(1) Part 4 of Schedule 1A to TCGA 1992 (anti-avoidance relating to assets deriving 75% of value from UK land) is amended as follows.
(2) For the heading of the Part substitute “Cell companies and anti-avoidance”.
(3) Before paragraph 11 insert—
Cell companies
10A (1) In the application of this Schedule in relation to the disposal of an asset consisting of a right or an interest in a cell company, each cell of the company is to be treated as if it were an individual company.
(2) For the purposes of this paragraph—
(a) a company is a “cell company” if under the law under which the company is formed, under the company’s articles of association or other document regulating the company or under arrangements entered into by or in relation to the company—
(i) some or all of the assets of the company are available primarily, or only, to meet particular liabilities of the company, and
(ii) some or all of the members of the company, and some or all of its creditors, have rights primarily, or only, in relation to particular assets of the company;
(b) “cell”, in relation a cell company, means an identifiable part of the company that carries on distinct business activities and to which particular assets and liabilities of the company are primarily or wholly attributable.
Anti-avoidance
.
(4) The amendments made by this section have effect in relation to disposals made on or after 26 November 2025.
41 Non-residents: double taxation relief relating to collective investment vehicles
(1) In paragraph 2 of Schedule 18 to FA 1998 (duty to give notice of chargeability to corporation tax), after sub-paragraph (2) insert—
(2A) Where sub-paragraph (1A) would apply as regards a company if the company were to make a claim to obtain relief under section 6(2)(a) or (3)(a) of TIOPA 2010 in respect of a disposal that has an appropriate connection to a collective investment vehicle for the purposes of paragraph 6 of Schedule 5AAA to TCGA 1992, the company is not required to make such a claim in order to obtain relief in respect of the disposal (despite section 6(6) of TIOPA 2010).
(2) In section 55A of FA 2004 (exception to duty to give notice to coming within charge to corporation tax), after subsection (4) insert—
(5) Where subsection (1) would apply as regards a company if the company were to make a claim to obtain relief under section 6(2)(a) or (3)(a) of TIOPA 2010 in respect of a disposal that has an appropriate connection to a collective investment vehicle for the purposes of paragraph 6 of Schedule 5AAA to TCGA 1992, the company is not required to make such a claim in order to obtain relief in respect of the disposal (despite section 6(6) of TIOPA 2010).
(3) In Schedule 2 to FA 2019—
(a) in the heading before paragraph 10 (no return required in respect of disposal connected to CIS), for “schemes” substitute “vehicles”;
(b) in paragraph 10—
(i) for “scheme” substitute “vehicle”;
(ii) after sub-paragraph (2) insert—
(3) If, by virtue of sub-paragraph (1), a person is not required to make or deliver a return under this Schedule in respect of a disposal, the person is not required to make a claim to obtain relief under section 6(2)(a) or (3)(a) of TIOPA 2010 in respect of the disposal (despite subsection (6) of that section).
;
(c) in paragraph 11(1)(a)—
(i) for “CIS” substitute “CIV”;
(ii) for “scheme” substitute “vehicle”;
(d) in paragraph 11(1)(b), for “subject of the scheme” substitute “subject of or held by the vehicle”;
(e) in paragraph 12(1)(a), for “CIS” substitute “CIV”.
(4) The amendments made by subsections (1) and (2) have effect in relation to disposals made on or after 1 April 2026.
(5) The amendments made by subsection (3) have effect in relation to disposals made on or after 6 April 2026.
42 Abolition of notional tax credit on distributions received by non-UK residents
(1) Omit section 399 of ITTOIA 2005 (tax treated as paid on distributions received by non-UK resident persons).
(2) In ITA 2007—
(a) in section 425 (total amount of income tax to which individual charged for a tax year), in subsection (5)(a), omit sub-paragraph (i);
(b) in section 1026 (meaning of “non-qualifying income”), omit paragraph (a).
(3) In TMA 1970—
(a) in section 9 (returns to include self-assessment), in subsection (1), in the closing words, omit “or section 399(2)”;
(b) in section 59B (payment of income tax and capital gains tax), in subsection (1), in the closing words, omit “or section 399(2)”.
(4) In the Unauthorised Unit Trusts (Tax) Regulations 2013 (S.I. 2013/2819), in regulation 12 (treatment of income of an exempt unauthorised unit trust), omit paragraph (3)(b).
(5) The amendments made by this section have effect for the tax year 2026-27 and subsequent tax years.
43 Non-resident, and previously non-domiciled individuals
(1) Part 1 of Schedule 3 makes provision about income tax and capital gains tax in connection with whether an individual has been non-UK resident or domiciled outside the United Kingdom, including—
(a) provision about the reliefs for qualifying new residents,
(b) provision about the residency of personal representatives, and
(c) provision about former users of the remittance basis.
(2) Part 2 of that Schedule makes provision amending Schedule 10 to FA 2025 (temporary repatriation facility).
(3) Part 3 of that Schedule makes provision about individuals who have been temporarily non-resident.
44 Trust protections etc: minor amendments and transitional protection
(1) In Chapter 5 of Part 5 of ITTOIA 2005 (settlements), in section 643C (meaning of “available protected income”)—
(a) in subsection (1), in Step 5, after “within” insert “Step 2 or”;
(b) in subsection (3)(b), at the end insert “and not exempt from income tax by virtue of any of sections 737 to 742A of that Act”.
(2) In Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad), in section 733 (benefits charge: amount of deemed income), in subsection (2B)—
(a) in paragraph (a), for “732(2)” substitute “721, 728 or 732”;
(b) in the words after paragraph (b), omit “under section 731”.
(3) In section 87HA of TCGA 1992 (onward gifts from non-residents or qualifying new residents), in subsections (2) and (3), omit “capital”.
(4) In FA 2025, in Schedule 12 (trust protections), in Part 4 (commencement and transitional provision), after paragraph 70 insert—
Settlements: transitional protection where available protected income is increased by this Schedule
70A (1) This paragraph applies for the purposes of section 643A of ITTOIA 2005 if an individual’s untaxed benefits total in relation to a settlement for the tax year 2024-25 exceeded the available protected income up to the end of that tax year.
(2) In determining under section 643B of that Act the individual’s untaxed benefits total for the tax year 2025-26 or a later tax year, any benefit provided to the individual in the tax year 2024-25 or an earlier tax year is to be disregarded at Step 1 in subsection (1).
(3) In this paragraph “untaxed benefits total” and “available protected income”, in relation to an individual, a settlement and a tax year, are to be construed in accordance with sections 643B and 643C of ITTOIA 2005 (as they have or had effect for the tax year in question).
(5) The amendments made by subsection (1) come into force on 6 April 2026.
(6) The amendments made by subsections (2) to (4) are treated as having come into force on 6 April 2025.
(1) Schedule 4—
(a) makes provision for employer PAYE notifications in respect of treaty non-resident employees, and
(b) makes other amendments to sections 690 to 690E of ITEPA 2003 in relation to the making of employer PAYE notifications and HMRC PAYE directions.
(2) The amendments made by Schedule 4 have effect for the tax year 2026-27 and subsequent tax years (but see paragraph 8(2) of that Schedule).
(1) Schedule 5 provides—
(a) for a power of His Majesty’s Revenue and Customs to assess “unassessed transfer pricing profits”,
(b) for those profits to be subject to a higher rate of corporation tax (rather than the main or any other rate), and
(c) for the abolition of diverted profits tax (which is superseded).
(2) The amendments made by that Schedule have effect in relation to accounting periods beginning on or after 1 January 2026.
(1) The Commissioners for His Majesty's Revenue and Customs may by regulations make provision—
(a) requiring persons specified for the purposes of this paragraph (“reporting entities”) to provide an officer of Revenue and Customs with information of specified descriptions in connection with specified international controlled transactions;
(b) requiring reporting entities to provide the information—
(i) at specified times,
(ii) in relation to specified periods of time, and
(iii) in a specified form and manner;
(c) imposing obligations on reporting entities (including obligations to obtain information from specified persons for the purposes of complying with requirements imposed by virtue of paragraph (a));
(d) about contravention of, or non-compliance with, the regulations (including provision imposing penalties);
(e) about appeals in relation to the imposition of any penalty.
(2) The regulations may—
(a) make different provision for different purposes;
(b) make provision by reference to things specified in a notice published by the Commissioners (as revised or replaced from time to time) in accordance with the regulations;
(c) allow any requirement, obligation or other provision that may be imposed or made by reference to subsection (1)(a) to (c) to be made by specific or general direction given by the Commissioners;
(d) make provision under which the Commissioners or other persons may exercise discretions.
(3) For the purposes of subsection (1)—
(a) “specified” means specified in the regulations, and
(b) a transaction is an international controlled transaction if the transfer pricing condition or the permanent establishment condition is met in relation to it.
(4) The transfer pricing condition is that—
(a) the transaction, or a series of transactions of which the transaction forms part, is the means by which provision (within the meaning of Part 4 of TIOPA 2010) has been made or imposed between two persons,
(b) the participation condition (within the meaning of that Part) is met in relation to that provision,
(c) one of those persons is—
(i) a UK resident company,
(ii) a non-UK resident company within the charge to corporation tax as a result of it falling within paragraph (a), (c) or (d) of section 5(2) of CTA 2009 (deals in or develops UK land, carries on a UK property business or has other UK property income), or
(iii) a partnership whose members include a company within the charge to corporation tax, and
(d) the other person is a non-UK resident person or is a partnership whose members include a non-UK resident person.
(5) The permanent establishment condition is that the transaction is relevant to the determination of—
(a) exemption adjustments made under section 18A of CTA 2009, or
(b) the profits of a non-UK resident company that are (for the purposes of the Corporation Tax Acts) attributable to a permanent establishment of the company in the United Kingdom.
(6) References in this section to a transaction includes any transaction that may be treated to have occurred for the purposes of applying Chapter 3A or 4 of Part 2 of CTA 2009 (profits of permanent establishments).
Schedule 7 makes provision about permanent establishments, including for the purposes of giving effect to certain provisions of the Model Tax Convention on Income and on Capital published by the Organisation for Economic Co-operation and Development in 2017.
51 Controlled foreign companies: interest on reversal of state aid recovery
(1) This section applies if a repayment of interest (“the relevant repayment”) is, or has been at any time, made to a company in consequence of the cancellation of an interest charging notice given to the company under Schedule 7ZA to TIOPA 2010 (recovery of unlawful state aid).
(2) Interest must be paid to the company in respect of the relevant repayment.
(3) The amount of interest payable under this section is the amount that would have been payable by virtue of section 826 of the Income and Corporation Taxes Act 1988 (interest on tax overpaid) in respect of the relevant repayment if, at the time of the relevant repayment—
(a) the relevant repayment had been among the repayments and payments listed in subsection (1) of that section, and
(b) the material date for the purposes of that section, in relation to the relevant repayment, had been the date on which the interest mentioned in subsection (1) above was paid by the company.
(4) Interest payable under this section must be paid—
(a) in respect of a relevant repayment made before 2 December 2025, as soon as reasonably practicable;
(b) in respect of a relevant repayment made on or after that day, at the same time as the relevant repayment.
(5) Nothing in paragraph 10(1) of Schedule 7ZA to TIOPA 2010 (Treasury duty to make regulations where Commission Decision is revoked or annulled) requires the Treasury to make any further provision in relation to the repayment of interest paid by virtue of that Schedule.
(6) References in this section to Schedule 7ZA to TIOPA 2010 are to the Schedule treated as inserted in that Act by paragraph (b) of Schedule 4 to the Taxation (Post-transition Period) Act 2020.
(7) This section is treated as having come into force on 2 December 2025.
