Tax Administration

Corporate tax simplification: business investment

Budget 2026 launches a targeted corporate tax simplification programme, building on the 2024 Corporate Tax Roadmap. It aims to reduce overlapping requirements, uncertainty and administrative burdens without reopening fundamental features of the tax base. HM Treasury and HMRC will develop and test options through stakeholder working groups and technical discussions over the next year, in relation to the following areas.

Financing and international activity

• Treaty relief on interest paid overseas: The concluded consultation, Simplifying Treaty Relief from Withholding Tax on Interest Paid Overseas, considered replacing HMRC directions with self-assessment. Options remain under consideration, including simpler procedures for passported lenders, limited self-assessment and better real-time information. The government will publish a summary of responses and its response shortly, with further engagement before measures are settled. HMRC will also publish interim guidance on operating the existing rules, including dealing with administrative failures.
• Controlled foreign companies: The government will retain CFC rules but consider simplification for Pillar 2 groups, possible alignment of exemptions with Pillar 2 adoption and rationalisation following developments in transfer pricing. Options will be developed and tested through stakeholder engagement.
• Anti-hybrid mismatches: The government will retain robust anti-hybrid rules but consider whether all counteractions remain appropriate for Pillar 2 groups. Stakeholder engagement will explore how the regimes can operate together more proportionately and where rationalisation is possible.
• Interest deductibility – unallowable purpose: The government is open to changes to scope, exclusions and interactions with other provisions, to increase certainty. Further guidance and low-risk views linked to Advanced Tax Certainty Service eligibility are also under consideration. Businesses are invited to provide practical examples of where simplification or greater certainty could be achieved, including circumstances in which additional guidance or low-risk views would help.
• Corporate interest restriction: Following Finance Act 2026 changes concerning reporting companies, the government has identified no significant simplification opportunities without significant fiscal cost or risk to policy objectives. Businesses are invited to suggest ways to address concerns or reduce compliance burdens while maintaining effective tax-base protection.

Investment and innovation

• R&D reliefs: The government proposes gathering stakeholder views on how to simplify the R&D relief legislation. Legislative simplification is proposed for the ERIS intensity ratio, including total expenditure and connected-company aggregation, the PAYE/NIC cap exemption and going concern requirements.
• Predevelopment costs: The Tax Treatment of Predevelopment Costs consultation has concluded, with its response summary published at Budget Uncertainty remains over expenditure such as design and engineering costs, professional fees and mixed-purpose costs. Further engagement will explore clearer guidance, worked examples and practical apportionment, and targeted legislation will be considered if guidance cannot provide sufficient certainty.
• Patent Box: For companies accessing the 10% rate on qualifying IP profits, options to simplify the computation include removing computational steps below an income de minimis, introducing sector-specific routine return percentages and permitting higher-level income streaming. These will be explored through the stakeholder programme.
• Intangible fixed assets: To simplify the regime and increase certainty, potential changes under Part 8 CTA 2009 include narrowing relevant asset restrictions, accommodating differing accounting outcomes, simplifying partnership and related-party rules, and aligning IP licensing more closely with equivalent capital gains transactions. Businesses are invited to comment and identify further opportunities.

Administration and reporting

• Corporation tax administration: A Call for Evidence is underway on reporting duplication, alignment with accounting and business processes, digital services, automation and AI. It will explore opportunities to simplify requirements while preserving the information HMRC needs to administer the system effectively. The evidence will be considered alongside the simplification programme in developing the longer-term approach.
• Advance Tax Certainty Service: Budget 2026 reduces the qualifying investment threshold to £300m. The service provides a clear position on how HMRC will apply tax legislation to specified aspects of major projects before significant investment decisions are made. Its scope will be reviewed after at least one year of operation, with the intention of making further improvements.
• International Movements of Capital: The government intends to repeal the requirement to report certain transactions exceeding £100m separately within six months. It will review other reporting requirements and consider whether any of the information should instead be supplied through existing or other channels.
• Securities transfer taxes: The government has confirmed its intention to introduce legislation replacing Stamp Duty and Stamp Duty Reserve Tax with a single, digital, self-assessed Securities Transfer Tax from late

Engagement timetable and implications

The programme will proceed in stages. From November 2026 to April 2027, engagement will focus on identifying businesses’ priorities, developing solutions and testing emerging approaches. Between May and September 2027, the government will develop detailed proposals for the highest-priority areas and undertake a final round of technical consultation ahead of a future fiscal event. Working groups, roundtables and technical discussions will help assess options before draft legislation is published.

