Midweek Tax News

On 26 November, the Chancellor delivered her Autumn Budget. Our summary of the measures was circulated to Midweek Tax News subscribers on Budget day and can also be found here or on the EY Budget webpage. Our webcast on Thursday 27 October looked at the economic impact of the Chancellor’s announcements and assessed the key tax implications – if you were not able to attend on the day, an on-demand replay of the webcast can be accessed here.

From a corporate tax perspective, there were no changes to corporation tax rates or the rates of tax relief for research and development (R&D) spend. However, there was a reduction to the capital allowance writing down allowance (WDA) rate on main pool expenditure, from 18% to 14% from April 2026, alongside a new 40% first-year allowance available for expenditure on main-rate assets from January 2026. The Government confirmed that the Energy Profits Levy (EPL) will be in place until 31 March 2030 at the latest, or earlier if the Energy Security Investment Mechanism is triggered. Further consultation will be undertaken on replacing the EPL with the permanent Oil and Gas Profits Mechanism (OGPM).

Legislation will be included in the upcoming Finance Bill to simplify administration in relation to the appointment of reporting companies under the corporate interest restriction (CIR) regime and there will also be technical amendments to CIR in respect of relief for certain capital expenditure. For the research and development expenditure credit (RDEC), audio-visual expenditure credit (AVEC) and video games expenditure credit (VGEC) regimes, there are changes clarifying the treatment of payments made between group companies in exchange for the surrender of credits.

With regard to international taxation, the Government published final legislation to reform aspects of the rules relating to transfer pricing and permanent establishments, and to bring the diverted profits tax within the scope of the corporation tax regime. In addition, it will legislate to require in-scope multinationals to submit an International Controlled Transaction Schedule (ICTS) which will report information annually on cross-border related party transactions. The Finance Bill will include technical amendments to the UK’s Pillar Two legislation to ensure that UK legislation remains consistent with commentary and administrative guidance to the GloBE rules. The Government has also confirmed that a new ‘Advance Tax Certainty Service’ (ATCS) will provide tax clearances for major investments with £1 billion or more of qualifying expenditure over the project lifetime.

The headline employment and personal tax measures announced last week were broadly in line with pre-Budget speculation, with tax rises coming in the form of a three-year extension to the freeze on income tax thresholds and employer National Insurance contributions (NICs) thresholds, imposition of NICs on salary sacrifice arrangements for pension contributions (with an annual exempt allowance) and a high value council tax surcharge on properties worth over £2 million (to be introduced in April 2028). Alongside the Budget documents, we also saw the publication of guidance and draft legislation for the mandatory payrolling of benefits and expenses, which was announced in Budget 2024 and is due to take effect from 6 April 2027.

Further details of the employment and personal tax measures included in the Budget can be found in our Budget alert, and our Mobility Tax alert is available which looks at how the Budget changes may affect globally mobile employees and their employers.

The Finance Bill is expected to be published in the coming days.

On Monday, 1 December, the UK Government announced that it had reached a pharmaceuticals deal with the US. Under the deal, which forms part of the UK-US Economic Prosperity Deal signed in May 2025, UK pharmaceutical imports to the US will be subject to zero percent tariffs for at least three years. In return, the UK Government has agreed that National Institute for Health and Care Excellence (NICE) will increase its baseline threshold for judging cost-effectiveness of drugs, which could allow more drugs and treatments to be approved in the UK. The UK will also increase the overall amount the NHS spends on medicines, and the amount that drug companies are required to rebate to the NHS under the Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) will be reduced to 15% in 2026.

These developments will be covered in further detail in next week’s edition of our fortnightly Trade Talking Points newsletter. If you do not currently receive Trade Talking Points you can subscribe here. If you would like to discuss the impact of these developments on your business, please get in touch with one of the contacts listed below.

During 2026, we will be hosting a series of webcasts which will provide tax insights and cover emerging trends across Private Equity portfolio companies. On 14 January, at 12:00, in the first webcast in the series, our panel will examine:

• UK transfer pricing changes and HMRC guidelines
• Capital allowances: tax deductibility of right-of-use (ROU) assets and recent value creation opportunities

To join this webcast, you can register here.

On 25 November 2025, the UK Emissions Trading Scheme (UK ETS) Authority published its main response to the consultation on the expansion of scope to the maritime sector. Domestic maritime emissions will be included in the UK ETS from July 2026. The response document sets out decisions of the UK ETS on matters such as the surrender period in the scheme's first year and the requirement for a Document of Compliance. On the same date, the UK ETS Authority also launched a new consultation on the proposed expansion of the UK ETS to a share of emissions from international maritime voyages to and from the UK. This consultation closes on 20 January 2026.

As highlighted in Midweek Tax News last week, on 19 November the OECD released updates to the Model Tax Convention on Income and on Capital and its Commentary. Key updates include changes to the commentary to Article 5 to clarify when cross-border remote working creates a taxable presence for a business, and the addition of new alternative provision on how income from activities connected with the exploitation and extraction of natural resources should be taxed. A global tax alert is now available which discusses these updates and some of the other changes included in the updated commentary. In addition, this global tax alert discusses how the amendments relating to remote working will have a significant impact on the Italian permanent establishment concept.

In October 2025, the Irish government published its Action Plan for the reform of Ireland's taxation regime for interest, which proposed a phased approach to reforming and simplifying the Irish interest-taxation regime. Phase 1 of the reform will focus on the underlying framework for the taxation and deductibility of interest in Ireland and is intended to address some of the primary concerns raised by stakeholders in an earlier consultation. A Feedback Statement in relation to Phase 1 was launched on 21 November. The document requests feedback on proposals in a number of key areas including new interest deductibility rules for corporation tax; alignment of tax treatment between trading and passive interest income; and the widening of the scope of interest deductibility to include ‘interest equivalents’. The consultation period will run until 16 January 2026 and it is intended that legislative amendments to implement a reformed regime will be included in Finance Bill 2026.

We have included links to a selection of our tax alerts below. Additional articles are available in our global tax alert library.

G20: On 22-23 November, G20 leaders met in South Africa. In their Declaration following the conclusion of their meeting, the leaders reaffirmed their commitment to continuing constructive engagement to address concerns regarding Pillar Two global minimum taxes.

The latest edition of the EY private equity tax update publication, which provides a cross-border overview of key tax developments across Europe, is now available. This edition covers the new UK regime for the taxation of carried interest from April 2026, as well as developments in Germany, Italy, Luxembourg, the Netherlands, Portugal and Ireland.