23 January 2026
Finance Bill and National Insurance Contributions Bill: progress update
Selected clauses and schedules of Finance Bill (No. 2) Bill 2024-26 will be considered by MPs in a Public Bill Committee next week, with the first hearing taking place on 27 January 2026. Proceedings are due to conclude by 26 February 2026 at the latest (but may conclude sooner). A number of government amendments have been tabled in the name of Exchequer Secretary Dan Tomlinson MP. Affected clauses and schedules of relevance to businesses include those on umbrella companies (Clause 24), transfer pricing (Schedule 6), and Pillar Two (Schedule 8). HMRC have published updated Explanatory Notes in respect of some of the proposed amendments.
The Commons stages of the National Insurance Contributions (Employer Pensions Contributions) Bill, which will create a power for the Treasury to apply NICs to salary-sacrificed pension contributions that exceed £2,000 per annum from April 2029, concluded this week. The Bill has begun its stages in the House of Lords, with its first reading on 22 January 2026 and its second reading scheduled for 4 February 2026.
Tax treatment of ‘capital interests’ held by individual partners in a UK LLP
The Upper Tribunal (UT) has largely allowed HMRC’s appeal, and dismissed the taxpayers’ cross-appeal, in Mark Benedict Holden v HMRC / HMRC v The Boston Consulting Group UK LLP and others. The case concerns the tax treatment of individual members of a UK LLP in respect of amounts identified as ‘capital interests’ in various LLP agreements. The ‘capital interest’ arrangements were put in place by The Boston Consulting Group UK LLP, following its establishment as an LLP in 2011, and were structured in a manner that was intended to cause them to be regarded as capital assets for tax purposes. HMRC disagreed and amended partnership statements and/or issued discovery assessments in respect of the years 2012/13 through to 2016/17.
The UT considered a number of substantive matters and procedural issues, including whether the First-tier Tribunal (FTT) was wrong to hold that the ‘capital interests’ were not interests in the capital of the LLP. The UT concurred with the FTT that the payments could not be regarded as payments in respect of an interest in capital or goodwill. The UT also considered whether the FTT was incorrect to decide that the mixed member partnership rules (MMRs) at section 850C ITTOIA 20025 did not apply. The UT ultimately agreed with HMRC that the MMRs in fact applied. In respect of the earlier years pre-dating the enactment of the MMRs, the UT agreed with the FTT that the payments received by the individual members were taxable as miscellaneous income (section 687 ITTOIA). Were its findings on the MMRs to be incorrect, the miscellaneous income provisions would also have applied in the later years. In the event that the ‘capital interests’ were in fact capital in nature, and the UT’s findings relating to the MMRs and/or miscellaneous income were incorrect, the UT considered that the sale of occupation income provisions would have applied, with the individual members charged to income tax on “the capital amount receivable” by each of them.
UK tax treaty with Peru now in force
As expected, HMRC have updated their page Peru: tax treaties to confirm that the 2025 UK-Peru Double Taxation Convention and Protocol entered into force on 21 January 2026. The provisions of the treaty will have effect in line with the provisions in its entry into force article. According to HMRC, the convention is effective in the UK from 1 January 2027 for taxes withheld at source, 6 April 2026 for income tax and capital gains tax, and 1 April 2026 for corporation tax. The convention is effective in Peru from 1 January 2027.
OECD publishes updated transfer pricing country profiles
The OECD has published updated transfer pricing country profiles reflecting the current transfer pricing legislations and practices of various countries. According to the OECD, the profiles focus on countries' domestic legislation regarding key transfer pricing aspects, including the arm's length principle, methods, comparability analysis, intangible property, intra-group services, cost contribution agreements, documentation, administrative approaches to avoiding and resolving disputes, safe harbours and other implementation measures. The updated profiles include new sections on the simplified and streamlined approach for baseline marketing and distribution activities (resulting from the work on Amount B of Pillar One) and the transfer pricing treatment of hard-to-value intangibles. Updated profiles have been published for Bosnia and Herzegovina, Brazil, Costa Rica, Croatia, Greece, Iceland, Korea and Norway.
Medpro Healthcare Limited & Ors: Application for a late appeal
In 2023, the First-tier Tribunal (FTT) refused Medpro Healthcare Limited (and others) permission to bring a VAT appeal against a penalty assessment and personal liability notices out of time. The Upper Tribunal (UT) subsequently allowed Medpro’s appeal, and remitted the matter back to the FTT. However, the two UT members disagreed on ground of appeal four, which questioned the previous UT decision in Katib (and, in effect, Martland) on the basis that it had “improperly constrained the FTT’s discretion to extend time for out-of-time appeals”. Marcus Smith J considered that the UT is not permitted to give guidelines to the FTT as to what weight to place on particular factors when considering whether to extend time for an appeal, and would have allowed the appeal on ground four. Judge Cannan, however, was “not convinced that Martland and Katib are wrong”, and considered that providing such guidance is part of the function of the UT, to promote consistency in FTT decisions. As Marcus Smith J had the casting vote, his view prevailed, with both members agreeing that if it was permissible for the UT to give guidance, the guidance given by the UT in Martland was appropriate.
In considering HMRC’s appeal against the UT’s decision on ground four, the Court of Appeal (CoA) has held that “Marcus Smith J was wrong, and Judge Cannan was right”. The CoA considered that the UT is entitled to give guidance to the FTT on the exercise of a statutory discretion. The CoA allowed HMRC’s appeal, and concluded that upon remittal of the application, the FTT should proceed on the basis that the Martland guidance, as amplified in Katib, is appropriate. (Contact: Rob Holland)
EMEA Dbriefs webcasts
As a reminder, the next EMEA Dbriefs tax webcast will take place on Wednesday 11 February 2026 at 12.00 GMT/13.00 CET. In UK tax update – February, our panel will discuss topical tax developments of relevance to UK businesses in relation to corporate taxes, employment taxes and indirect taxes.