(1) In the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001)—
(a) in regulation 20 (application to gains of non-resident settlements), omit paragraphs (2) to (5);
(b) in regulation 21 (application of transfer of assets abroad provisions), omit paragraphs (4) to (6).
(2) In consequence of the amendments made by subsection (1)—
(a) in section 734 of ITA 2007 (reduction in amount charged: previous capital gains tax charge), in subsection (5), omit “20 and”;
(b) in Schedule 7 to FA 2008 (remittance basis), omit paragraphs 100 to 102;
(c) in the Offshore Funds (Tax) Regulations 2009—
(i) in regulation 18 (charge to tax on disposal of asset: further provisions), in paragraph (5), omit sub-paragraph (c);
(ii) in regulation 19 (income treated as arising under regulation 17: remittance basis), omit paragraph (5);
(iii) omit regulation 130 (amendments of FA 2008);
(iv) in Part 2 of Schedule 3 (index of defined expressions), omit the entry for “OIG amount”;
(d) in Schedule 10 to FA 2025 (temporary repatriation facility)—
(i) in paragraph 3(7), for “paragraphs 4 and 5” substitute “paragraph 5”;
(ii) in paragraph 3(9), for “paragraphs 4 and 5” substitute “paragraph 5”;
(iii) omit paragraph 4;
(iv) in paragraph 5(7), for “paragraphs 3 and 4” substitute “paragraph 3”;
(v) in paragraph 10, omit sub-paragraphs (7) and (8).
(3) Section 53 makes provision preserving in certain cases the effect of the law as it applied before the amendments made by this section.
(4) This section—
(a) is to be treated as having come into force on 6 April 2025;
(b) has effect for the tax year 2025-26 and subsequent tax years.
(1) This section applies in relation to an offshore income gain arising to the trustees of a settlement in a case where Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad) applies in relation to that gain for the tax year 2025-26 or any subsequent tax year because of the amendments made by section 52.
(2) If the offshore income gain arose in a tax year before the tax year 2025-26 and, by reason of that offshore income gain or a part of it, an offshore income gain was treated as arising in a tax year before the tax year 2025-26 to an individual under paragraphs (2) to (5) of regulation 20 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001)—
(a) Chapter 2 of Part 13 of ITA 2007 is to be treated as not applying in relation to the offshore income gain arising to the trustees or that part of that gain, and
(b) references in section 734 of ITA 2007 to chargeable gains treated as accruing to an individual are to be treated as including the offshore income gain treated as arising to the individual.
(3) An individual is not chargeable to income tax under Chapter 2 of Part 13 of ITA 2007 on income treated as arising to the individual under section 732 of ITA 2007 by reason of the offshore income gain to the extent that the income, without the amendments made by section 52(1) and (2)(b)—
(a) would have been treated as arising to that individual under paragraphs (2) to (5) of regulation 20 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), and
(b) would have been non-chargeable income (see subsections (4), (5) and (6)).
(4) The income would have been non-chargeable income if, without the amendments made by section 52(1) and (2)(b)—
(a) the income would have been treated as arising by reason of—
(i) the matching of a capital payment received (or treated as received) by the individual before 6 April 2008 with an offshore income gain arising on or after 6 April 2025, or
(ii) the matching of a capital payment received (or treated as received) by the individual on or after 6 April 2025 with an offshore income gain arising before 6 April 2008, and
(b) paragraph 100 of Schedule 7 to FA 2008 would have applied to the income.
(5) The income would have been non-chargeable income to the extent that, without the amendments made by section 52(1) and (2)(b), it would have exceeded the relevant proportion of income—
(a) which would have been treated as arising to the individual by reason of—
(i) the matching of a capital payment received (or treated as received) by the individual on or after 6 April 2008 with an offshore income gain arising on or after 6 April 2025, or
(ii) the matching of a capital payment received (or treated as received) by the individual on or after 6 April 2025 with an offshore income gain arising on or after 6 April 2008, and
(b) to which paragraph 101 of Schedule 7 to FA 2008 would have applied,
and, for that purpose, “relevant proportion” has the meaning given by sub-paragraphs (9) to (18) of paragraph 126 of that Schedule as they would have been modified by sub-paragraph (3) of paragraph 101 of that Schedule.
(6) The income would have been non-chargeable income to the extent that, without the amendments made by section 52(1) and (2)(b), it would have exceeded the relevant proportion of income—
(a) which would have been treated as arising to the individual by reason of—
(i) the matching of a capital payment received (or treated as received) by the individual on or after 6 April 2008 with an offshore income gain arising on or after 6 April 2025, or
(ii) the matching of a capital payment received (or treated as received) by the individual on or after 6 April 2025 with an offshore income gain arising on or after 6 April 2008,
(b) to which paragraph 102 of Schedule 7 to FA 2008 would have applied, and
(c) to which paragraph 101 of that Schedule would not have applied,
and, for that purpose, “relevant proportion” has the meaning given by sub-paragraphs (4) to (7) of paragraph 127 of that Schedule as they would have been modified by sub-paragraph (4) of paragraph 102 of that Schedule.
(7) Subsection (3) does not prevent Chapter 2 of Part 13 of ITA 2007 from having effect as though the income not chargeable to tax under that subsection had been charged to tax under section 731 of that Act.
(8) Accordingly—
(a) in the application of section 733(1) of ITA 2007 to the individual for subsequent tax years, the amount of that income will be deducted at Step 2 and at paragraph (a) of Step 5, and
(b) in the application of section 733(1) of ITA 2007 to any other individual for subsequent tax years, the amount of that income will be deducted at paragraph (b) of Step 5.
(9) In section 733 of ITA 2007, after subsection (2D) insert—
(2E) See subsections (7) and (8) of section 53 of FA 2026 (offshore income gains: savings relating to amendments made by section 52 of that Act) for special provision about income that is treated as arising under section 732 but that is not chargeable to income tax under subsection (3) of that section.
(10) This section—
(a) is to be treated as having come into force on 6 April 2025;
(b) has effect for the tax year 2025-26 and subsequent tax years.
54 Legacies to charities to be within scope of tax
(1) Part 10 of ITA 2007 (special rules about charitable trusts etc) is amended in accordance with subsections (2) to (4).
(2) In section 518 (overview), in subsection (1), for “523” substitute “523A”.
(3) After section 523 (but beneath the same italic heading) insert—
Legacies: income tax liability and exemption
523A (1) This section applies to a gift of property—
(a) that is made by will to a charitable trust, and
(b) that is not charged to income tax, apart from this section.
(2) Income tax is charged on the gift.
(3) It is charged on the total value of the property so received in the tax year; and for that purpose the value of any property other than money is its market value as at the time of the death of the person by whose will the gift of the property is made.
(4) But property is not taken into account in calculating total income so far as it is applied to charitable purposes only.
(5) The trustees of the charitable trust are liable for any tax charged under this section.
(6) A gift of property made to a charitable trust is treated for the purposes of this section as made by will if—
(a) the gift is made to the trust by virtue of the variation, after a person’s death, of a disposition of property effected by the person’s will, and
(b) the variation is treated under section 142 of IHTA 1984 (alteration of dispositions taking effect on death) as having been effected by the deceased.
(7) In this section—
“property” includes rights and interests of any description;
“will” includes a testament, a codicil and any testamentary disposition of property.
(4) In section 562 (excess expenditure), in subsection (5) (definition of “non-taxable sums”), omit “, legacies”.
(5) In ITTOIA 2005, in section 636 (settlements: calculation of undistributed income), in subsection (7), at the appropriate place insert—
section 523A (legacies)
.
(6) Part 11 of CTA 2010 (charitable companies etc) is amended in accordance with subsections (7) to (9).
(7) In section 466 (overview), in subsection (1), for “474” substitute “474A”.
(8) After section 474 (but beneath the same italic heading) insert—
Legacies: corporation tax liability and exemption
474A (1) This section applies to a gift of property—
(a) that is made by will to a charitable company, and
(b) that is not chargeable to corporation tax apart from this section.
(2) The value of the property that is the subject of the gift is treated as an amount in respect of which the charitable company is chargeable to corporation tax, under the charge to corporation tax on income.
(3) For that purpose the value of any property other than money is its market value as at the time of the death of the person by whose will the gift of the property is made.
(4) But the value attributable to property is not taken into account in calculating total profits so far as the property is applied to charitable purposes only.
(5) A gift of property made to a charitable company is treated for the purposes of this section as made by will if—
(a) the gift is made to the company by virtue of the variation, after a person’s death, of a disposition of property effected by the person’s will, and
(b) the variation is treated under section 142 of the Inheritance Tax Act 1984 (alteration of dispositions taking effect on death) has having been effected by the deceased.
(6) The exemption under subsection (4) requires a claim.
(7) In this section—
“property” includes rights and interests of any description;
“will” includes a testament, a codicil and any testamentary disposition of property.
(9) In section 515 (excess expenditure), in subsection (5) (definition of “non-taxable sums”), omit “, legacies”.
(10) The amendments made by this section have effect in relation to gifts received on or after 6 April 2026.
(1) Section 558 of ITA 2007 (approved charitable investments) is amended in accordance with subsections (2) to (5).
(2) The existing text becomes subsection (2).
(3) Before that subsection insert—
(1) For the purposes of section 543 “approved charitable investment” means an investment—
(a) that is of a type listed in subsection (2) and is made for an allowable purpose, or
(b) that is not of a type listed in subsection (2) but that is approved under subsection (3).
(4) In subsection (2)—
(a) for the words before Type 1 substitute “The following are the types of investment mentioned in subsection (1)(a)—”;
(b) omit Type 12.
(5) At the end insert—
(3) An officer of Revenue and Customs may approve a loan or other investment under this subsection if satisfied, on a claim, that it is made for an allowable purpose.
(4) For the purposes of this section an investment is made “for an allowable purpose” if it is reasonable to draw the conclusion, from all the circumstances of the case, that the investment is made—
(a) for the sole purpose of benefiting the charitable trust, or
(b) for that purpose and one or more ancillary or incidental purposes,
and is not made for the avoidance of tax (whether by the trust or any other person).
(6) Section 511 of CTA 2010 (approved charitable investments) is amended in accordance with subsections (7) to (10).
(7) The existing text becomes subsection (2).
(8) Before that subsection insert—
(1) For the purposes of section 496 “approved charitable investment” means an investment—
(a) that is of a type listed in subsection (2) and is made for an allowable purpose, or
(b) that is not of a type listed in subsection (2) but that is approved under subsection (3).
(9) In subsection (2)—
(a) for the words before Type 1 substitute “The following are the types of investment mentioned in subsection (1)(a)—”;
(b) omit Type 12.
(10) At the end insert—
(3) An officer of Revenue and Customs may approve a loan or other investment under this subsection if satisfied, on a claim, that it is made for an allowable purpose.
(4) For the purposes of this section an investment is made “for an allowable purpose” if it is reasonable to draw the conclusion, from all the circumstances of the case, that the investment is made—
(a) for the sole purpose of benefiting the charitable company, or
(b) for that purpose and one or more ancillary or incidental purposes,
and is not made for the avoidance of tax (whether by the company or any other person).
(11) The amendments made by this section have effect in relation to investments made on or after 6 April 2026.
56 Tainted charity donations: replacement of purpose test with outcome test
(1) Section 809ZJ of ITA 2007 (tainted donations) is amended in accordance with subsections (2) and (3).
(2) For subsection (5) substitute—
(5) Condition B is that a linked person who is not a charity receives financial assistance—
(a) under or in connection with the arrangements, and
(b) directly or indirectly from the charity to which the donation is made or from a connected charity.
(3) In subsection (8), at the appropriate place insert—
“financial assistance” includes a loan, a guarantee, an indemnity or any form of investment (in each case, whether or not on arm’s length terms);
.
