9 January 2026
Spring Forecast date announced
HM Treasury has announced that a ‘Spring Forecast’ event will take place on Tuesday 3 March 2026.
Finance Bill progress update
Finance Bill (No. 2) Bill 2024-26, the Finance Bill introduced to enact many of the Budget’s tax announcements, will begin its Committee Stages next week. The Bill’s Second Reading took place on 16 December 2025. The government has scheduled the Committee of the whole House to take place in two sittings on 12 and 13 January 2026. The Public Bill Committee will be brought to a conclusion by 26 February 2026 at the latest.
UK tax treaties with Andorra, Portugal and Romania now in force
HMRC have updated their pages Andorra: tax treaties and Romania: tax treaties to confirm that the 2025 UK-Andorra Double Taxation Convention and the 2024 UK-Romania Double Taxation Agreement and Protocol entered into force on 22 December 2025. HMRC have also updated their page Portugal: tax treaties to confirm that the 2025 UK-Portugal Double Taxation Convention and Protocol entered into force on 29 December 2025. The provisions of each treaty have effect in line with the provisions in the relevant entry into force article.
OECD publishes Pillar Two ‘Side-by-Side package’
On 5 January 2026, the G20/OECD Inclusive Framework published details of a ‘side-by-side package' in relation to the Pillar Two global minimum tax rules. The package covers a number of new or extended safe harbours, and the side-by-side system, which will allow the US tax regime to sit alongside Pillar Two. For further details, see our alert.
UK Exchequer Secretary to the Treasury, Dan Tomlinson MP, has issued a written statement confirming that measures to implement the side-by-side agreement with the US in UK legislation will be subject to technical consultation and then brought forward in the next Finance Bill, to be applied for accounting periods beginning on or after 1 January 2026.
HMRC publish draft guidance on transfer pricing, permanent establishments and diverted profits tax reforms
HMRC have updated their International Manual with draft guidance relating to reforms to the UK’s transfer pricing, permanent establishments, and diverted profits tax legislation, included in Finance (No. 2) Bill 2024-26. The changes are, in most cases, due to take effect for accounting periods commencing on or after 1 January 2026. For further details please see our alert.
A new chapter, INTM414000 – Reform of transfer pricing, covers the reforms to the UK’s transfer pricing legislation. A separate new chapter, INTM489100 – Transfer Pricing - Unassessed Transfer Pricing Profits, covers the repeal of diverted profits tax as a separate tax and creation of new unassessed transfer pricing profits (UTPP) rules within corporation tax. In addition, updates have been made to existing manual pages within INTM260000 - Non-residents trading in the UK, regarding reforms to the UK’s permanent establishments legislation.
HMRC update guidance on withholding tax on payments of interest overseas
HMRC have added a page to their International Manual (see INTM413205) setting out that they are reviewing their processes and guidance in respect of withholding tax on payments of interest overseas. At present, where certain criteria are met, HMRC allow settlement of disclosures on the basis of charging only late payment interest (see INTM413230). However, HMRC have signalled in the guidance update that this concessionary approach could be changed following the review.
HMRC publish Guidelines for Compliance on imported hybrid mismatches
On 17 December 2025, HMRC published the latest in their Guidelines for Compliance (GfC) series. GfCs are intended to help taxpayers and their advisers understand HMRC’s view on particular issues and include best practice examples. New GfC16, Help with imported hybrid mismatches, covers the imported hybrid mismatch rules in the Taxation (International and Other Provisions) Act 2010 and sets out HMRC approaches to risk assessment across a range of structures, arrangements and transactions.
HMRC publish technical consultation on Construction Industry Scheme
On 6 January 2026, HMRC released a technical consultation on proposed amendments to the Construction Industry Scheme (CIS) regulations to simplify the scheme's administration. According to HMRC, the government intends to amend the regulations to exempt payments made to local authorities or certain public bodies from the scope of the CIS. This will allow an existing Extra Statutory Concession, created by HMRC, to be removed. HMRC state that the government also plans to reinstate the requirement, removed in 2015, for construction contractors to file nil returns in months where no subcontractors have been paid, unless HMRC have been notified in advance. The consultation closes on 3 February 2026.
