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 | 22 May 2026
King’s Speech 2026
As part of the State Opening of Parliament, the King’s Speech was delivered on 13 May 2026 setting out the government’s legislative agenda for the second session of the current Parliament. Tax policy announcements are typically reserved for Budget statements and so taxation did not feature heavily in the speech.
Details of 34 new Bills and three Draft Bills to be taken forward in this session are included in the speech’s background briefing notes. The Bills include an Overnight Visitor Levy Bill, to “provide a legislative framework to enable mayors and potentially other local leaders to introduce a levy”, as well as an Electricity Generator Levy Bill to enact the previously announced increase in the rate of the electricity generator levy (EGL) (see previous Business Tax Briefing). A European Partnership Bill will also be introduced to “deliver the manifesto commitment to improve the UK’s trade and investment relationship with the EU by facilitating the implementation of new deals agreed with the EU now and in the future.”
Government announces mandatory foreign permanent establishment exemption
On 21 May 2026, the government announced that UK-resident companies will be required to exclude profits and losses attributable to foreign permanent establishments (together with credits for associated overseas tax suffered) from their corporation tax computation, effectively making the existing elective foreign branch exemption mandatory. For most companies, the new requirement is intended to apply for corporation tax accounting periods beginning on or after 1 January 2027. An earlier start date will apply to UK-resident companies with foreign permanent establishments that carry on activities in connection with the exploration or exploitation of oil and gas, with the new rules applying with specific effect from 1 September 2026. Draft legislation for these changes is expected to be published “over the summer”. Further details are on Deloitte tax@hand.
HMRC manuals: transfer pricing reforms – intangible fixed assets
HMRC have updated their Corporate Intangibles Research and Development Manual (see 24 April 2026 update) for changes to the intangible fixed assets legislation that were included in Finance Act 2026, and formed part of the transfer pricing reforms consulted on in Reform of UK law in relation to transfer pricing, permanent establishment and Diverted Profits Tax. For further details see our previous alert.
Electricity generator levy technical note published
On 6 May 2026, HMRC published a technical note on the increase in the rate of the electricity generator levy (EGL) from 45% to 55%, with effect from 1 July 2026. The note sets out how the EGL will be charged where the ‘qualifying period’ straddles the commencement date and the interaction with quarterly instalment payments for large or very large companies.
First-tier Tribunal finds in favour of taxpayer in SDLT group relief decision
The First-tier Tribunal (FTT) has found in favour of the taxpayer in the Stamp Duty Land Tax (SDLT) group relief case HC-One No.1 Limited. The case considers the SDLT consequences of a corporate reorganisation undertaken by the BUPA corporate group, alongside the unwind of an existing securitisation structure, as part of the divestment of certain care homes. The properties were first transferred intra-group from various operating companies (OpCos) to HC-One No.1 Limited, a newly formed subsidiary intended to serve as the sale vehicle. Group relief from SDLT was claimed on each transfer. Subsequently, the shares in HC-One No.1 Limited were sold to an unrelated third-party. Immediately prior to the sale, a parent company of the OpCos was placed into members' voluntary liquidation.
HMRC contended that the intra-group transfers formed part of arrangements of which a main purpose was the avoidance of SDLT, such that the targeted anti-avoidance provision (Schedule 7 paragraph 2(4A) Finance Act 2003) applied. Alternatively, HMRC contended that the anti-avoidance provision in section 75A Finance Act 2003 applied to recharacterise the transactions. The FTT concluded that the liquidation of the parent company to preserve group relief did not constitute tax avoidance and therefore allowed the taxpayer’s appeal on the main purpose issue. In the FTT’s view, the exclusion from the clawback of group relief where the purchaser ceases to be a member of the same group as the vendor by reason of the winding up of the vendor or a company above it is “unconstrained” and “not limited to insolvent liquidation or liquidation with a commercial motivation.” The FTT also concluded that section 75A did not apply, finding that the neither the share sale nor the liquidation was a transaction "involved in connection" with the intra-group transfers of the properties.
