For groups with 31 December year ends, this means the first filing deadline was 30 June 2026.

HMRC has also updated its guidance on reporting Pillar 2 Top-up Taxes to:

• Confirm that late filing penalties would usually apply to UK tax returns, overseas return notifications and information returns submitted after the deadline. However, under a transitional approach, no late filing penalties will be charged where submissions are made before 1 August 2026. HMRC has stressed that the temporary penalty easement is not an extension of the filing deadline. Groups should still make reasonable efforts to file on time.
• Clarify the position where HMRC identifies errors in an information return after it has been submitted. The guidance explains that, where HMRC asks a group to correct errors and a replacement return is submitted on or before 1 September 2026, HMRC will treat the submission date as the date it received the original information return rather than the corrected return.

Key takeaway

Pillar 2 compliance requirements are continuing to develop as groups move into their first reporting cycle. In-scope groups should ensure that registration, filing processes and data collection procedures are in place, particularly where reliance is being placed on a GloBE Information Return filed in another jurisdiction. While HMRC has adopted a temporary relaxation of late filing penalties, this does not alter the underlying filing deadlines.

The publication of Notice 3 means that HMRC’s Pillar 2 administrative framework is now largely in place, with registration, territory lists and return-filing requirements covered by Notices 1, 2 and 3 respectively.

UK creative industries tax reliefs: increased HMRC scrutiny

The UK’s creative industries tax reliefs and expenditure credits support investment in qualifying creative activities, including film, television, video games, theatre, orchestral productions and museum and gallery exhibitions.

HMRC has indicated (in Agent Update issue 144) that the value of claims and changes in claimant behaviour are factors behind its increased focus on compliance activity. The review covers both the legacy creative industry tax reliefs and the newer Audio-Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC) regimes. It is reviewing these trends to understand how the reliefs are operating in practice.

This may result in an increase in enquiries across relevant reliefs, including a small number of random enquiries to provide assurance across the wider population.

HMRC states that its approach will remain proportionate and focused on supporting taxpayers to get things right first time.

Key takeaway

Businesses claiming creative industry reliefs or expenditure credits should ensure claims are fully documented and supported by contemporaneous evidence. Claimants should also be prepared for increased HMRC scrutiny.

BlueCrest Supreme Court case: LLP salaried member rules clarified

Case: HMRC v BlueCrest Capital Management (UK) LLP [2026] UKSC 18

The Supreme Court considered the LLP salaried member rules, which determine whether LLP members should be taxed as employees rather than self-employed partners. The legislation applies where three conditions are met. Broadly, these consider a member’s remuneration, influence over the LLP’s affairs and capital contribution to the LLP. If any condition is not met, the member continues to be taxed as a partner rather than an employee.

BlueCrest argued that certain portfolio managers and desk heads failed Condition A because part of their remuneration was linked to the LLP’s profits and failed Condition B because they exercised significant influence over the LLP’s affairs through their investment management responsibilities.

The Supreme Court unanimously dismissed BlueCrest’s appeal. In relation to Condition A, it held that remuneration based primarily on the performance of an individual’s portfolio constituted disguised salary, notwithstanding that overall LLP profits acted as a cap on discretionary allocations. The Court concluded that the remuneration was not linked to overall LLP profits in the way typically associated with a partner’s share of partnership profits.

In relation to Condition B, the Court held that significant influence must derive from the LLP’s legal governance framework, including members’ rights and duties under the LLP agreement. Influence arising from an individual’s performance, expertise, profitability or informal standing within the business was not sufficient. The Court agreed with the Court of Appeal that the First-tier Tribunal had applied the wrong legal test when assessing whether certain members had significant influence and therefore upheld the decision to remit that issue to the First-tier Tribunal for reconsideration.

Key takeaway

This is an important decision on the LLP salaried member rules. The Supreme Court confirmed that Condition B is concerned with influence derived from an LLP’s governance arrangements rather than an individual’s commercial importance within the business. The LLP agreement therefore plays a key part in identifying the source of any influence, and should be considered carefully by LLPs to ensure it reflects the influence the partners in the LLP do have on the governance of the LLP.

The decision is likely to be relevant to many LLP structures and the application of the salaried member rules more generally.

Upper Tribunal considers deductibility of payments made in group restructuring context

Case: Swiss Centre Ltd v HMRC [2026] UKUT 227

The Upper Tribunal (UT) considered whether payments of around £33.5 million made to the National Asset Management Agency (NAMA) were deductible for corporation tax purposes.