(4) Section 939C of CTA 2010 (tainted donations) is amended in accordance with subsections (5) and (6).
(5) For subsection (5) substitute—
(5) Condition B is that a linked person who is not a charity receives financial assistance—
(a) under or in connection with the arrangements, and
(b) directly or indirectly from the charity to which the donation is made or from a connected charity.
(6) In subsection (8), at the appropriate place insert—
“financial assistance” includes a loan, a guarantee, an indemnity or any form of investment (in each case, whether or not on arm’s length terms);
.
(7) Schedule 9 contains amendments connected with those made by this section in relation to tainted charity donations.
(8) The amendments made by this section and by Schedule 9 have effect in relation to relievable charitable donations made on or after 6 April 2026.
(9) In a case where an associated donation is made on or after 6 April 2026 in relation to a tainted donation made before that date, the tainted donation is regarded for the purposes of sections 809ZMB of ITA 2007, section 939FB of CTA 2010 and section 257B of TCGA 1992 as having “become” a tainted donation at the time when it was made.
(10) In subsections (8) and (9)—
“associated donation” means an associated donation within the meaning of section 809ZMB of ITA 2007 or section 939FB of CTA 2010 (as inserted, in each case, by Schedule 9);
“relievable charitable donation” means a relievable charity donation within the meaning of Chapter 8 of Part 13 of ITA 2007 or Part 21C of CTA 2010;
“tainted donation” means a tainted donation within the meaning of Chapter 8 of Part 13 of ITA 2007 or Part 21C of CTA 2010.
(1) ITTOIA 2005 is amended in accordance with subsections (2) to (4).
(2) After section 23H (double taxation) insert—
Carried interest
Tax treatment of carried interest
23I (1) This section applies where—
(a) an individual performs investment management services in any tax year directly or indirectly in respect of an investment scheme under any arrangements, and
(b) under the arrangements, one or more sums of carried interest arise to the individual from an investment scheme in a tax year.
(2) For income tax purposes—
(a) the individual is treated as carrying on a trade, by virtue of the arrangements, for the tax year referred to in subsection (1)(b),
(b) the amount to be treated as the profits of the trade for that tax year is the sum of the non-qualifying profits of the trade and 72.5% of the qualifying profits of the trade (see subsection (3)), and
(c) the individual is treated as the person receiving or entitled to those profits.
(3) In subsection (2)(b)—
(a) the amount of the non-qualifying profits of the trade is—
(i) the total amount of carried interest arising to the individual from any investment scheme in the tax year under the arrangements that is not qualifying carried interest, minus
(ii) the proportion of any permitted deduction for the tax year (see section 23N) that is the same as the proportion of the total amount of carried interest that is not qualifying carried interest;
(b) the amount of the qualifying profits of the trade is—
(i) the total amount of qualifying carried interest arising to the individual from any investment scheme in the tax year under the arrangements, minus
(ii) the proportion of any permitted deduction for the tax year that is the same as the proportion of the total amount of carried interest that is qualifying carried interest.
(4) In Schedule A1—
(a) Part 1 explains what it means for a sum arising to an individual from an investment scheme under arrangements to be “carried interest” for the purposes of this group of sections and that Schedule;
(b) Part 2 sets out certain circumstances in which a sum arising to another person is treated as arising to the individual;
(c) Part 3 sets out how to determine the extent to which carried interest arising to an individual from an investment scheme is qualifying carried interest;
(d) Part 4 allows for an election to be made to treat carried interest as arising at an earlier time.
(5) A sum of carried interest arising to an individual from an investment scheme in a tax year is to be treated for the purposes of this section as not being a sum of carried interest to the extent that—
(a) it is chargeable to income tax on the individual by virtue of section 62 (earnings) or Part 7 of ITEPA 2003 (employment income relating to securities) in the tax year, or
(b) an election made under section 23J that has effect for the tax year applies in relation to the sum.
Election to disapply section 23I
23J (1) An individual who performs investment management services directly or indirectly in respect of an investment scheme under arrangements mentioned in section 23I(1)(a) may make an election under this section.
(2) Where an election made under this section has effect for a tax year, the election applies in relation to a sum of carried interest arising to the individual under the arrangements in the tax year to the extent that the carried interest would, ignoring this group of sections, be brought into account in calculating the profits of a trade of the individual for the purposes of income tax for any tax year.
(3) An election made under this section—
(a) must be made by notice given to an officer of Revenue and Customs, and
(b) may not be revoked.
(4) A notice making an election—
(a) must state the tax year for which it is to have effect, and
(b) may not be given after 31 January following the end of that tax year.
Location of trade treated as carried on under section 23I etc
23K (1) An individual who is treated as carrying on a trade for a tax year under section 23I is treated as carrying on the trade—
(a) wholly in the United Kingdom, if all of the applicable workdays are UK workdays;
(b) wholly outside the United Kingdom, if all of the applicable workdays are not UK workdays;
(c) otherwise, partly in the United Kingdom and partly outside the United Kingdom.
(2) Where the trade is treated as carried on partly in the United Kingdom and partly outside the United Kingdom, the amount to be treated as the profits arising from the part of the trade treated as carried on in the United Kingdom is the sum of the non-qualifying profits of that part of the trade and 72.5% of the qualifying profits of that part of the trade.
(3) In subsection (2)—
(a) the amount of the non-qualifying profits of the part of the trade treated as carried on in the United Kingdom is the proportion of the non-qualifying profits of the trade (determined in accordance with section 23I(3)(a)) that is the same as the proportion of the applicable workdays that are UK workdays (but see subsection (4));
(b) the amount of the qualifying profits of the part of the trade treated as carried on in the United Kingdom is the proportion of the qualifying profits of the trade (determined in accordance with section 23I(3)(b)) that is the same as the proportion of the applicable workdays that are UK workdays (but see subsection (5)).
(4) For the purposes of subsection (3)(a) in a case where—
(a) the individual is a non-UK resident for the tax year, and
(b) any of the non-qualifying profits of the trade are anticipated qualifying profits,
any UK workday in a non-UK tax year is not to be treated as a UK workday (but remains an applicable workday) for the purposes of determining the proportion of the anticipated qualifying profits that is an amount of non-qualifying profits of the part of the trade treated as carried on in the United Kingdom.
(5) For the purposes of subsection (3)(b) in a case where the individual is a non-UK resident for the tax year, the following days are not to be treated as UK workdays (but remain applicable workdays)—
(a) any UK workday prior to 30 October 2024;
(b) any UK workday in a non-UK tax year;
(c) any UK workday prior to a period of 3 or more non-UK tax years.
(6) For the purposes of this section—
(a) a day is an “applicable workday” if it is a day in the relevant period on which the individual performs any investment management services directly or indirectly in respect of an investment scheme (whether or not under the arrangements mentioned in section 23I(1)(a));
(b) a day is a “UK workday” if it is a day in the relevant period on which the individual spends more than 3 hours performing any investment management services directly or indirectly in respect of an investment scheme (whether or not under those arrangements) in the United Kingdom;
(c) a year is a “non-UK tax year” if the individual is a non-UK resident for the tax year and there are fewer than 60 UK workdays in the year;
(d) non-qualifying profits are “anticipated qualifying profits” if, on the first UK workday in the relevant period, it was reasonable to assume that they would be qualifying profits.
(7) For the purposes of subsection (6) the “relevant period” is the period—
(a) beginning with the later of—
(i) the day on which the first external investor was admitted to any scheme from which the individual is entitled to carried interest under the arrangements mentioned in section 23I(1)(a), and
(ii) the first day on which the individual performs any investment management services directly or indirectly in respect of an investment scheme under the arrangements;
(b) ending with the earlier of—
(i) the last day in the tax year for which the individual was treated as carrying on the trade under section 23I on which a sum of carried interest arose to the individual from an investment scheme under the arrangements for the purposes of that section, and
(ii) the last day on which the individual performed any investment management services directly or indirectly in respect of an investment scheme under the arrangements.
(8) For the purposes of subsection (6)—
(a) investment management services performed by an individual in the course of travelling to or from the United Kingdom by air or sea or via a tunnel under the sea are assumed to be performed overseas even during the part of the journey in or over the United Kingdom, and
(b) travelling to or from the United Kingdom is taken to—
(i) begin when the individual boards the aircraft, ship or train that is bound for a destination in the United Kingdom or (as the case may be) overseas, and
(ii) end when the individual disembarks from that aircraft, ship or train.
Carried interest arising where individual deceased
23L (1) This section applies where—
(a) the individual referred to in section 23I(1)(a)has died, and
(b) as a result, one or more sums that would have been sums of carried interest arising to the individual from an investment scheme under the arrangements arise instead to another person in a tax year.
(2) For the purposes of sections 23I and 23K—
(a) the sums are treated as if they had arisen to the individual in the tax year in which they arose to the other person,
(b) the other person is treated as carrying on the trade under section 23I for that tax year (instead of the individual), and
(c) the other person is treated as the person receiving or entitled to the profits of that trade.
Temporary non-UK residents: tax treatment of accrued carried interest gains
23M (1) This section applies where, on the disposal of an asset by an individual who was temporarily non-resident in tax year 2025-26 or earlier, a gain accrued to the individual in the temporary period of non-residence under section 103KA(2) or (3) of TCGA 1992 (as it then had effect).
(2) For income tax purposes—
(a) the individual is treated as carrying on a trade for the period of return,
(b) the amount to be treated as the profits of the trade for the period of return is 72.5% of the amount of the gain which accrued to the individual in the temporary period of non-residence, and
(c) the individual is treated as the person receiving or entitled to those profits.
(3) For the purposes of this section, “the period of return”, “temporarily non-resident” and “the temporary period of non-residence” have the meanings given by Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance).
Permitted deduction etc
23N (1) For the purpose of section 23I the amount of any “permitted deduction” for a tax year is—
(a) the amount of any consideration given by or on behalf of the individual wholly and exclusively for the entitlement to carried interest under the arrangements referred to in section 23I(1)(a), minus
(b) the amount of any such consideration deducted in calculating the profits of a trade that the individual is treated as carrying on under section 23I for an earlier tax year by virtue of those arrangements.
(2) In subsection (1), “consideration” means consideration in money or money’s worth but does not include the performance of any investment management services directly or indirectly in respect of an investment scheme.
(3) For the purposes of this Act no other deduction may be made from the amount treated as the profits of the trade under section 23I.
Carried interest: anti-avoidance
23P (1) In determining whether section 23I applies in relation to an individual, no regard is to be had to any arrangements the main purpose, or one of the main purposes, of which is to secure that that section does not to any extent apply in relation to—
(a) the individual, or
(b) the individual and one or more other individuals.
(2) In determining whether an individual falls within paragraph (a) of section 23I(1), no regard is to be had to any arrangements the main purpose, or one of the main purposes, of which is to secure that the individual falls within that paragraph.
Carried interest: avoidance of double taxation
23Q (1) Subsection (2) applies where—
(a) an individual performs investment management services directly or indirectly in respect of an investment scheme under arrangements mentioned in section 23I(1)(a), and
(b) the individual is entitled to carried interest under the arrangements.
(2) No income tax is chargeable on the individual by virtue of the individual’s entitlement to carried interest other than—
(a) income tax chargeable in respect of carried interest arising to the individual under the arrangements—
(i) by virtue of section 23I or 23M,
(ii) by virtue of section 62 (earnings) or Part 7 of ITEPA 2003 (employment income relating to securities), or
(iii) where an election made under section 23J has effect for a tax year, otherwise under this Part, or
(b) income tax chargeable in respect of—
(i) the award of the entitlement to carried interest to the individual, or
(ii) the individual’s acquisition of the entitlement to carried interest,
whether by virtue of section 62 (earnings) or Part 7 of ITEPA 2003 (employment income relating to securities) or otherwise.
