This monthly briefing note summarises some tax and other news items of interest to UK-focused private companies and their management teams and shareholders.
United Kingdom | Deloitte Private | 31 July 2026
Andy Burnham MP becomes UK Prime Minister; New Chancellor appointed
On 20 July 2026, Andy Burnham MP replaced Sir Keir Starmer MP as UK Prime Minister. In his first speech as Prime Minister, Burnham stated that he would set out measures to help with the cost of living, including how they would be funded. A new 10-year plan for Britain is also to be published later this year.
On 20 July 2026, Prime Minister Andy Burnham MP appointed John Healey MP as the new Chancellor of the Exchequer, replacing Rachel Reeves MP. In his first speech to Treasury staff, Healey outlined his five priorities as Chancellor. His first priority is fiscal discipline, including meeting the government’s fiscal rules, while maintaining a buffer for uncertainty. His other priorities include delivering growth in every postcode, backing Britain, supporting wealth creation, and making life more affordable.
‘L-Day’ announcements
On Monday 13 July 2026 (‘L-Day’), the government published a number of draft clauses intended for the next Finance Bill for technical consultation. The draft clauses are accompanied by explanatory and impact notes. Comments from stakeholders are invited by 7 September 2026, subject to a few exceptions. The government also published four new consultations and several consultation outcomes. The Exchequer Secretary to the Treasury, Dan Tomlinson MP, also issued a written ministerial statement summarising the draft legislation and consultations.
Draft legislation included:
Reform of the foreign permanent establishment exemption – draft legislation was published on a mandatory foreign permanent establishment exemption. This follows a government announcement in May 2026 that UK-resident companies will be required to exclude profits and losses attributable to foreign permanent establishments (PEs) from their corporation tax computation, effectively making the existing ‘foreign branch exemption election’ mandatory. The new rules will apply for corporation tax accounting periods beginning on or after 1 January 2027. Read more in Deloitte’s alert.
Introduction of the Pillar Two Side-by-Side package and amendments to Multinational Top-up Tax and Domestic Top-up Tax – draft legislation was published implementing the Side-by-Side package in line with the administrative guidance published by the OECD/G20 Inclusive Framework in January 2026 (see our previous alert). The Side-by-Side package legislation will take effect for accounting periods beginning on or after 1 January 2026. In addition, the draft legislation corrects or clarifies some technical points within the existing UK legislation.
Profits from exploration and exploitation rights – draft legislation was published that explicitly treats certain exploration and exploitation rights in relation to activities undertaken in the UK or on the UK continental shelf as immovable property. This will apply to profits arising on or after 1 April 2027 for corporation tax purposes, where such rights derive their value from, or are used in connection with, land or natural resources.
Oil and Gas Revenue Levy – draft legislation was published for a new permanent 35% levy on exceptional oil and gas revenues, to take effect when the Energy Profits Levy ends at the end of March 2030, or earlier if the Energy Security Investment Mechanism is triggered.
Securities Transfer Tax – draft legislation was published for the replacement of Stamp Duty and Stamp Duty Reserve Tax with a single Securities Transfer Tax (STT). The government plans to introduce STT in 2027. The government also published the outcome of its previous consultation on the stamp taxes on shares framework.
New consultations included:
Simplifying treaty relief from withholding tax on interest paid overseas – a consultation was published that looks at potential ways to simplify obtaining treaty relief from UK withholding tax on interest paid overseas. Options under consideration include self-assessment of whether the conditions for treaty relief are met, without the need to obtain advance HMRC clearance. The consultation closes on 7 September 2026.
Tax treatment of predevelopment costs – a consultation was published on the tax treatment of predevelopment costs, in line with the government’s commitment in the Corporate Tax Roadmap and following the Supreme Court’s judgment in the capital allowances case Orsted West of Duddon Sands (UK) Limited (see previous Business Tax Briefing). The consultation closes on 21 September 2026. HMRC have also made updates to their Capital Allowances Manual (see CA20060 and CA20070) following the Supreme Court’s judgment.