Advanced tax certainty: lower threshold

Following the introduction of Advanced Tax Clearances in Finance Act 2026, HMRC have announced a change to the ATC regime which lowers the threshold for access to the service from £1bn of UK expenditure to £300m. The service is now available to persons who are expecting to incur £300m of expenditure in relation to goods, intangibles or services (other than financing) which are consumed in the UK; or in relation to immovable property in the UK. The expenditure threshold continues to relate to standalone projects or a series of projects of a “highly similar” nature.

HMRC still aim for the clearance process to take 90 days. Clearance can be obtained in relation to corporation tax, VAT, SDLT, income tax, PAYE and CIS.

Once obtained clearances remain in force for five years unless there is a change of law or an adverse decision of an appeal court. There is a positive obligation on the person who has obtained the clearance to notify HMRC of any material changes which would affect the clearance; this is subject to a £5,000 penalty for non-compliance.

The service will be kept under review with a view to developing it further in the future.

Modernising the administration of corporation tax

HMRC has launched a call for evidence on modernising corporation tax administration, open until 20 January 2027. The purpose of the call for evidence is to gather views on the future of corporation tax administration and how it could evolve to make compliance simpler by helping taxpayers understand and meet their obligations, reducing duplication, and making administration more proportionate.

HMRC sees simpler administration as supporting compliance, against an estimated corporation tax gap of £21bn in 2024 to 2025, equivalent to 18.1% of liabilities. HMRC’s vision of better administration is built on five principles: helping taxpayers get things right first time; a secure, flexible IT platform; better-integrated information flows; proportionate obligations for different entities; and better use of data.

The questions contained within the call for evidence are structured around that vision. They explore technology and AI, information sharing, filing and payment timelines, agent services and interactions with HMRC, including whether different administrative approaches could better serve smaller companies and complex groups.

For clarity, this is an exercise to shape long-term reform, not an announcement of immediate changes to tax rules or obligations. It is intended to build on HMRC’s “Transformation Roadmap”, including the previously confirmed intention not to introduce Making Tax Digital for corporation tax.

Taxpayers can respond online or at ctmodernisation@hmrc.gov.uk. Following the call for evidence, HMRC will publish a response setting out resulting actions and the next stages of consultation.

Modernising HMRC’s approach to wealthy taxpayer compliance

Again, HMRC is focusing on closing the tax gap here, which HMRC estimates for wealthy taxpayers is equivalent to 6% of the total tax gap. HMRC considers that the “wealthy taxpayer population” comprises taxpayers with income over £200,000 or assets over £2m in any of the last three years. HMRC’s view is that the scale, complexity and international nature of some wealthy individuals’ affairs, and their ability to obtain sophisticated advice, can create greater scope for error, uncertainty and deliberate non-compliance.

As part of this modernisation plan, which includes better engagement and improved taxpayer experience, HMRC emphasises that it will be using better data (including third party data), digital services and technology (including AI) to improve its understanding of wealthy taxpayers and to prevent errors and identify risk earlier. This will enable HMRC to target compliance activity for maximum impact. By 2030, HMRC also intends to have recruited 400 additional specialists tackling offshore non-compliance by the wealthy, with the expectation of additional compliance yield.

Given HMRC is also reviewing the personal tax offshore anti-avoidance legislation to improve the effectiveness of those rules, it seems likely that wealthy taxpayers will increasingly be a key focus of HMRC’s targeted compliance activities.

Property income data reporting

The government has launched a consultation on modernising how HMRC collects property income data from letting agents and tenancy deposit protection schemes. The reforms would replace the current notice-based approach with an ongoing obligation to report specified data regularly. The datasets in scope are:

• Letting agent data: rental income data provided by letting agents; and
• Tenancy deposit data: data provided by tenancy deposit protection schemes.