The payments (comprising an additional sum and a separate guarantee payment in respect of another group company) formed part of arrangements to facilitate the sale of a property and reduce wider group indebtedness. The taxpayer argued they were deductible under the loan relationship rules or, alternatively, as capital gains enhancement expenditure.

The First-tier Tribunal (FTT) concluded that the payments were made for a range of wider group purposes and did not give rise to deductible debits under the loan relationship regime. The UT found no error of law in that decision and upheld it.

The UT agreed that the payments were made for a mixture of reasons, including reducing group debt, facilitating the transaction and wider commercial objectives, and did not arise from the company’s own loan relationships. In particular, it confirmed that there was insufficient causal connection between the payments and any relevant loan relationship where there are multiple inseparable purposes.

The UT also rejected the argument that the guarantee payment gave rise to a loan relationship loss, and confirmed that neither element of the disputed sum could be deducted under the loan relationship rules or treated as enhancement expenditure for capital gains purposes.

The appeal was therefore dismissed.

Key takeaway

This decision highlights the importance of establishing a direct connection between expenditure and the taxpayer’s own loan relationships. Where payments are made as part of a wider restructuring, refinancing or debt-resolution exercise benefiting multiple group entities, loan relationship relief may not be available.

Construction Industry Scheme (CIS) update: new HMRC guidance and ongoing uncertainty

The Construction Industry Scheme (CIS) requires tax to be deducted from certain payments relating to construction work. However, questions continue to arise regarding the scope of the regime and its application to more complex commercial arrangements.

The Chartered Institute of Taxation (CIOT) has recently raised concerns with HMRC about the operation of regulation 20A of The Income Tax (Construction Industry Scheme) Regulations 2005 (SI 2005/2045), which was intended to remove many landlord contributions to tenant works from CIS provided certain statutory conditions are met. CIOT’s view is that there is significant uncertainty and administrative burden for landlords meaning that tax continues to be withheld unnecessarily from these payments.

HMRC has updated Appendix A.3 of its Construction Industry Scheme: a guide for contractors and subcontractors (CIS 340) to add that a contract will fall within CIS where a person agrees the work to be carried out, or pays for it, even if they are not the one carrying out the construction work. This includes adding an example involving a business that agrees what repair work is needed and pays for the repair work to be undertaken by another party. The guidance confirms that, even if the main purpose is not construction, the contract falls within CIS because it includes construction work.

Key takeaway

Despite recent guidance updates, uncertainty remains in several areas of CIS. Businesses involved in property, construction or development finance should continue to review arrangements carefully.

HMRC Transformation Roadmap: progress update

HMRC has published a progress update on its Transformation Roadmap, setting out developments delivered over the last year and planned future changes to the tax system. HMRC notes achievements in terms of wider uptake of digital services and steps they have taken to start to close the tax gap including recruitment of additional officers and the use of AI. Among the developments highlighted for business are plans to publish an e-invoicing roadmap at Budget 2026 ahead of the proposed mandatory introduction of e-invoicing for all VAT invoices from April 2029.

Key takeaway

The update provides further evidence of HMRC’s direction of travel towards a more digital and data-driven tax administration system.

UK corporate re-domiciliation regime: Saffery consultation response

The government is planning to introduce a corporate re-domiciliation regime that would allow overseas companies to move their place of incorporation to the UK without creating a new legal entity. This scheme is expected to be attractive to foreign multinational groups and financial services companies wishing to benefit from the UK regulatory environment, for example the Qualifying Asset Holding Company (‘QAHC’) regime.

In our response, we note that existing UK tax legislation should generally provide an appropriate framework for the regime, although greater clarity may be required in some areas, including confirmation that re-domiciliation does not itself result in a taxable disposal.

It should be noted that no similar regime for re-domiciliation out of the UK is proposed.

Key takeaway

The proposed regime could increase the UK’s attractiveness as a location for internationally mobile businesses.

You may also find the following recent Saffery insights helpful

• Corporate tax update – June 2026
• Key VAT updates for June 2026
• International Controlled Transactions Schedule (ICTS): HMRC launches consultation on 16 June 2026
• Owner‑managed businesses could face significant new HMRC reporting obligations
• VAT and Transfer of a Going Concern (TOGC): UK rules and key considerations

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.