(3) Subsection (4) applies where—
(a) an individual is chargeable to income tax and national insurance contributions by virtue of section 23I or 23M in respect of a sum of carried interest arising to the individual from an investment scheme, and
(b) at any time any other UK tax or national insurance contributions charged on any person—
(i) in relation to the sum mentioned in paragraph (a), or
(ii) or in respect of any person’s entitlement to that sum,
has or have been paid and not repaid.
(4) The individual may make a claim for one or more consequential adjustments to be made in respect of the profits chargeable by virtue of section 23I or 23M to take account of the amounts paid as mentioned in subsection (3)(b).
(5) On a claim under this section an officer of Revenue and Customs must make such of the consequential adjustments claimed (if any) as are just and reasonable.
(6) Consequential adjustments in respect of the profits chargeable by virtue of section 23I or 23M must not have the effect that—
(a) the total of—
(i) the amount of income tax and national insurance contributions charged on the adjusted profits by virtue of section 23I or 23M, and
(ii) any amounts paid as mentioned in subsection (3)(b), is less than
(b) the amount of income tax and national insurance contributions to which the individual was chargeable by virtue of section 23I or 23M in respect of the sum of carried interest before the making of any consequential adjustments.
(7) Consequential adjustments may be made—
(a) in respect of any period,
(b) by way of an assessment, the modification of an assessment, the amendment of a claim, or otherwise, and
(c) despite any time limit imposed by or under an enactment.
(8) In this section “UK tax” means income tax, corporation tax, capital gains tax or inheritance tax.
(9) For the purposes of section 9(2) of TIOPA 2010 (unilateral entitlement to credit for non-UK tax corresponding to capital gains tax), in a case where the capital gain mentioned in subsection (2)(b) of that section accrued on a sum of carried interest arising to an individual, the reference to capital gains tax calculated by reference to that gain is to be read as if it were a reference to income tax chargeable under section 23I in respect of the sum of carried interest.
Definitions
23R (1) In this section, this group of sections and Schedule A1—
“AIF” has the meaning given by regulation 3 of the Alternative Investment Fund Managers Regulations 2013 and includes—
arrangements which permit an external investor to participate in investments acquired by the AIF without participating in the AIF itself, and
arrangements under which sums arise to an individual performing investment management services in respect of the AIF without those sums arising from the AIF itself;
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
“collective investment scheme” has the meaning given by section 235 of FISMA 2000 and includes—
arrangements which permit an external investor to participate in investments acquired by the collective investment scheme without participating in the scheme itself, and
arrangements under which sums arise to an individual performing investment management services in respect of the collective investment scheme without those sums arising from the scheme itself;
“external investor”, in relation to an investment scheme and any arrangements, means a participant in the scheme other than—
an individual who at any time performs or is to perform investment management services directly or indirectly in respect of the scheme, or
a person through whom sums are to, or may, arise directly or indirectly to such an individual from the scheme under the arrangements;
“investment management services”, in relation to an investment scheme, includes—
the provision of investment advice,
seeking funds for the purposes of the scheme from participants or potential participants,
researching potential investments to be made for the purposes of the scheme,
acquiring, managing or disposing of property for the purposes of the scheme,
acting for the purposes of the scheme with a view to assisting a body in which the scheme has made an investment to raise funds, and
any activity incidental or ancillary to any activity mentioned in paragraphs (a) to (e);
“investment scheme” means—
a collective investment scheme, or
an AIF, or any part of an AIF, that is not a collective investment scheme;
“participant”, in relation to an investment scheme, means a person taking part in the scheme, whether by becoming the owner of, or of any part of, the property that is the subject of the scheme or otherwise;
“sum” includes any money or money's worth (and other expressions are to be construed accordingly);
“this group of sections” means sections 23I to 23Q.
(2) For the purposes of section 23K and Schedule A1, in determining what it is reasonable to assume in relation to an investment scheme, regard is to be had to all the circumstances including in particular any prospectus or other document which—
(a) is made available to external investors in the investment scheme, and
(b) on which external investors may reasonably be supposed to have relied or been able to rely.
(3) In section 7 (income charged), in subsection (1), after “section 23E(1)” insert “, section 23I or section 23M”.
(4) In section 845H (qualifying foreign income)—
(a) in row 1 of the table at the end insert “other than profits of such a trade treated as carried on under section 23I”;
(b) after row 1 of the table insert—
1A | 72.5% of the amount of the qualifying profits (within the meaning of section 23I) of a trade treated as carried on under section 23I that do not arise from the part of a trade treated as carried on in the United Kingdom (see section 23K).
1B | The foreign pre-arrival proportion of the non-qualifying profits (within the meaning of section 23I) of a trade treated as carried on under section 23I. The foreign pre-arrival proportion is the proportion of the applicable workdays (within the meaning of section 23K) that fall within the pre-arrival period and are not UK workdays (within the meaning of section 23K). The pre-arrival period is the period ending immediately before the individual became a qualifying new resident that consists only of tax years for which the individual was non-UK resident.
(5) In Schedule 11—
(a) Part 1 inserts Schedule A1 to ITTOIA 2005 (Carried interest: interpretation etc.);
(b) Part 2 contains consequential and connected amendments.
(6) The amendments made by this section and that Schedule have effect for the tax year 2026-27 and subsequent tax years (but in relation to investment management services whenever performed).
59 Pensions: abolition of the lifetime allowance charge
(1) Paragraph 134 of Schedule 9 to FA 2024 (power to make further provision in connection with the abolition of the lifetime allowance charge) is amended as follows.
(2) In sub-paragraph (2)—
(a) for paragraph (b) substitute—
(b) have effect for the tax years 2024-25 and 2025-26 (as well as subsequent tax years);
;
(b) in paragraph (d), at the end insert “(including any provision that could be made under paragraph 133)”.
(3) In sub-paragraph (3) omit “that increase any person’s liability to tax”.
(4) In sub-paragraph (4), for “5 April” substitute “30 June”.
60 Collective money purchase schemes and Master Trust schemes
(1) Part 4 of FA 2004 (pension schemes) is amended in accordance with subsections (2) to (9).
(2) In section 153 (registration of pension schemes), in subsection (5)—
(a) omit the “or” at the end each of paragraphs (f), (g) and (h);
(b) at the end of paragraph (i) insert
, or
(j) the pension scheme is an unauthorised collective money purchase scheme.
(3) In section 158 (grounds for de-registration), in subsection (1)—
(a) omit the “or” at the end of each of paragraphs (ea), (f) and (g);
(b) in paragraph (h), after “that the” insert “pension”;
(c) at the end of paragraph (h) insert
, or
(i) that the pension scheme is an unauthorised collective money purchase scheme.
(4) For the italic heading before section 274ZA substitute “Master Trust schemes, collective money purchase schemes etc”.
(5) Before section 274ZA (but after the italic heading) insert—
Master Trust schemes
274ZZA (1) In this Part “Master Trust scheme” means (subject to subsections (2) to (4)) a Master Trust scheme within the meaning of PSA 2017 or PSA(NI) 2021.
(2) Any provision of PSA 2017 or PSA(NI) 2021 under which a reference to a Master Trust scheme does not include a section of it that is a collective money purchase scheme (within the meaning of that Act) does not apply for the purposes of subsection (1).
(3) Section 1(2) of PSA 2017 and section 1(2) of PSA(NI) 2021 (which restrict the meaning of “Master Trust scheme” in the case of schemes that provide benefits other than money purchase benefits) do not apply for the purposes of subsection (1).
(4) Where, by virtue of section 40(2) of PSA 2017 or section 40(2) of PSA(NI) 2021, more than one pension scheme is treated as a single Master Trust scheme for the purposes of that Act, each of those pension schemes is a Master Trust scheme for the purposes of this Part.
(5) For the purposes of this Part a pension scheme is an “unauthorised Master Trust scheme” if—
(a) it is a Master Trust scheme the lawful operation of which, or of any section or part of which, requires authorisation under PSA 2017 or PSA(NI) 2021, or
(b) it is not a Master Trust scheme but, by virtue of section 40(1)(a) of PSA 2017 or section 40(1)(a) of PSA(NI) 2021, the lawful operation of the pension scheme, or of any section or part of it, requires authorisation under that Act,
and such authorisation has not been granted, or has been granted but has been withdrawn.
(6) In this section—
“PSA 2017” means the Pension Schemes Act 2017;
“PSA(NI) 2021” means the Pension Schemes Act (Northern Ireland) 2021.
Collective money purchase schemes
274ZZB (1) In this Part “collective money purchase scheme” means (subject to subsection (2)) a collective money purchase scheme within the meaning of Part 1 or 2 of the Pension Schemes Act 2021.
(2) A reference in this Part to a collective money purchase scheme is, in relation to a relevant divided pension scheme, a reference to the pension scheme as a whole (and is not a reference to any of its sections considered separately).
(3) In this section “relevant divided pension scheme” means a pension scheme which is divided into sections at least one of which is a collective money purchase scheme under subsection (1).
(4) For the purposes of this Part a pension scheme is an “unauthorised collective money purchase scheme” if—
(a) the lawful operation of the pension scheme, or (in the case of a relevant divided pension scheme) of any section of it, requires authorisation under Part 1 or 2 of the Pension Schemes Act 2021, and
(b) such authorisation has not been granted, or has been granted but has been withdrawn.
Power to make provision about collective money purchase schemes
274ZZC (1) The Commissioners for His Majesty’s Revenue and Customs may by regulations amend or otherwise modify any provision of this Part in its application in relation to—
(a) a collective money purchase scheme, or
(b) any benefits payable, or arrangements, under such a pension scheme.
(2) Regulations under this section—
(a) may make different provision for different cases;
(b) may include transitional or saving provision.
(6) Section 274ZA (National Employment Savings Trust and Master Trust schemes) is amended as follows—
(a) for the heading substitute “Schemes treated as occupational pension schemes”;
(b) after subsection (2) insert—
(3) This Part applies in relation to a pension scheme that—
(a) is a collective money purchase scheme, and
(b) is not an occupational pension scheme,
as it applies in relation to an occupational pension scheme.
(7) In section 279 (other definitions), omit subsections (1B) to (1D).
(8) In section 280(2) (general index), in the table—
(a) in the definition of “Master Trust scheme”, for the entry in the second column substitute “section 274ZZA”;
(b) omit the definition of “unauthorised (in relation to a Master Trust scheme)”;
(c) at the appropriate places insert—
collective money purchase scheme | section 274ZZB
unauthorised collective money purchase scheme | section 274ZZB(4)
unauthorised Master Trust scheme | section 274ZZA(5)
.
(9) In section 282 (orders and regulations), after subsection (1A) insert—
(1B) No regulations may be made under section 274ZZC (power to make provision about collective money purchase schemes) that increase any person’s liability to tax unless a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, the House of Commons.
(10) In FA 2018, in Schedule 3 (pension schemes), in paragraph 4 (Master Trust schemes registered before passing of FA 2018), in sub-paragraph (2), for “Section 274B(2) of FA 2004 (as inserted by paragraph 1(5))” substitute “Section 274ZA(2) of FA 2004”.
(1) Schedule 7A to TIOPA 2010 (interest restriction returns) is amended as follows.
(2) For paragraph 1 (appointment by a worldwide group of a reporting company) substitute—
1 (1) An interest restriction return for a period of account of a worldwide group is of no effect unless it is submitted to an officer of Revenue and Customs by the reporting company of the group for that period.
(2) A member of a worldwide group may appoint a company to be the group’s reporting company for a period of account.
