22 May 2026
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.
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 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.
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.
First-tier Tribunal partially allows appeal in film partnerships case
The First-tier Tribunal (FTT) has partially allowed the appeals of five partnerships in the film partnerships case Take 3.9 TV Partnership & Ors. The FTT found that a component of the advances made by the partnerships to film production companies, funded by equity contributions from the partners, were allowable deductions in respect of film production expenditure in computing their trading profits. The key questions considered by the FTT were whether the partnerships were carrying on a trade, and whether the expenditure on the production of films was actually incurred and was incurred wholly and exclusively for the purposes of that trade.
The FTT concluded that the partnerships were carrying on a trade; while their activities had a primary fiscal motive, i.e. to increase the tax advantages available, they also amounted to trading on a standalone basis, and therefore the fiscal motive did not serve to denature those activities. The FTT identified two distinct components of the advances made by the partnerships to the film production company: a debt component and an equity component. The debt component of each advance was a highly secured loan repayable out of monies advanced by other contributors towards film production costs, and was held not to be expenditure incurred on the production of the films. However, the equity component was incurred by the partnerships on the production of films and was incurred wholly and exclusively for the purposes of their trade.
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.
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.