The consultation seeks views on reporting frequency, the information required, data quality standards and reporting arrangements. Its aim is to improve the accuracy and usability of data to help taxpayers get their tax right the first time, strengthen compliance and reduce the tax gap. It is being held to ensure the new requirements are practical and proportionate, with appropriate lead-in time, guidance and support to minimise burdens, including for letting agents that do not currently report to HMRC.

The government welcomes responses from third parties, including letting agents and tenancy deposit protection scheme providers, as well as taxpayers and other interested parties with views on the reform of these datasets and associated safeguards. The consultation runs from 28 October 2026 to 20 January 2027.

Timely payments in income tax self-assessment

From April 2029, automated in-year payments, such as Direct Debit, will become the default approach for Income Tax Self Assessment (ITSA) taxpayers liable to make Payments on Account. Taxpayers with sufficient PAYE income will have the option to pay through PAYE instead. This revises the Budget 2025 announcement of mandatory PAYE collection for eligible taxpayers, while extending timely payments to the wider Payments on Account population.

The objective is to bring payments closer to when income is earned, addressing a gap of up to 22 months under the current system. Currently, taxpayers with ITSA liabilities exceeding £1,000 must make two Payments on Account unless at least 80% of their income tax liability has already been deducted at source. Following a consultation, which closed on 4 August 2026, the government has chosen optional PAYE collection in response to concerns about taxpayer control, confidentiality and payroll administration. Neither a revised threshold nor the frequency and timing of the new payments is confirmed, but it has been confirmed that taxpayers will make regular, smaller payments throughout the year.

HMRC will introduce web and app functionality in 2028. Detailed transitional arrangements remain outstanding, including how to address cashflow pressure from overlapping liabilities for previous and current tax years. Suggestions for spreading liabilities, deferrals and penalty waivers are not confirmed measures.

Smaller, regular payments could improve budgeting and reduce taxpayer debt, but their practical benefit will depend on accessible forecast adjustments, timely repayments and flexibility for fluctuating income. The government will continue working with stakeholders and publish further detail in 2027 on payment timing and frequency, safeguards for taxpayers facing financial difficulty, penalties and interest, communications and support, and transition arrangements.

Mandatory direct debit arrangements for VAT and PAYE

The Autumn Budget confirms that taxpayers will be required to set up direct debit instructions for VAT return liabilities from 1 April 2029 and PAYE return liabilities from 6 April 2029, subject to defined exceptions. The government has published its response to the consultation and will introduce legislation in a future Finance Bill. The requirement does not mean that every VAT or PAYE payment must be made by direct debit: businesses will retain the ability to pay using other methods before a specified cut-off date, with the direct debit used to collect any unpaid balance.

Fiscal devolution roadmap

The government has published a Fiscal Devolution Roadmap which proposes shifting funding for regional and local government in England away from central grants towards assigned and locally retained tax revenues. Its three main tax measures are income tax assignment for mayoral strategic authorities (MSAs), greater local retention of business rates and an optional Overnight Visitor Levy for all strategic authorities. The aim is to give local leaders more predictable funding and a direct financial stake in local economic growth.

From April 2028, MSAs will receive a share of income tax based on where taxpayers live, initially covering basic-rate tax on employment, self-employment and pension income. Mayors will not gain powers to change income tax rates or thresholds. Bespoke initial funding allocations and equalisation arrangements will address differences in regional tax bases, while authorities will share in subsequent revenue growth. Tapered gains, a funding floor and rolling resets are proposed to balance growth incentives with financial stability; detailed parameters remain to be agreed at the next Spending Review.

All strategic authorities, including those without mayors, will be able to choose whether to introduce an Overnight Visitor Levy on short-term, commercially let visitor accommodation. The levy will be a percentage of accommodation costs, subject to a national framework and exemptions, with some discretion over additional local exemptions. Accommodation providers will be legally responsible for calculating, collecting and paying it, while strategic authorities will administer it. Local consultation and advance notice will be required, and authorities are expected to be able to set out plans for investing the proceeds by March 2028.

From 2027, MSAs are to receive a 20% share of locally retained business rates, replacing specified grants, together with a 20% share of local business rates growth. The government intends local and regional government collectively to retain 100% of business rates income before the end of the decade.