(3) The appointment is of no effect for the period of account unless—
(a) the company to be appointed as the group’s reporting company for the period is an eligible company for that period, and
(b) the appointment is authorised by more than half of the eligible companies for that period.
(4) For this purpose a company is “eligible” if and only if the company—
(a) was a UK group company at a time during the period of account, and
(b) was not dormant throughout that period.
(3) After that paragraph insert—
Appointment of company where purported return submitted
1A (1) This paragraph applies where a company has purported to submit to an officer of Revenue and Customs a return for a period of account of a worldwide group despite the fact it had not been appointed for the period of account at the time at which it purported to submit the return.
(2) A member of the group may, in accordance with paragraph 1, appoint the company as the group’s reporting company for the period of account.
(3) If an appointment is made as mentioned in sub-paragraph (2)—
(a) the company is to be treated for the purposes of this Part of this Act as if it had been appointed under paragraph 1, and
(b) the appointment is to be treated for the purposes of this Part of this Act as if it had been made at the time immediately before the return (or, if more than one, the first return) for the period of account was submitted.
(4) But—
(a) sub-paragraph (3) does not apply for the purposes of paragraph 11A, and
(b) for the purposes of paragraph 6(2), the time of the appointment is taken to be the actual time at which the company was appointed as the group’s reporting company (rather than the time provided for by sub-paragraph (3)(b)).
(4) For paragraph 2 (revocation by worldwide group of appointment under paragraph 1), substitute—
2 (1) A member of a worldwide group may revoke an appointment previously made under paragraph 1 in relation to a period of account.
(2) The revocation is of no effect for the period of account unless it is authorised by more than half of the eligible companies for that period.
(3) For this purpose a company is “eligible” if and only if the company—
(a) was a UK group company at a time during the period of account, and
(b) was not dormant throughout that period.
(4) The revocation of an appointment does not prevent the making of a further appointment under paragraph 1 (whether at the same time as the revocation, or later).
(5) In paragraph 4 (appointment of reporting company by Revenue and Customs)—
(a) for sub-paragraph (1) substitute—
(1) This paragraph applies where no interest restriction return in relation to a period of account of a worldwide group (“the relevant period of account”) has been submitted to an officer of Revenue and Customs before the end of the period of 18 months beginning with the end of the relevant period of account.
,
(b) in sub-paragraph (4), at the end insert “and supersedes any appointment of a reporting company in relation to that period made under paragraph 1”,
(c) in sub-paragraph (5), after paragraph (b) insert—
But the time limits provided by paragraph (a) or (b) do not apply where sub-paragraph (6A) applies.
, and
(d) after sub-paragraph (6) insert—
(6A) If—
(a) a company has purported to submit to an officer of Revenue and Customs a return for the relevant period of account despite the fact it had not been appointed for that period at the time at which it purported to submit the return, and
(b) no appointment of the company as the group’s reporting company for that period has been made by a member of the group in reliance on paragraph 1A,
an officer of Revenue and Customs may, by notice to the company, appoint it to be the group’s reporting company for that period, and sub-paragraphs (3) and (4) apply in relation to that notice and appointment.
(6B) The company is to be treated for the purposes of this Part of this Act as if it had been appointed immediately before it submitted the return (or, if more than one, the first return) for the relevant period of account.
(6C) But—
(a) sub-paragraph (6B) does not apply for the purposes of paragraph 11A, and
(b) for the purposes of paragraph 6(2), the time of the appointment is taken to be the actual time at which the company was appointed as the group’s reporting company (rather than the time provided for by sub-paragraph (6B)).
(6) In paragraph 5 (appointment by officer of Revenue and Customs of replacement reporting company), in sub-paragraph (6)(a), omit sub-paragraph (ii) and the “and” before that sub-paragraph.
(7) In paragraph 6 (obligation of reporting company to notify group members of its status)—
(a) in sub-paragraph (2), for “the relevant time” substitute “the appointment is made”, and
(b) omit sub-paragraphs (3) and (4).
(8) In paragraph 7 (obligation of reporting company to submit interest restriction return)—
(a) for sub-paragraphs (1) to (3) substitute—
(1) A reporting company appointed under paragraph 1 in relation to a period of account may submit a return for that period to an officer of Revenue and Customs.
(2) A reporting company appointed under paragraph 4 in relation to a period of account must submit a return for that period to an officer of Revenue and Customs.
(3) A reporting company appointed under paragraph 5 in relation to a period of account must submit a return for that period to an officer of Revenue and Customs unless a return for the period has already been submitted under sub-paragraph (1) or (2) or this sub-paragraph.
, and
(b) in sub-paragraph (6), for paragraph (b) substitute—
(b) if the reporting company was appointed under paragraph 4 or 5, the later of—
(i) the period mentioned in paragraph (a), and
(ii) the end of the period of 3 months beginning with the day on which it was appointed.
(9) Consequently, the italic heading before that paragraph becomes “Submission of interest restriction returns by reporting companies”.
(10) In paragraph 8 (revised interest restriction return), in sub-paragraph (3), for paragraph (b) substitute—
(b) if the reporting company was appointed under paragraph 4 or 5, the later of—
(i) the period mentioned in paragraph (a), and
(ii) the end of the period of 3 months beginning with the day on which it was appointed.
(11) In paragraph 10 (meaning of “consenting company” and “non-consenting company”)—
(a) in sub-paragraph (2)—
(i) in paragraph (a), for “the appropriate persons” substitute “the reporting company in relation to the period of account”, and
(ii) in paragraph (b), for “the appropriate persons” substitute “the reporting company”, and
(b) omit sub-paragraph (3).
(12) Omit paragraph 11 (company authorising reporting company appointment treated as consenting company) together with the italic cross-heading before it.
(13) After paragraph 11 insert—
Penalty for submission of return where no reporting company appointed
11A (1) A company is liable to a penalty if the company has purported to submit to an officer of Revenue and Customs a return for a period of account of a worldwide group in circumstances where it had not been appointed for the period of account at the time at which it submitted the return.
(2) The penalty is £1,000.
(3) If a company becomes liable to a penalty under this paragraph, an officer of Revenue and Customs must—
(a) assess the penalty, and
(b) notify the company.
(4) The assessment must be made within the period of 12 months beginning with the day on which a company is (after the time mentioned in sub-paragraph (1)) appointed as the group’s reporting company for the period of account.
(5) A company may, by notice, appeal against a decision of an officer of Revenue and Customs that a penalty is payable under this paragraph.
(6) Notice of appeal under this paragraph must be given—
(a) within 30 days after the penalty was notified to the company,
(b) to the officer of Revenue and Customs who notified the company.
(7) A penalty under this paragraph must be paid before the end of the period of 30 days beginning with—
(a) the day on which the company was notified of the penalty, or
(b) if notice of appeal against the penalty is given, the day on which the appeal is finally determined or withdrawn.
11B (1) Liability to a penalty under paragraph 11A does not arise if, in reliance on paragraph 1A, a company is, at any time up to the end of the period of 18 months after the end of the period of account, appointed as the group’s reporting company for the period of account.
(2) Liability to a penalty under paragraph 11A also does not arise if—
(a) without being prompted by an officer of Revenue and Customs to do so, the company notified an officer of Revenue and Customs of the circumstances mentioned in paragraph 11A(1), or
(b) there is a reasonable excuse for failing to appoint a reporting company before the return was submitted.
(3) If there is a reasonable excuse for the failure but the excuse has ceased, the excuse is to be treated as having continued if a reporting company is appointed without unreasonable delay after the excuse ceased.
(14) In paragraph 20 (required contents of interest restriction return: full returns and abbreviated returns)—
(a) in sub-paragraph (3)—
(i) before paragraph (a) insert—
(za) state the name and (where it has one) the Unique Taxpayer Reference of the reporting company,
,
(ii) in paragraph (c), at the end insert “and whether it authorised the appointment of the reporting company for the period of account”, and
(iii) after that paragraph insert—
(ca) contain a statement that each of the companies authorising the appointment of the reporting company was an eligible company and that they together constituted more than half of the eligible companies,
, and
(b) in sub-paragraph (5), for “(a) to (c)” substitute “(za) to (ca)”.
(15) In paragraph 29 (penalty for failure to deliver return)—
(a) in sub-paragraph (1)(a), at the beginning insert “submits or”, and
(b) for sub-paragraph (4) substitute—
(4) The assessment must be made—
(a) within the period of 12 months beginning with the day on which the return was received by an officer of Revenue and Customs, or
(b) if no return is received by an officer of Revenue and Customs, the period of 12 months beginning with the filing date mentioned in sub-paragraph (1)(b).
(16) In paragraph 44 (enquiry into return for wrong period or wrong group)—
(1A) Sub-paragraph (1) applies even if the company submitting the return had not been appointed as a reporting company for the period of account for which the return was submitted; and references to a reporting company in paragraph 40, and elsewhere in this Schedule where the context is an enquiry into the return, are to the company who submitted the return.
(17) In paragraph 56 (power of Revenue and Customs to make determinations where no return filed etc), in sub-paragraph (4)(a), after “has effect” insert “under paragraph 4 or 5”.
(18) In paragraph 61 (provision of information between members of group where no reporting company appointed), for sub-paragraph (2) substitute—
(2) Condition A is that no appointment of a reporting company in relation to the period of account has been made before the end of the period of 12 months beginning with the end of the period of account.
(19) The amendment made by subsection (3) has effect in relation to periods of account ending on or after 31 March 2024 (except so far as it relates to the new paragraph 11A of Schedule 7A to TIOPA 2010).
(20) The amendments made by subsection (14) have effect in accordance with provision made by regulations made by the Commissioners for His Majesty’s Revenue and Customs.
(21) The remaining amendments made by this section have effect in relation to periods of account ending on or after 31 March 2026.
62 Corporate interest restriction: capital expenditure and tax-EBITDA calculation
(1) In section 407 of TIOPA 2010 (amounts not brought into account in determining a company’s tax-EBITDA)—
(a) in subsection (1)(b) (allowances or charges under CAA 2001), at the end insert “or capital expenditure for which a deduction is given under a relevant enactment”, and
(b) after subsection (1) insert—
(1A) For the purposes of subsection (1)(b) “relevant enactment” means—
(a) section 86A of CTA 2009 (contributions to flood and coastal erosion risk management projects);
(b) section 142 of CTA 2009 (waste disposal site preparation expenditure);
(c) section 145 of CTA 2009 (waste disposal site restoration payments);
(d) section 147 of CTA 2009 (cemeteries and crematoria).
(2) The amendments made by this section have effect in relation to periods of account ending on or after 31 December 2021.
(3) An interest restriction return which is revised to take account of the amendments made by this section is, despite paragraph 8(3) of Schedule 7A to TIOPA 2010, of effect if the revised return is received by an officer of Revenue and Customs before 1 October 2026.
63 Avoidance schemes involving certain non-derecognition liabilities
(1) In Part 20 of CTA 2009 (general calculation rules), in Chapter 1 (restriction of deductions), after section 1305A insert—
Avoidance schemes involving certain non-derecognition liabilities
1305B (1) This section applies if—
(a) assets (“the underlying assets”) are transferred to a relevant entity,
(b) for accounting purposes following the transfer—
(i) the underlying assets continue to be recognised to any extent by a member of the transferor group, and
(ii) a liability is also recognised by a member of the transferor group in connection with the underlying assets or otherwise in connection with the transfer,
(c) in calculating a company’s profits for corporation tax purposes a deduction would (ignoring this section) be allowed for a loss, expense or debit in connection with the liability mentioned in paragraph (b)(ii), and
(d) the loss, expense or debit arises, to any extent, as a result of arrangements (whether or not they are or include the transfer mentioned in paragraph (a)) where the main purpose, or one of the main purposes, of any party to the arrangements in being a party to them is to secure a tax advantage for any person.