Reforming Land Remediation Relief – a consultation was published on potential options to reform Land Remediation Relief. The consultation closes on 21 September 2026.
Supreme Court dismisses taxpayer’s appeal on LLP salaried members legislation
The Supreme Court has unanimously dismissed the taxpayer’s appeal in the LLP ‘salaried members’ legislation case HMRC v BlueCrest Capital Management (UK) LLP. The case concerns the rules which, if three statutory conditions are all met, can lead to certain individual members of an LLP being treated for income tax and NIC purposes as employees receiving employment income, rather than as self-employed partners.
The judgment focuses on ‘Condition B’, which tests whether the relevant “mutual rights and duties” of the members and the LLP gave individuals “significant influence over the affairs of the partnership.” The Supreme Court agreed with the Court of Appeal’s judgment of 2025 that the lower Tribunals had misinterpreted the condition. The Supreme Court holds that Condition B is concerned with the mutual legally enforceable rights and duties of the members and of the LLP, i.e. those derived from the contractual and statutory framework for the LLP (such as the LLP agreement, or delegated authority traceable back to it). Informal or de facto influence over the affairs of the LLP derived from members’ performance is not relevant in testing whether influence is ‘qualifying’. The Court also provided guidance on the interpretation of “significant”, “influence”, and “the affairs” of the LLP. The case has been remitted to the First-tier Tribunal to reconsider the application of Condition B based on the guidance on the law provided. The Supreme Court also dismissed an argument raised in relation to ‘Condition A’, which concerns the extent to which amounts received by the members were fixed or variable by reference to the LLP’s overall profits. For further details, please see our alert.
HMRC publish technical consultations relating to financial services sector
HMRC have published two technical consultations of relevance to the financial services sector. On 16 July 2026, HMRC published a consultation on draft regulations that would update certain definitions used in the Bank Levy legislation to align with regulatory changes. The amendments would have effect for chargeable periods beginning on or after 1 January 2027. The consultation closes on 13 August 2026. A separate consultation, published on 20 July 2026, covers reforms intended to improve the quality and consistency of data that HMRC receives on interest income (including bank and building society interest and interest from other sources) and card sales. The measure will come into force on 6 April 2028. The consultation closes on 20 August 2026.
Bill to increase Electricity Generator Levy rate receives Royal Assent
The Taxation (Energy and Vehicles) Bill completed its stages in the House of Lords on 14 July 2026. No amendments were made to the version that was passed by the Commons on 1 July 2026. The Bill received Royal Assent on 15 July 2026 and has now become Taxation (Energy and Vehicles) Act 2026. As a reminder, the Act increases the Electricity Generator Levy (EGL) rate from 45% to 55% with effect from 1 July 2026. It also includes legislation for two vehicle-taxation changes announced in May 2026 in relation to approved mileage allowance rates for 2026/27, and a temporary vehicle excise duty exemption for certain heavy goods vehicles.
Muller LLP: Supreme Court refuses permission to appeal
The Supreme Court has refused permission for Muller UK & Ireland Group LLP to appeal a long-running tax dispute with HMRC, stating that the application did not raise an arguable point of law. The case concerned the acquisition of intangible fixed assets and goodwill by a limited liability partnership (LLP) from its corporate members, and in particular whether or not the corporate members were considered "related parties." The Court of Appeal held that the corporate members were related parties, and that consequently the assets transferred did not fall within the intangible fixed assets regime and no deduction for amortisation was available. The Court of Appeal decision, Muller UK and Ireland Group LLP & Ord v HMRC is now final.