Corporation tax treatment of compensation for mis-sold interest rate hedging products
The First-tier Tribunal (FTT) has dismissed the taxpayer’s appeal in the corporation tax case Chester Lettings Limited. The case concerns the tax treatment of compensation (including an interest element) received for mis-sold interest rate hedging products (IRHPs). In this case, the hedging product was embedded within the loans. The FTT upheld HMRC's position that the compensation was a ‘redress payment’, taxable as a non-trading loan relationship (NTLR) credit. The taxpayer’s argument that the payment was for a 'lost opportunity', which is a ‘capital’ sum was rejected.
HMRC launch research and development advance assurance services
HMRC have launched two research and development (R&D) tax relief advance assurance services for small and medium-sized enterprises (SMEs). A full claim advance assurance service is available to eligible SMEs claiming R&D tax relief for the first time, covering up to three accounting periods.
A separate targeted advance assurance service (also referred to as the ‘advance assurance pilot’), running until May 2027, offers eligible SMEs the opportunity to make up to two applications for advance assurance on specific areas of their R&D tax relief claim. Each application can only include one project and one area of R&D relief. The areas are: whether a project meets the definition of R&D for tax purposes, whether overseas expenditure qualifies for relief, whether the company can claim R&D relief where work is contracted by one company to another, or whether the company qualifies for exemption from the PAYE and National Insurance contributions cap.
Temporary reduced VAT rate for children’s meals, tickets, and family attractions announced
On 21 May 2026, the government announced that a temporary reduced VAT rate of 5% will apply to the supply of children’s meals, tickets, and family attractions from 25 June 2026 to 1 September 2026. Details are set out in Revenue and Customs Brief 5 (2026), with an accompanying fact sheet. The temporary rate will apply to: certain supplies of children’s meals; children’s and family admission to theatres, cinemas, concerts, exhibitions, and shows; and admission tickets to qualifying attractions suitable for families with children.
The reduced rate covers supplies marketed, priced, and presented as intended for children. Children’s meals are those held out for sale only as a meal for children and supplied by a restaurant for consumption on the premises. Children’s admission tickets are those that are held out for sale only as a right of admission for a child. Where a ticket includes the right of admission for a family including children, the reduced rate will apply to the whole ticket. Qualifying attractions include amusement parks, circuses, adventure parks, museums, zoos, wildlife parks, soft play centres, and observation attractions. The reduced rate will apply to admission for all customers, including adults, for qualifying attractions that are suitable for children. The reduced rate does not apply to sport, including charges for spectating and for participating in sport or physical recreation. The government has stated that it “expects qualifying businesses to pass these savings on to families by lowering the prices” paid by customers.
RCB 4 (2026): VAT liability of supplies of electricity from public EV charge points
HMRC have published Revenue and Customs Brief 4 (2026) (RCB) on the VAT liability of supplies of electricity from public electric vehicle charge points. The RCB provides an update on HMRC’s position following the First-tier Tribunal (FTT) decision in Charge My Street Limited. The reduced VAT rate of 5% applies to supplies of electricity for domestic use. The provision of electricity to a person at any premises at a rate not exceeding 1000 kilowatt hours a month is deemed to be for domestic use. The FTT agreed with Charge My Street that its supplies of EV charging at public charging stations fell within the de minimis limit for supplies of electricity, and so were deemed to be for domestic use and, accordingly, subject to the reduced rate. The RCB states that HMRC’s “position remains that charging electric vehicles at public charge points is standard rated for VAT”. HMRC have applied for permission to appeal the FTT decision. (Contact: Donna Huggard)
RCB 3 (2026): VAT treatment of public funds received by further education institutions
HMRC have published Revenue and Customs Brief 3 (2026) (RCB) on the VAT treatment of certain public funds received by further education institutions. The RCB sets out HMRC’s response to the Court of Appeal (CA) judgment in Colchester Institute Corporation. The RCB explains that, historically, HMRC took the view that amounts paid by government agencies to further education institutions to fund free education provided to eligible students were a grant, and outside the scope of VAT. However, in Colchester, the CA confirmed the Upper Tribunal (UT) decision that the funding was third-party consideration for the supply of education services to students. The RCB states that HMRC will not be appealing the CA judgment, which they will now consider further, in consultation with stakeholders. Any change in policy will be announced by way of a RCB and updated guidance.