(2) The deduction mentioned in subsection (1)(c) is not allowed so far as it is attributable on a just and reasonable apportionment to the purpose mentioned in subsection (1)(d).
(3) For the purposes of the condition in subsection (1)(b) it does not matter whether the assets recognised as mentioned in subsection (1)(b)(i) and the liability recognised as mentioned in subsection (1)(b)(ii)—
(a) are recognised immediately after the transfer or only later;
(b) are first recognised at the same time or at different times;
(c) are recognised by the same member of the transferor group as they were before the transfer.
(4) For the purposes of subsection (1) the circumstances in which assets are “transferred” to a relevant entity include circumstances in which—
(a) a right to income deriving from the assets is transferred to the relevant entity;
(b) a contract is entered into to pay the relevant entity income deriving from the assets;
(c) the assets, or income deriving from them, come to be held in trust for the benefit of the relevant entity.
(5) In this section—
“arrangements” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions;
“member of the transferor group” means any of the following—
the person who transferred the underlying assets as mentioned in subsection (1)(a);
a company that is connected with the person mentioned in paragraph (a) and is not the relevant entity mentioned in subsection (1)(a);
a transparent entity in which the person mentioned in paragraph (a) or a company falling within paragraph (b) has an interest;
“relevant entity” means—
a securitisation company within the meaning of Chapter 4 of Part 13 of CTA 2010, or
any person that is a party to the same capital market arrangement (within the meaning of paragraph 1 of Schedule 2A to the Insolvency Act 1986) as such a company;
“transparent entity” means anything that—
may be treated as an entity for accounting purposes, and
is not chargeable to corporation tax or income tax as a person (ignoring any exemptions).
(6) The following apply for the purposes of this section—
section 1122 of CTA 2010 (“connected” persons)
section 1139 of CTA 2010 (“tax advantage”).
(2) The amendment made by this section has effect in relation to accounting periods beginning on or after 26 November 2025; and for that purpose an accounting period beginning before and ending on or after that date is treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate accounting periods.
64 Energy (oil and gas) profits levy: decommissioning relief agreements
(1) In section 80 of FA 2013 (decommissioning relief agreements), after subsection (4) insert—
(4A) No payment is to be made to a company under a decommissioning relief agreement by reference to the energy (oil and gas) profits levy.
(4B) Every decommissioning relief agreement (whenever entered into) is to be read accordingly.
(2) The amendment made by subsection (1) has effect in relation to claims under decommissioning relief agreements made in relation to decommissioning expenditure incurred on or after 26 November 2025.
65 Agricultural property relief and business property relief etc
Schedule 12 makes provision—
(a) limiting agricultural property relief and business property relief, and
(b) extending Schedule A1 to IHTA 1984 (overseas property not excluded property if value attributable to UK residential property) to UK agricultural property.
In IHTA 1984, before section 151 (but after the italic heading that precedes it) insert—
Certain pension interests treated as part of estate
150A (1) For the purposes of this Act a member of a registered pension scheme, a qualifying non-UK pension scheme or a section 615(3) scheme is treated as beneficially entitled immediately before their death to property (“notional pension property”) by reference to the arrangements under the scheme as they stand at that time.
(2) The value of the member’s notional pension property in relation to the scheme is calculated as follows—
Step 1
For each money purchase arrangement under the scheme add together—
the value of any property that—
is held in a pension pot, and
may or must be used to provide benefits under the arrangement on the death of the member, and
the value of any property that—
is not held in a pension pot, and
may be and can reasonably be expected to be used to provide benefits under the arrangement on the death of the member,
then deduct the value of any property within paragraph (a) or (b) that may only be used to provide an excluded benefit.
Step 2
For each defined benefits arrangement under the scheme add together—
the amount of any benefit that must be paid as a lump sum death benefit under the arrangement on the death of the member,
the amount of any benefit not within paragraph (a) that may be and can reasonably be expected to be paid as a lump sum death benefit under the arrangement on the death of the member, and
the amount of any benefit that may be and, assuming that the maximum amount possible is paid as a lump sum death benefit, can reasonably be expected to be paid as a scheme continuation payment under the arrangement on the death of the member,
then deduct the amount of any benefit within paragraph (a), (b) or (c) that may only be paid as an excluded benefit.
Step 3
Add together each of the amounts given at Steps 1 and 2.
(3) In determining for the purposes of subsection (2) any question as to what can reasonably be expected, regard is to be had (in particular) to appropriate actuarial assumptions.
(4) Except under this section, no interest in or under a registered pension scheme, a qualifying non-UK pension scheme or a section 615(3) scheme is taken into account for the purposes of this Act in determining the value of the estate of a member of the scheme immediately before their death.
(5) For the purposes of section 6 (excluded property), notional pension property in relation to a pension scheme is regarded as situated in the country or territory in which the scheme is established.
(6) In subsection (2)—
“excluded benefit”, in relation to a pension scheme, means a benefit that may only be paid under the scheme as one or more of the following—
a dependants’ scheme pension;
a trivial commutation lump sum death benefit whose payment to a person extinguishes the person’s entitlement to a dependants’ scheme pension;
a dependants’ annuity, or a nominees’ annuity, that was purchased together with a lifetime annuity payable to the member (and for that purpose “purchased together” is to be construed in accordance with paragraphs 17(1A) and 27AA(2) of Schedule 28 to the Finance Act 2004);
any amount that—
is payable as a benefit (in any form) in respect of a member of the scheme if the member is in employment or other work of a particular description immediately before their death, and
is not payable as a benefit (in any form) in respect of a member of the scheme if the member does not meet those conditions;
“held in a pension pot” means available for the purpose of providing benefits to or in respect of one specific member of the scheme;
“scheme continuation payment” means a payment made—
in relation to a registered pension scheme, in accordance with pension rule 2 in section 165(1) of the Finance Act 2004 (continuing payments after death);
in relation to a qualifying non-UK pension scheme or a section 615(3) scheme, in such a way as would be in accordance with that rule if the scheme in question were a registered pension scheme.
(7) Each of the following has the same meaning in this section as in Part 4 of the Finance Act 2004 (pension schemes etc)—
“arrangement” (see section 152(1) of that Act);
“defined benefits arrangement” (see section 152(6) of that Act);
“dependants’ annuity” (see paragraph 17 of Schedule 28 to that Act);
“dependants’ scheme pension” (see paragraph 16 of Schedule 28 to that Act);
“lifetime annuity” (see paragraph 3 of Schedule 28 to that Act);
“lump sum death benefit” (see section 168(2) of that Act);
“money purchase arrangement” (see section 152(2) of that Act);
“nominees’ annuity” (see paragraph 27AA of Schedule 28 to that Act);
“trivial commutation lump sum death benefit” (see paragraph 20 of Schedule 29 to that Act);
but for the purposes of this section those definitions are to be read with any necessary modifications in applying them to a qualifying non-UK pension scheme or a section 615(3) scheme.
(1) IHTA 1984 is amended as follows.
(2) For section 210 substitute—
Pension rights
210 (1) This section applies to any tax that is attributable to the value of notional pension property of a deceased member of a registered pension scheme, a qualifying non-UK pension scheme or a section 615(3) scheme.
(2) For the purposes of this Part the tax is treated as also attributable to the value of—
(a) any property held for the purposes of the scheme that is available for paying a benefit on the deceased’s death, except so far as the property may only be used to provide an excluded benefit, or an exempt benefit, on the deceased’s death, and
(b) any property that is received by a person under the scheme as a benefit on the deceased’s death, other than an excluded benefit or an exempt benefit.
(3) The persons liable for the tax (as well as including a person within section 200(1)(c) (person in whom property is vested etc))—
(a) include the deceased’s personal representatives so far as they are not already liable under section 200(1)(a),
(b) where the scheme is a registered pension scheme, include the scheme administrator where—
(i) a benefit has been paid in breach of section 226A (withholding of benefits), or
(ii) the scheme administrator has failed to comply with section 226B (direct payment of tax on receipt of notice), and
(c) where the scheme is a registered pension scheme or a section 615(3) scheme, do not (despite section 200(1)(b) and (c)) include the trustees of the scheme (if there are any) or any other person who holds property for the purposes of the scheme in question.
(4) Where the scheme administrator is liable for tax by virtue of subsection (3)(b)(ii) (and not by virtue of subsection (3)(b)(i)), their liability is limited to the amount of tax that they have failed to pay as required under section 226B.
(5) Sections 271 to 272C of the Finance Act 2004 (liability of scheme administrator) apply in relation to a liability under this Act as they apply in relation to a liability under Part 4 of that Act.
(6) Subsection (3)(c) does not prevent a person from being liable to tax—
(a) under subsection (3)(b) in their capacity as scheme administrator, or
(b) by virtue of subsection (5).
(7) In this Act “exempt benefit”, in relation to a pension scheme and a deceased member of the scheme, means a benefit paid under the scheme if and so far as the payment renders the transfer of value made on the deceased’s death an exempt transfer.
(8) For provision under which a payment of a benefit renders the transfer of value on death an exempt transfer to the extent of the payment, see—
section 18 (transfers between spouses or civil partners);
section 23 (gifts to charities or registered clubs);
section 24 (gifts to political parties);
section 24A (gifts to housing associations);
section 25 (gifts for national purposes etc);
section 27 (maintenance funds for historic buildings etc).
(3) In section 211 (burden of tax on death), for subsection (3) substitute—
(3) If—
(a) personal representatives pay an amount of tax,
(b) the amount does not fall to be borne as part of the general testamentary and administration expenses of the estate,
(c) property to whose value the tax is attributable is vested in someone other than the personal representatives (“the vestee”), and
(d) the personal representatives cannot recover the amount by deducting it from any sums payable to the vestee out of the estate (whether because there are no sums so payable or because such sums are insufficient or have already been paid without deduction),
the vestee must repay the amount to the personal representatives.
(4) In section 212 (powers to raise tax), in subsection (1), for “or any part of it” substitute “, any property derived from that property, or any part of that property or of property derived from it”.
(5) In section 239 (certificates of discharge), after subsection (4) insert—
(4A) If—
(a) the personal representatives of a deceased person are given a certificate under subsection (2), and
(b) further property is afterwards shown to have been included in the estate of the deceased immediately before their death by virtue of section 150A(1) (notional pension property),
then despite subsection (4)(b) the personal representatives are not liable for any tax attributable to that further property unless the failure to disclose the property in the application under subsection (2) was due to carelessness on the part of the personal representatives.
68 Withholding of benefits and payment of tax by pension scheme administrator
In IHTA 1984, after section 226 insert—
Tax on notional pension property: withholding of benefits
226A (1) The personal representatives of a deceased person may give a notice to the scheme administrator of a registered pension scheme if they know that they are, or have reason to believe that they may be, liable for tax attributable to notional pension property of the deceased in relation to the scheme.
(2) A prospective personal representative of a deceased person may give a notice to the scheme administrator of a registered pension scheme if they have reason to believe that, on becoming a personal representative, they would be, or might be, liable for tax attributable to notional pension property of the deceased in relation to the scheme.
(3) In this section “withholding notice” means a notice under subsection (1) or (2).
(4) While a withholding notice has effect, no benefit may be paid under the scheme to a person (“P”) if—
(a) the total amount of benefits previously paid under the scheme to P on the deceased’s death exceeds 50% of P’s benefit entitlement, or
(b) the payment of the benefit would result in the total amount of benefits paid under the scheme to P on the deceased’s death exceeding 50% of P’s benefit entitlement.
(5) In subsection (4) a person’s “benefit entitlement” means so much of the value of the notional pension property of the deceased in relation to the scheme as is attributable on a just and reasonable apportionment, having regard to appropriate actuarial assumptions, to benefits that have been paid, or are or will be payable, to that person.