Align Technology Switzerland GmbH & Align Technology BV: VAT and aligners
Align Technology Switzerland GmbH and Align Technology BV (herein referred to together as ‘Align’) make removeable orthodontic appliances used to correct misaligned teeth (Aligners). Align treated its supplies of Aligners as VAT exempt as supplies of dental prostheses within Items 2 and 2A of Group 7, Schedule 9, VAT Act 1994. HMRC considered that Aligners were not dental prostheses, and that supplies of Aligners should accordingly be standard rated. On appeal, the First-tier Tribunal (FTT) concluded that the word ‘prosthesis’ can include devices that improve bodily function, and that VAT exemption for the supply of Aligners would be consistent with the objectives of the exemption and allowed Align’s appeal. The Upper Tribunal (UT) has allowed HMRC’s appeal on the basis that the FTT erred in its interpretation of the phrase ‘dental prostheses’ and thereby misapplied VAT Act 1994.
In considering the points around statutory construction, dictionary definitions, and case law on the meaning of a ‘prosthesis’ and ‘dental prostheses’, and reviewing the EU VAT Committee Guidelines and relevant Working Paper, the UT concluded that ‘dental prostheses’, as used in the exemption, means “artificial items which replace missing or damaged teeth. They do not include the Aligners”. The UT set aside the FTT decision and HMRC’s appeal was allowed. (Contact: Phil Simmons)
St Patrick's International College Limited & Ors: VAT and Alternative Providers of higher education – Court of Appeal
St Patrick’s International College Limited and two other institutions providing higher education, argued that their supplies of education services should be exempt from VAT under the direct effect of the EU Principal VAT Directive (PVD), or alternatively, in accordance with Group 6 of Schedule 9 to the Value Added Tax Act 1994 (VATA). Whilst it was common ground that the Appellants had similar educational aims to universities, colleges of universities and Further Education Corporations (FECs), the institutions were Alternative Providers (APs). Unlike Higher Education Institutions and FECs, APs are not included in VATA as ‘eligible bodies’ entitled to VAT exemption. As such, HMRC considered that exemption did not apply, with both the First-tier and Upper Tribunal agreeing with HMRC that the UK was entitled to treat APs differently given the different regulatory regimes that applied, and that there had been no breach of fiscal neutrality. However, the Court of Appeal has allowed the appeals. In addressing Ground 1, that of the incorrect implementation of the PVD into UK statute, the CA held that the FTT and the UT had erred in law in concluding that the test in Rank Group Plc (C-259/10 and C-260/10) – under which a difference in VAT treatment is a breach of fiscal neutrality if the supplies are identical or similar from the point of view of the typical consumer and meet the same consumer needs – does not apply to the ‘supplier condition’ in the education exemption. This conclusion was reached on the basis that the Court was bound by its previous decision in LIFE [2020] EWCA Civ 452 (regarding whether restricting the welfare exemption to certain categories of provider was compatible with fiscal neutrality). As Ground 1 succeeded, the Court did not rule on the Appellants’ alternative arguments. The appeals were allowed. (Contact: Laurie Pay)
Simplification of the Capital Goods Scheme
HMRC have published a policy paper on the simplification of the Capital Goods Scheme. The measures, which are intended to reduce the administrative burden for VAT-registered businesses, remove computers and items of computer equipment from the list of assets covered by the scheme, and the expenditure threshold for land, buildings and civil engineering work will increase from £250,000 (exclusive of VAT) to £600,000 (exclusive of VAT). The measures come into force from 29 July 2026. Existing assets and expenditure incurred before that date will continue to be treated under the current rules. SI 2026/765: The Value Added Tax (Amendment) Regulations 2026 has been made to implement these changes. (Contact: Ben Tennant)
GfC8: Help with VAT compliance controls – new section on temporary reduced VAT rate
HMRC have published a new section of Guidelines for Compliance 8 (GfC8), Help with VAT compliance controls, covering the temporary reduced VAT rate for children’s meals, tickets and family attractions. GfC8 sets out what HMRC consider to be best practice for VAT accounting and compliance processes, supporting businesses to identify and assess risk, and put in place appropriate controls. The new section sets out the parameters of the temporary reduced rate, which applies from 25 June 2026 to 1 September 2026 inclusive, and notes that businesses are expected to pass the benefit of the reduction on to customers. The guidelines then set out examples of both risks that may arise and controls that may help businesses reduce the risk of error and support accurate reporting. The guidelines also note that businesses must ensure the correct VAT rate is applied from 2 September 2026. HMRC have also published an update to Revenue and Customs Brief 5 (2026) on the temporary reduced VAT rate. (Contact: Adam Routledge)
Pillar Two: Expiration of HMRC’s ‘transitional approach’ to penalties
In June 2026, HMRC published guidance on the UK’s 'transitional approach' to penalties for businesses within the scope of the UK’s Pillar Two top-up taxes (multinational top-up tax and domestic top-up tax) (see previous Business Tax Briefing). As a reminder, this transitional approach is in place until 31 July 2026. Therefore, late filing penalties will not apply to a return (GloBE Information Return, self-assessment return and/or overseas return notification) that is filed on or before 31 July 2026.
