Business Tax Briefing

Finance Bill: Public Bill Committee

The Public Bill Committee’s consideration of Finance Bill (No. 2) Bill 2024-26 commenced this week, with four sittings taking place in the mornings and afternoons of 27 and 29 January 2026 (see here and here). Each of the government amendments debated by MPs so far were approved by the Committee, including those in relation to the Finance Bill’s clauses and schedules on umbrella companies (‘Gov 5’ to ‘Gov 8’), transfer pricing (‘Gov 20’), and Pillar Two (‘Gov 21’ to ‘Gov 24’). No amendments or new clauses tabled by opposition MPs on the Committee were passed. The Committee will continue its scrutiny of the Bill on 3 February 2026 and is due to conclude on Thursday 26 February 2026, at the latest. Once the Committee stages have been completed, the amended Finance Bill will return to the House of Commons for its remaining Commons stages (Report Stage and Third Reading). No dates for these stages have yet been announced.

Welsh Final Budget published

The Welsh Final Budget was published on 20 January 2026. In line with the Draft Budget in October 2025, the Final Budget did not announce any changes to the devolved income tax or land transaction tax rates for 2026/27 (see our previous Business Tax Briefing). As signposted at the Draft Budget, the Final Budget document confirms landfill disposals tax rates and non-domestic rates arrangements for 2026/27. On 27 January 2026, the Senedd passed a motion to approve the Welsh Rate Resolution for 2026/27, keeping overall Welsh rates of income tax aligned with those in England and Northern Ireland.

New business rates relief announced for pubs and live music venues in England

On 27 January 2026, HM Treasury issued a press release setting out a package of measures to support British pubs, including on business rates. A new 15% 'pubs and live music venues relief' will be available to eligible ‘pubs’ and ‘live music venues’ in England in 2026-27. In 2027-28 and 2028-29, eligible businesses will see the increase to their business rates bill limited to inflation. The eligibility criteria for the relief are set out in a separate news story. HM Treasury states that the new relief applies “on top” of retail, hospitality and leisure (RHL) multipliers, as well as any support the business is eligible for through Transitional Relief or the Supporting Small Business scheme. Updates have been made to the existing page, Business Rates Multipliers: Qualifying Retail, Hospitality or Leisure, to reflect the further support announced for pubs and live music venues.

Upper Tribunal sets aside “careless” and “deliberate” inaccuracy penalties

On 19 January 2026, the Upper Tribunal (UT) issued its decision in Delphi Derivatives Limited (in Members’ Voluntary Liquidation) v HMRC, which concerns penalties resulting from a failed tax avoidance scheme, involving the use of an employee benefit trust (EBT). The penalties involved alleged “careless” and “deliberate” inaccuracies in Delphi’s P35 returns. The First-tier Tribunal (FTT) dismissed Delphi’s appeal against both penalties. While the UT dismissed a number of Delphi’s grounds of appeal, it also identified errors of law in the FTT’s decision and ultimately set both penalties aside.

In respect of the "careless” inaccuracy penalty, the Tribunals considered the meaning of the words “due to” in paragraph 3(1)(a) of Schedule 24 to Finance Act 2007, which states that an inaccuracy is ““careless” if the inaccuracy is due to failure by P to take reasonable care”. The UT, with the benefit of the Court of Appeal’s decision in Mainpay, found that it was necessary to determine what caused the inaccuracies in the P35 returns, and whether those inaccuracies were caused by carelessness on the part of Delphi, dismissing the wider attribution/mode of behaviour test of causation applied by the FTT. While Delphi was careless in proceeding with the scheme, this was not the cause of the inaccuracies in the return. Rather, the UT held that the cause was a reasonable but mistaken view of the law and set aside the penalty.

In respect of the “deliberate” inaccuracy penalty, the FTT found that the inaccuracy in Delphi’s return was attributable to deliberate action. However, the UT, citing case law such as the Supreme Court’s decision in Raymond Tooth, considered that this statement disclosed an error of law, as it is “not the action to which the inaccuracy is attributable that must be deliberate but rather it is the inaccuracy itself that must be deliberate.” In the UT’s view there was no evidence that the inaccuracies in Delphi’s return were deliberate. The UT therefore set aside the penalty.

FS Commercial Limited: Jurisdiction of First-tier Tribunal

The Court of Appeal (CA) has considered the nature of the First-tier Tribunal’s (FTT’s) jurisdiction. HMRC had disallowed input tax claimed by FS Commercial Limited on the basis that it had not provided VAT invoices to support input tax recovery, as requested by HMRC. In the course of preparing for its appeal to the FTT against HMRC’s assessment for the input tax, FS Commercial sought to include the invoices that had previously not been provided. The FTT ruled that its jurisdiction was supervisory only; it could review the reasonableness of HMRC’s decision not to accept alternative evidence in the absence of valid VAT invoices. However, it did not have appellate jurisdiction, which would have allowed it to make its own decision regarding the deductibility of the input tax, taking into account the now-provided invoices. Accordingly, FS Commercial was not able to rely on invoices that had not been provided to HMRC before the decision to disallow the input tax was made. The Upper Tribunal (UT) upheld the FTT decision. The CA has agreed with the FTT and UT.

The CA identified that this dispute concerned the exercise of HMRC’s discretion to allow the deduction of input tax in the absence of invoices where there is sufficient alternative evidence. The CA did not accept FS Commercial’s argument that the issuing of an assessment meant that an appeal against the assessment would engage the FTT’s appellate jurisdiction, allowing the presentation of new evidence. The CA found that the FTT's jurisdiction is supervisory when considering disputes concerning the exercise of HMRC’s discretion as to whether to accept alternative evidence, and this does not change just because an assessment was issued. The CA dismissed FS Commercial’s appeal. (Contact: Nicole Brook)

EMEA Dbriefs webcasts

The next EMEA Dbriefs tax webcast will take place on Wednesday 4 February 2026 at 14.00 GMT/15.00 CET. In The evolving tariff landscape: dealing with a world of uncertainty, our panel will provide a timely, practical, update on the trade and tariffs landscape and what it means for businesses now, fresh from discussions and insights gathered at Davos 2026.

On Tuesday 10 February at 14.00 GMT/15.00 CET, Alison Lobb will be hosting Remote working and permanent establishments – plus other updates to the OECD Model Treaty and Commentary. Our panel will discuss updates to the OECD Model Treaty and its Commentary, including to the definition of a ‘fixed place of business’ permanent establishment in situations of cross-border remote working, in particular home working.