27 February 2026
Finance Bill and National Insurance Contributions Bill: progress update
The remaining Commons stages of Finance (No. 2) Bill 2024-26 (Report Stage and Third Reading) are provisionally scheduled for Wednesday 11 March 2026. The Finance Bill will then move to the House of Lords. The House of Lords has provisionally scheduled its Second Reading and remaining stages for Tuesday 17 March 2026.
The House of Lords Committee stage of the National Insurance Contributions (Employer Pensions Contributions) Bill started and completed on 24 February 2026. All proposed amendments were withdrawn or not moved, and as a result the Bill proceeds to its Report Stage unamended. The Lords Report Stage has provisionally been scheduled for Thursday 5 March 2026.
HMRC manuals: new 40% first-year allowance for main rate assets
At Budget 2025, the government announced that it would introduce a new 40% first-year allowance (FYA) for main rate assets from 1 January 2026. The 40% FYA applies to new expenditure on eligible assets, including most plant or machinery for leasing, but will exclude second-hand assets, cars, and assets leased overseas. HMRC have added new guidance pages to their Capital Allowances Manual (see CA23195+) on the new FYA. A note at the start of the new section states that the guidance “explains legislation which is still subject to Parliamentary approval and royal assent” but has been published “because expenditure incurred on or after 1 January 2026 will be eligible for the 40% first-year allowance.”
UK lists of countries with qualified status for Pillar Two purposes updated
HMRC have updated their notice to specify further countries with a qualified income inclusion rule (IIR) and/or a qualifying domestic top-up tax (QDMTT) that meets safe harbour standards. The update follows changes to the OECD Inclusive Framework’s central record of countries whose local implementation of the Pillar Two rules have so far been assessed as ‘qualified’. Hong Kong SAR and Qatar have been added to HMRC’s lists of countries with a qualified IIR and a QDMTT that meets safe harbour standards. Bahrain has been specified as having a QDMTT that meets safe harbour standards.
Upper Tribunal partially allows loan relationships imported losses appeal
The Upper Tribunal (UT) has published its decision in the corporation tax loan relationships case UK Care No. 1 Limited v HMRC, concerning the imported losses rule in section 327 CTA 2009. The UT has allowed UK Care No. 1 Limited’s (UKC1’s) appeal in part. UKC1, an initially Guernsey tax resident company, acted as the issuer of certain loan notes secured by the care home business of the BUPA Group. In February 2016, the BUPA Group acquired the shares in UKC1, and UKC1 migrated its tax residence to the UK. UKC1 redeemed the loan notes in April 2016, giving rise to an accounting loss of approximately £150 million, being the difference between the amount UKC1 had to pay to redeem the loan notes and the carrying value of its liability under the loan notes in its accounts. UKC1 brought into account a loan relationship debit in respect of the loss. The market value of the loan notes immediately before migration was £324,805,450, approximately £56.8 million less than the redemption amount. The taxpayer argued that the loss comprised three elements (unamortised issue costs, unamortised discount, and a premium (comprising of a compensatory and penalty element)), all items of expense referable to the remaining contractual term of the loan notes in the post-migration period.
The First-tier Tribunal (FTT) confirmed that the ‘penalty’ element of the loss (£56.8 million) was allowable, but that the remainder of the debit (£93.9 million) could not be brought into account, due to being wholly or partly referable to a time when the company was not chargeable to UK corporation tax on any profits arising from the loan relationship. The UT first dismissed UKC1’s argument that section 327 does not apply to expenses and the loss on redemption was made up entirely of expenses. The UT then went onto consider whether the disputed elements of the loss were ‘referable to’ the pre-migration period. The UT agreed with the FTT that the ‘compensatory’ element of the loss (£89.7 million) was referable to the pre-migration period, being attributable to pre-migration changes in market conditions. However, it considered that the FTT erred in its conclusion on the ‘unamortised discount and unamortised issue costs’ element (£4.1 million). The UT found that the accounting treatment of the discount and issue costs was relevant, and that spreading them over the life of the loan was economically sensible. As a matter of commercial reality, the unamortised portions related to the post-migration period and were only written off due to early redemption.
Advisory fuel rates
On 23 February 2026, HMRC published the new advisory fuel rates for company cars applicable from 1 March 2026. The previous mileage rates, effective from 1 December 2025, can be used for up to one month from the date the new rates apply. The rates for all diesel and petrol engine sizes are unchanged from the previous quarter. The rates for LPG engines sized 2000cc and below have decreased by one penny per mile, and the rate for LPG engines over 2000cc has decreased by two pence. This is the third quarter with two advisory electricity rates (one for home charging and one for public charging) since their introduction from 1 September 2025. The rate for public charging has increased by one penny per mile and the rate for home charging is unchanged from the previous quarter.
RCB 2 (2026): Aggregates levy devolution
HMRC have published Revenue and Customs Brief 2 (2026) on changes to aggregates levy. From 1 April 2026, Scottish aggregates tax (SAT) will replace aggregates levy in Scotland, and will be administered by Revenue Scotland. The RCB sets out how aggregates levy will change following devolution to Scotland on 1 April 2026. Businesses supplying aggregate between other parts of the UK and Scotland will need to be registered for both aggregates levy and SAT, but there are cross-border relief arrangements in place so that both taxes are not paid on the same quantity of aggregate. The RCB also sets out the evidence needed for cross-border relief, how to complete aggregates levy returns, record-keeping requirements, and guidance for customers and middlemen operating cross-border. It also notes that Revenue Scotland will honour weighing methods agreed with HMRC initially, but may wish to review or change them in the future. (Contact: Zoe Hawes)
EMEA Dbriefs webcasts
The next EMEA Dbriefs webcast will take place on Thursday 5 March 2026 at 12.00 GMT/13.00 CET. In Dispute Resolution – New OECD Manual on Effective Mutual Agreement Procedures, our panel will discuss the OECD Inclusive Framework’s updated Manual on Effective Mutual Agreement Procedures (MEMAP), a comprehensive, practical guide to the Mutual Agreement Procedure (MAP) under double tax treaties. We’ll cover the steps of an ‘ideal MAP process’, best practices for businesses and competent authorities, and timeframes.