Pillar Two: HMRC deadline for resubmission of GIRs that failed validation
On 13 July 2026, HMRC updated their guidance on the extended deadline for corrections to GloBE Information Returns (GIRs) that were submitted by the 30 June 2026 deadline (or 31 July deadline if applicable) but not accepted (see previous Business Tax Briefing). As a reminder, such GIRs will be recorded as successful submissions within HMRC systems on the date of original filing on condition that they are amended to pass validations and are re-submitted on or before 1 September 2026.
HMRC launch expanded Transfer Pricing and Profit Diversion Compliance Facility
HMRC have published new guidance, expanding and renaming their ‘Profit Diversion Compliance Facility’ (PDCF) as the ‘Transfer Pricing and Profit Diversion Compliance Facility’ (TP&PDCF). The facility was introduced in 2019 to provide an opportunity for businesses within the scope of Diverted Profits Tax (DPT) to bring their UK tax affairs up to date by making a disclosure to HMRC. The updated facility reflects the withdrawal of DPT by Finance Act 2026, and the introduction of replacement Unassessed Transfer Pricing Profits (UTPP) rules, with effect from 1 January 2026. It also broadens the scope of the original facility to include all significant non-financial transfer pricing risks. For further detail, please see our alert.
New Advance Tax Certainty Service officially launched
HMRC’s Advance Tax Certainty Service was officially launched on 1 July and is now open for applications. HMRC have published a website, and a guidance manual. Once businesses have submitted a tax certainty application, HMRC aim to provide clearance within 90 days of submission. If granted, clearances will be binding for five years, subject to changes in facts and law. The HMRC team can be contacted via advancetaxcertainty@hmrc.gov.uk.
Corporate Criminal Offences statistics updated
HMRC have updated their statistics on investigations of corporate criminal offences (CCO) for the failure to prevent the facilitation of tax evasion. As at 30 June 2026, HMRC had secured one charging decision, with an additional 13 live CCO investigations. A further 27 identified cases were under review as to whether they should proceed to an investigation. The cases identified span 11 business sectors. To date, HMRC have reviewed and rejected an additional 136 cases. However, HMRC note that some of these previous investigations have led to satisfactory explanations that have caused CCO investigations to be dropped but have instead led to other tax and regulatory offences being pursued.
EMEA Dbriefs webcasts
The next EMEA Dbriefs webcast, Mandatory overseas permanent establishment exemption, will take place on Thursday 20 August 2026 at 12.00 BST/13.00 CEST. The webcast will cover the government’s announcement that UK-resident companies will be required to exclude profits and losses attributable to foreign permanent establishments (PEs) from their corporation tax computation, effectively making the UK’s existing ‘foreign branch exemption election’ mandatory. Our panel will discuss the new UK approach set out in the draft legislation, including changes to the existing overseas permanent establishment exemption rules, restricted losses and transitional rules, and implementation dates and next steps.