(6) Subsection (4) does not apply to the payment of an excluded benefit or an exempt benefit.
(7) A withholding notice has effect from the time when it is received by the scheme administrator until the earliest of the following—
(a) any time when it is withdrawn by —
(i) the personal representatives, or
(ii) if the person who gave the notice was a prospective personal representative, that person;
(b) any time when all the tax attributable to notional pension property of the deceased in relation to the scheme, and any interest due in respect of that tax, is paid;
(c) 15 months after the end of the month in which the deceased died.
(8) A withholding notice does not have effect unless it complies with any requirements prescribed by the Commissioners for His Majesty's Revenue and Customs as to form and content.
(9) The rules of a registered pension scheme are void so far as they purport to require a benefit to be paid in breach of subsection (4).
(10) A payment that would fall due but for a withholding notice instead falls due immediately after the notice ceases to have effect.
(11) For the consequences if a benefit is paid in breach of subsection (4), see section 210(3)(b) (joint liability of scheme administrator).
(12) In this section—
“prospective personal representative”, in relation to a deceased person, means a person who has reason to believe that they will become a personal representative of that person;
“registered club” has the same meaning as in Chapter 9 of Part 13 of the Corporation Tax Act 2010.
Tax on notional pension property: direct payment by scheme administrator
226B (1) A person (“the taxpayer”) may by notice (a “payment notice”) require the scheme administrator of a registered pension scheme to pay any tax for which the taxpayer is liable and which is attributable to the value of the notional pension property of a deceased member of the scheme.
(2) The scheme administrator must pay the amount of tax specified in a payment notice before the end of the period of 35 days beginning with the day on which they receive the notice, unless the notice—
(a) is withdrawn by the taxpayer during that period (and before the amount is paid), or
(b) does not comply with the requirements of subsection (3), or ceases to comply with them during that period (and before the amount is paid).
(3) The requirements are—
(a) that the payment notice specifies the amount of tax that it requires to be paid;
(b) that the amount specified is not less than £1,000;
(c) that the amount specified does not exceed the amount of tax for which the taxpayer is liable in respect of notional pension property of the deceased in relation to the scheme;
(d) that where the taxpayer is a beneficiary the amount specified does not exceed the difference between—
(i) the amount of the benefits payable to the beneficiary under the scheme on the deceased’s death, and
(ii) the amount that has already been paid on the deceased’s death in benefits to or for the benefit of the beneficiary under the scheme, or that has already been specified in a payment notice given by the beneficiary in relation to the deceased;
(e) that where the taxpayer is the deceased’s personal representatives the amount specified does not exceed the difference between—
(i) the amount of the benefits payable under the scheme on the deceased’s death, and
(ii) the amount that has already been paid on the deceased’s death in benefits under the scheme, or that has already been specified in a payment notice given by any person in relation to the deceased;
(f) that the payment notice complies with any requirements prescribed by the Commissioners for His Majesty's Revenue and Customs as to form and content.
(4) The references in subsection (3)(e) to benefits do not include excluded benefits or exempt benefits.
(5) The references in subsection (3)(d) and (e) to the amount of benefits payable under the scheme—
(a) include any amount that has been or will in future be payable, and
(b) in a case where the exact amount of benefits that will in future be payable cannot be known, are to be read as references to the amount that, having regard (in particular) to appropriate actuarial assumptions, can reasonably be expected to be paid.
(6) Where the scheme administrator pays an amount of tax under this section, a consequential adjustment may be made, on a basis that is just and reasonable having regard to appropriate actuarial assumptions and to any tax previously paid—
(a) where the taxpayer is a beneficiary, to that beneficiary’s entitlement to benefits under the scheme on the deceased’s death;
(b) where the taxpayer is the deceased’s personal representatives, to any person’s entitlement to benefits under the scheme on the deceased’s death.
(7) Any repayment under section 241 (overpayments) of tax paid by the scheme administrator under this section may, regardless of who the taxpayer is, be paid to—
(a) the deceased’s personal representatives, or
(b) any of the beneficiaries to whom an officer of Revenue and Customs considers the overpayment of tax to relate
(but may not be paid to the scheme administrator).
(8) The rules of a registered pension scheme are void so far as they purport to prohibit or restrict—
(a) the payment of tax by the scheme administrator as required under this section, or
(b) the making of a consequential adjustment under subsection (6) to a person’s entitlement to benefits under the scheme.
(9) In this section—
“beneficiary”, in relation to a deceased member of a pension scheme, means a person who receives or has a right to receive benefits under the scheme on the member’s death;
“tax” includes interest on tax.
(10) The Treasury may by regulations made by statutory instrument amend the figure for the time being mentioned in subsection (3)(b).
(11) A statutory instrument containing regulations under subsection (10) is subject to annulment in pursuance of a resolution of the House of Commons.
(12) For the consequences if the scheme administrator fails to comply with this section, see section 210(3)(b) (joint liability of scheme administrator).
(1) IHTA 1984 is amended as follows.
(2) Omit section 12A (pension drawdown fund not used up: no deemed disposition).
(3) In section 18 (exemption for transfers between spouses or civil partners), after subsection (3) insert—
(3A) To the extent that the value transferred by a transfer of value made on the death of a member of a pension scheme is attributable to the member’s notional pension property—
(a) the value transferred is treated for the purposes of this section as also attributable to any property that the person’s spouse or civil partner receives, or has a present or future right to receive, under the scheme on the death of the member otherwise than as an excluded benefit;
(b) the estate of the transferor’s spouse or civil partner is treated for the purposes of subsection (1) (so far as would not otherwise be the case) as increased by the value of any property that they receive, or have a right to receive, as mentioned in paragraph (a), and
(c) subsection (3) does not apply in relation to the transfer of value.
(4) In section 23 (gifts to charities or registered clubs), after subsection (5A) insert—
(5B) To the extent that the value transferred by a transfer of value made on the death of a member of a pension scheme is attributable to the member’s notional pension property—
(a) the value transferred is treated for the purposes of this section as also attributable to any property that on the death of the member is given under the scheme to charities or registered clubs, and
(b) subsection (2) does not apply in relation to the transfer of value.
(5) In section 24 (gifts to political parties), after subsection (4) insert—
(5) To the extent that the value transferred by a transfer of value made on the death of a member of a pension scheme is attributable to the member’s notional pension property—
(a) the value transferred is treated for the purposes of this section as also attributable to any property that on the death of the member is given under the scheme to a political party qualifying for exemption under this section, and
(b) section 23(2) does not (despite subsection (3)) apply in relation to subsection (1).
(6) In section 24A (gifts to housing associations), after subsection (3) insert—
(4) To the extent that the value transferred by a transfer of value made on the death of a member of a pension scheme is attributable to the member’s notional pension property—
(a) the value transferred is treated for the purposes of this section as also attributable to any land in the United Kingdom that on the death of the member is given under the scheme to a body falling within subsection (2), and
(b) section 23(2) does not (despite subsection (3)) apply in relation to subsection (1).
(7) In section 25 (gifts for national purposes etc), after subsection (3) insert—
(4) To the extent that the value transferred by a transfer of value made on the death of a member of a pension scheme is attributable to the member’s notional pension property—
(a) the value transferred is treated for the purposes of this section as also attributable to any property that on the death of the member is given under the scheme—
(i) to a body within Schedule 3, or
(ii) in the circumstances described in paragraph 1 of Schedule 14 to the Finance Act 2012 (gifts to nation), and
(b) section 23(2) does not (despite subsection (2)) apply in relation to subsection (1).
(8) In section 27 (maintenance funds for historic buildings etc), after subsection (2) insert—
(3) To the extent that the value transferred by a transfer of value made on the death of a member of a pension scheme is attributable to the member’s notional pension property—
(a) the value transferred is treated for the purposes of this section as also attributable to any property—
(i) that on the death of the member is given under the scheme to a person and becomes comprised in a settlement, and
(ii) in respect of which the condition in subsection (1)(a) or (b) is met, and
(b) section 23(2) does not (despite subsection (2)) apply in relation to subsection (1).
(9) In section 151 (treatment of pension rights etc)—
(a) for the heading substitute “Other provision about pension interests”;
(b) for subsections (2) and (3) substitute—
(3) Sections 49 to 53 (holder of interest in possession treated as directly entitled to property in which interest subsists etc) do not apply in relation to an interest in possession in property where the property is held for the purposes of a registered pension scheme, a qualifying non-UK pension scheme or a section 615(3) scheme.
;
(c) omit subsection (4).
(10) Omit section 152 (cash options).
(11) After section 218A insert—
Pensions: information powers
218B (1) The powers conferred on the Board by section 251 of the Finance Act 2004 (powers relating to the provision and preservation of information in connection with pensions) are exercisable for the purposes of this Act.
(2) Subsection (1) is without prejudice to the generality of that section of that Act.
(12) In section 272 (general interpretation), in subsection (1)—
(a) in the definition of “member”, after “scheme,” insert “a qualifying non-UK pension scheme or a section 615(3) scheme,”;
(b) at the appropriate places insert—
“excluded benefit”, in relation to a pension scheme, has the meaning given by section 150A(6);
;
“exempt benefit”, in relation to a pension scheme and a deceased member of the scheme, has the meaning given by section 210(7);
;
“notional pension property”, in relation to a member of a pension scheme and a pension scheme, means property to which the member is treated under section 150A(1) (certain pension property treated as part of estate) as having been beneficially entitled immediately before their death by reference to the arrangements under the scheme;
;
“qualifying non-UK pension scheme” has the meaning given in section 271A;
;
“the scheme administrator”, in relation to a registered pension scheme, has the meaning given in section 270 of the Finance Act 2004;
.
(1) ITEPA 2003 is amended in accordance with subsections (2) to (6).
(2) In section 567 (amount charged to tax), in subsection (5), at the appropriate place insert—
section 567B (deduction where inheritance tax is paid in respect of pension death benefit);
.
(3) After section 567A insert—
Cases where inheritance tax is paid in respect of pension death benefit
567B (1) This section applies if—
(a) there is an amount of taxable pension income (“amount TPI”) for a tax year for a pension, annuity or other item of pension income,
(b) amount TPI reflects (to any extent) the payment to a person (“the beneficiary”) of a benefit under a pension scheme on the death of a member of the scheme (“the deceased”),
(c) the benefit is not an excluded benefit, and
(d) at any time (whether before or after the benefit is paid)—
(i) the beneficiary pays an amount of inheritance tax that is attributable to the value of the deceased’s notional pension property,
(ii) the deceased’s personal representatives pay an amount of inheritance tax that is so attributable and pass on the burden of that payment to the beneficiary, or
(iii) the scheme administrator pays (under section 226B of IHTA 1984) an amount of inheritance tax that is so attributable, and the payment meets the condition in subsection (2).
(2) A payment of an amount of inheritance tax meets the condition in this subsection if (and so far as)—
(a) in consequence of the payment, the scheme administrator makes an adjustment (under section 226B(5) of IHTA 1984) as a result of which the beneficiary’s entitlement to a benefit other than that mentioned in subsection (1) (“the other benefit”) is reduced, and
(b) disregarding that reduction, the other benefit would not give rise to taxable pension income for any tax year.
(3) A deduction is allowed from amount TPI equal to the lesser of—
(a) the amount of inheritance tax paid as mentioned in subsection (1)(d)(i) or (ii), less so much (if any) of that inheritance tax as has been deducted under this subsection in an earlier tax year, and
(b) so much of amount TPI as reflects the payment to the beneficiary of the benefit mentioned in subsection (1).