Changes to HMRC interest rates following Bank of England rate change
On 17 December 2025, the Bank of England’s Monetary Policy Committee announced a decrease in the official Bank Rate by 0.25 percentage points from 4% to 3.75%. HMRC have updated their interest rate tables to reflect the automatic 0.25 point decrease to interest rates for late tax payments and tax repayments as a result. The tables indicate that the newly-reduced rates took effect from 29 December 2025 for quarterly instalment payments of corporation tax, and from 9 January 2026 for most other tax payments.
Court of Appeal dismisses taxpayer’s SDLT appeal
The Court of Appeal (CoA) has handed down its judgment in the stamp duty land tax (SDLT) case The Tower One St George Wharf Limited. The case relates to a series of transactions for the transfer of an interest in a residential property from one group company to another. Whilst the CoA accepted the taxpayer’s primary appeal ground, it also agreed with arguments set out in HMRC’s Respondent’s Notice on the application of the anti-avoidance provision in section 75A FA 2003, leading to the ultimate outcome that the taxpayer’s appeal was dismissed.
The taxpayer’s primary appeal ground focussed on the deemed market value rule for transactions with a connected company (section 53 Finance Act 2003). The CoA agreed with the taxpayer’s contention that the ‘Case 3’ exemption from the market value rule set out in section 54(4)(b) Finance Act 2003 applied such that the SDLT should instead be calculated based on the (lower) actual consideration paid. However, the CoA also agreed with HMRC’s alternative argument that the anti-avoidance provision in section 75A Finance Act 2003 applied. Where the conditions are met, section 75A requires consideration of how SDLT would have arisen on one single ‘notional land transaction’ instead of the actual series of transactions. The CoA agreed that the corporation tax avoidance purpose that precluded SDLT group relief for the actual transactions also precluded SDLT group relief to be taken into account for the notional transaction. It also found that the ‘Case 3’ exception from the market value rule would not have been available for the notional transaction. As a result, the SDLT charge arising was based on the (higher) market value of the lease and not the actual consideration paid.
Hotel La Tour Limited – VAT recovery on fundraising share sale
To fund the development of a new hotel in Milton Keynes, Hotel La Tour Ltd (HLT) sold its existing hotel in Birmingham by way of the sale of shares in a subsidiary which owned the hotel. HLT sought to recover the VAT incurred on the marketing and legal costs associated with the sale on the basis that the relevant services were directly and immediately linked to its downstream taxable activities, namely developing and operating the new hotel. HMRC denied VAT recovery on the basis that the costs related to the exempt share sale. The First-tier Tribunal (FTT) and the Upper Tribunal (UT) found in HLT’s favour, and the Court of Appeal (CoA) found in favour of HMRC. The Supreme Court (SC) has upheld the CoA’s judgment.
The SC found that there was a direct and immediate link between the inputs and the sale of the shares, rather than the overall business, and since that share sale was exempt, the VAT was not deductible. The SC agreed with the CoA that the FTT and UT erred in their application of case law, by relying on the way in which the price of the shares was set (the ‘costs component’ concept) to reject the possibility of a direct and immediate link between the inputs and the share sale. The SC also rejected HLT’s argument that recent CJEU jurisprudence has erased the distinction between exempt and out of scope share sales. Further, the SC confirmed that recent CJEU cases had not modified the direct and immediate link as it applies to share sales to focus on the purpose of the transaction, i.e., what the funds were to be used for. Finally, the SC dismissed HLT’s argument that, as HLT’s supplies of management services to its subsidiary were “disregarded” as intra-VAT group, the share sale was outside the scope of VAT and that the fees were directly and immediately linked to the overall business. The SC dismissed HLT’s appeal. (Contact: Andrew Clarke)
EMEA Dbriefs webcasts
The next EMEA Dbriefs tax webcast will take place on Thursday 15 January 2026 at 14.00 GMT/15.00 CET. In Update on latest Pillar Two developments: Side-by-Side package, hosted by Alison Lobb, our panel will discuss the ‘Side-by-Side package’, which covers a number of new or extended safe harbours and the side-by-side system. We will discuss what the latest developments could mean for businesses and the approach to Pillar Two compliance.