Following the UT decision, HMRC gave further education institutions the option either to treat funding as third-party consideration or to continue treating education as a non-business activity. According to the RCB, for institutions that have continued to treat education as a non-business activity, any change to the VAT treatment will only apply from a future, yet-to-be-announced, date. Such institutions may continue to apply the relevant VAT zero- and reduced-rate reliefs, until the date of any change, and HMRC will not revisit prior periods. Institutions that adopted the third-party consideration approach should continue to do so. Such institutions should not have continued to apply the reliefs and also may be within the scope of the private school fees legislation. (Contact: Jacqui Nicholls)
OECD publishes Global Minimum Tax Implementation Toolkit
On 30 April 2026, the OECD Forum on Tax Administration published a Global Minimum Tax Implementation Toolkit in relation to the G20/OECD Inclusive Framework’s Pillar Two global minimum tax rules. The Toolkit is designed to support countries in implementing and applying the global minimum tax rules in a consistent and co-ordinated way. Further details are in our alert.
OECD publishes support for global minimum tax central filing obligations; HMRC guidance
On 18 May 2026, the G20/OECD Inclusive Framework published a collection of documents in relation to the Pillar Two global minimum tax rules. These include a ‘common understanding’ among implementing countries addressing compliance and co-ordination challenges for the central filing of global minimum tax information returns (GIRs) that could otherwise arise from any potential delays in the availability of fully operational filing portals or activated exchange relationships before the 30 June 2026 first filing deadline. Please see Deloitte’s Alert for further details.
On 19 May 2026, HMRC published guidance confirming that the UK supports the common understanding approach, and that HMRC will act in accordance with it for GIRs filed overseas where the approach’s conditions are met. HMRC state that this transitional approach will apply where the filing deadline for the information return is no later than 31 December 2026.
HMRC guidance: Advance Tax Certainty Service
On 12 May 2026, HMRC published a new guidance page on the Advance Tax Certainty Service for major investment projects. Broadly, the service will be available for projects with qualifying UK expenditure of at least £1 billion. The guidance confirms that the service will launch on 1 July 2026, with expressions of interest accepted from 1 June 2026 via email to advancetaxcertainty@hmrc.gov.uk or the business’s Customer Compliance Manager (CCM). Following the expression of interest, an early engagement meeting with HMRC will be scheduled before a clearance is formally submitted in writing.
HMRC publish technical note on the taxation of ecosystem services
On 14 May 2026, HMRC published a policy paper titled Technical note on ecosystem services, setting out their views on the tax treatment of various payments made to landowners under contracts for the provision of ecological benefits, referred to as ‘ecosystem services’. The note covers statutory and government-backed voluntary schemes, including biodiversity net gain, nutrient neutrality, the Woodland Carbon Code and the Peatland Code. It also sets out the general principles that HMRC will apply when considering the tax treatment of other similar non-statutory arrangements.
OECD publishes Taxing Wages 2026
The OECD has published the latest in its annual series of employment tax reports Taxing Wages. The latest report shows that the average ‘tax wedge’ – i.e. the average total taxes on labour costs paid by employees and employers as a percentage of the total labour cost to the employer – across the OECD for a single worker earning an average wage was 35.1% in 2025 (up by 0.15 percentage points from 2024). The tax wedge ranged from 52.5% in Belgium to 0% in Colombia. The equivalent figure for the United Kingdom for 2025 was 32.4%: an increase of 2.45 percentage points from 2024, mainly due to fiscal drag and the increase in the national insurance contribution rate accompanied by the lowering of the minimum earnings threshold. The UK’s employment tax burden in 2025 ranked 13th lowest out of the 38 OECD countries.
EMEA Dbriefs webcasts
The next EMEA Dbriefs webcast will take place on Wednesday 10 June 2026 at 12.00 BST/13.00 CEST. In UK tax update - June, our panel will discuss topical tax developments of relevance to UK businesses in relation to corporate taxes, employment taxes and indirect taxes.