(4) Where the deceased was under 75 on death, and the benefit mentioned in subsection (1) is a relevant lump sum death benefit, a deduction is allowed from amount TPI equal to the lesser of—
(a) the amount of inheritance tax paid as mentioned in subsection (1)(d)(iii) so far as it meets the condition in subsection (2), less so much (if any) of that inheritance tax as has been deducted under this subsection in an earlier tax year, and
(b) so much of amount TPI as reflects the payment to the beneficiary of the benefit mentioned in subsection (1).
(5) Where a deduction is allowed under both of subsections (3) and (4), the deduction under subsection (4) is to be made first.
(6) For the purposes of subsection (1)(d) the deceased’s personal representatives “pass on the burden” of a payment of inheritance tax to the beneficiary if—
(a) the personal representatives pay a sum to the beneficiary out of the deceased’s estate that has been reduced by the amount of inheritance tax, or
(b) the beneficiary reimburses the personal representatives that amount.
(7) In this section—
“IHTA 1984” means the Inheritance Tax Act 1984;
“inheritance tax” includes interest on inheritance tax;
“excluded benefit” has the same meaning as in IHTA 1984;
“notional pension property” has the same meaning as in IHTA 1984;
“relevant lump sum death benefit” has the same meaning as in section 637S.
(4) After section 579CA insert—
Refund of overpaid inheritance tax treated as pension
579CB (1) This section applies if—
(a) an amount of inheritance tax that is attributable to the value of notional pension property of a deceased member of a registered pension scheme is paid,
(b) some or all of the inheritance tax paid—
(i) is repaid under section 241(1) of that Act to a person, other than a non-qualifying person, who is entitled to receive benefits under the scheme on the deceased’s death (a “beneficiary”), or
(ii) is repaid under that section to the deceased’s personal representatives and passed on by the personal representatives to a beneficiary,
(c) in a case in which the payment of inheritance tax mentioned in paragraph (a) was made by the beneficiary or by the deceased’s personal representatives, a deduction is allowed under section 567B in respect of the payment, and
(d) the deceased was aged 75 or over at the date of their death.
(2) The relevant amount is treated for the purposes of this Part as though it were a pension paid under the registered pension scheme (and is treated as accruing in the tax year in which it is paid).
(3) In subsection (2) “the relevant amount” means—
(a) in a case in which the payment of inheritance tax mentioned in subsection (1)(a) is made by the scheme administrator, the amount of the payment made to the beneficiary mentioned in subsection (1)(b)(i) or (ii);
(b) in a case in which the payment of inheritance tax mentioned in subsection (1)(a) is made by a beneficiary or by the deceased’s personal representatives, the lesser of—
(i) the amount of the payment made to the beneficiary mentioned in subsection (1)(b)(i) or (ii), and
(ii) the deduction allowed under section 567B in respect of the payment of inheritance tax mentioned in subsection (1)(a).
(4) In this section—
“inheritance tax” includes interest on inheritance tax;
“non-qualifying person” has the same meaning as in section 206 of FA 2004 (special lump sum death benefit charge).
(5) In section 637T (availability of individual’s lump sum and death benefit allowance where multiple lump sum death benefits paid), after subsection (4) insert—
(5) Where any inheritance tax is attributable to the value of the individual’s notional pension property, references in subsection (4) to the amount of a lump sum death benefit are to its IHT-adjusted amount.
(6) The “IHT-adjusted amount” of a lump sum death benefit paid to a person under a registered pension scheme is (subject to subsection (7)) the amount determined as follows —
Step 1
Take the amount of the lump sum death benefit paid to the person.
Step 2
Add the amount (if any) by which the person’s entitlement to the lump sum death benefit was reduced in consequence of an adjustment under section 226B(5) of IHTA 1984.
Step 3
Deduct the amount (if any) of inheritance tax—
that is attributable to the value of the individual’s notional pension property in relation to the scheme, and
for which the person—
is, or at any time was, liable under section 200(1)(c) of IHTA 1984, or
would at any time have been liable under that provision if the tax had not previously been paid by another person.
If the result is a negative amount, the IHT-adjusted amount of the lump sum death benefit is nil.
(7) Where more than one lump sum death benefit is paid to the person under the scheme, the amount to be deducted under Step 3 is the following proportion of the amount of inheritance tax identified in that Step—
C
/
D
where—
“C” is the amount resulting from Step 2;
“D” is the aggregate of the amounts resulting from Step 2 in respect of each lump sum death benefit paid to the person under the scheme.
(8) In this section—
(a) “IHTA 1984” means the Inheritance Tax Act 1984;
(b) “notional pension property” has the same meaning as in IHTA 1984.
(6) In section 683 (PAYE income), in subsection (3B), at the end insert “or section 579CB (inheritance tax overpaid by scheme administrator: refund treated as pension)”.
(7) FA 2004 is amended in accordance with subsections (8) to (10).
(8) In section 164 (authorised member payments), in subsection (1), after paragraph (e) (but before the “and” that follows it) insert—
(ea) payments of inheritance tax under section 226B of the Inheritance Tax Act 1984 (direct payment of tax by scheme administrator),
.
(9) After section 206 insert—
Partial repayment of section 206 charge where IHT paid by recipient of benefit
206A (1) This section applies where—
(a) a registered pension scheme pays a lump sum death benefit in respect of a deceased member to a non-qualifying person,
(b) a liability to the lump sum death benefits charge arises in respect of the lump sum death benefit,
(c) at any time (whether before or after the payment of the lump sum death benefit)—
(i) the non-qualifying person pays an amount of inheritance tax that is attributable to the value of the deceased’s notional pension property, or
(ii) the deceased’s personal representatives pay an amount of inheritance tax that is so attributable and pass on the burden of that payment to the non-qualifying person, and
(d) the non-qualifying person makes an application under this section for a reduction in the lump sum death benefits charge.
(2) Section 206 applies in relation to the lump sum death benefit as if the amount of the benefit that was paid to the non-qualifying person were the amount in fact paid, reduced by the amount of inheritance tax paid as mentioned in subsection (1)(c).
(3) If and to the extent that the amount of the lump sum death benefits charge paid in respect of the lump sum death benefit exceeds the amount of the liability (as recalculated as a result of subsection (2)), the excess must be repaid to the non-qualifying person (and may not be repaid to the scheme administrator).
(4) An application under this section is of no effect unless it complies with such requirements as to timing, form and content as may be prescribed by the Commissioners.
(5) For the purposes of subsection (1)(c) the deceased’s personal representatives “pass on the burden” of a payment of inheritance tax to the non-qualifying person if—
(a) the personal representatives pay a sum to the non-qualifying person out of the deceased’s estate that has been reduced by the amount of inheritance tax, or
(b) the non-qualifying person reimburses the personal representatives that amount.
(6) In this section—
“the Commissioners” means the Commissioners for His Majesty’s Revenue and Customs;
“inheritance tax” includes interest on inheritance tax;
“non-qualifying person” has the same meaning as in section 206.
Supplementary charge on refund of overpaid IHT
206B (1) This section applies where—
(a) a registered pension scheme pays a lump sum death benefit in respect of a deceased member to a non-qualifying person,
(b) a liability to the lump sum death benefits charge arises in respect of the lump sum death benefit,
(c) an amount of inheritance tax that is attributable to the value of notional pension property of the deceased member is paid,
(d) some or all of the inheritance tax paid as mentioned in paragraph (c) is subsequently—
(i) repaid under section 241(1) of that Act to the non-qualifying person, or
(ii) repaid under that section to the deceased’s personal representatives and passed on by the personal representatives to the non-qualifying person, and
(e) in a case in which the payment mentioned in paragraph (c) was made by the non-qualifying person or by the deceased’s personal representatives, the non-qualifying person has made an application under section 206A in relation to the lump sum death benefit.
(2) A charge to income tax arises in respect of the relevant amount.
(3) In subsection (2) “the relevant amount” means—
(a) in a case in which the payment of inheritance tax mentioned in subsection (1)(c) is made by the scheme administrator, the amount of the payment made to the non-qualifying person mentioned in subsection (1)(d)(i) or (ii);
(b) in a case in which the payment of inheritance tax mentioned in subsection (1)(c) is made by the non-qualifying person, or by the deceased’s personal representatives, the lesser of—
(i) the amount of the payment made to the non-qualifying person mentioned in subsection (1)(d)(i) or (ii), and
(ii) the repayment made under section 206A to the non-qualifying person in relation to the lump sum death benefit.
(4) The person liable to the charge is the non-qualifying person.
(5) The rate of the charge is the same as the rate of the special lump sum death benefits charge (see section 206(4)).
(6) In this section—
“inheritance tax” includes interest on inheritance tax;
“non-qualifying person” has the same meaning as in section 206.
(10) In section 274A (power to split pension schemes), at the end insert—
(5) Sections 226A and 226B of the Inheritance Tax Act 1984 (withholding of benefits and payment of inheritance tax by scheme administrator) are treated for the purposes of this section as provision made by this Part.
The amendments made by sections 66 to 70 apply in relation to deaths, and (so far as relevant) to other transfers of value within the meaning of IHTA 1984, occurring on or after 6 April 2027.
In section 86 of FA 2021 (no indexation of rate bands, residential enhancement and taper threshold for tax years up to 2029-30)—
(a) for “or 2028” substitute “, 2028 or 2029”, and
(b) in the heading, for “2029-30” substitute “2030-31”.
73 Relevant property: disapplication of exemptions from exit charges
(1) In IHTA 1984, in section 65 (relevant property: exit charges), after subsection (8A) insert—
(8B) None of subsections (7), (7A) and (8) applies in relation to property comprised in a settlement if—
(a) a long-term residence change took place at a time—
(i) before the event in question, and
(ii) if there have been one or more ten-year anniversaries before the event in question, after the most recent of them,
(b) the long-term residence change did not result in tax being charged under this section by reference to the property, and
(c) the long-term residence change would have resulted in tax being charged under this section by reference to the property if the property had been property situated outside the United Kingdom when the long-term residence change took place.
(8C) In subsection (8B) “long-term residence change” means—
(a) the settlor not being a long-term UK resident at the start of the tax year 2025-26, or
(b) the settlor ceasing to be a long-term UK resident at the start of any later tax year.
(2) The amendment made by subsection (1) is treated as having come into force on 26 November 2025.
74 Relevant property: cap on charges for pre-30 October 2024 excluded property
(1) In IHTA 1984, after section 75A insert—
Cap on charges for pre-30 October 2024 excluded property
75B (1) This section applies if (ignoring this section) tax is charged under section 64 (ten-year anniversary charge) or 65 (exit charge) by reference to the value of property—
(a) that became comprised in the settlement in question before 30 October 2024,
(b) that immediately before 30 October 2024 was excluded property by virtue of section 48(3) or (3A) (as it had effect at that time), and
(c) that immediately before the occasion of the charge—
(i) is situated outside the United Kingdom and is not property to which paragraph 2 or 3 of Schedule A1 applies, or
(ii) is a holding in an authorised unit trust or a share in an open-ended investment company.
(2) The amount of tax charged by reference to the value of the property is, if it would otherwise be greater, to be reduced (but not below zero) to the difference between—
(a) the applicable cap in relation to the relevant period in which the occasion of the charge falls, and
(b) any amount of tax already charged under section 65 in relation to the settlement, earlier in that relevant period, by reference to the value of property meeting the conditions in subsection (1).
(3) In this section—
“the applicable cap” means—
in relation to the first relevant period, £125,000 multiplied by the number of whole successive quarters in the period;
in relation to a subsequent relevant period, £5 million;
“relevant period” means—
the period beginning with 6 April 2025 and ending with the first ten-year anniversary falling after that date, and
each subsequent period of ten years.
(2) The amendment made by subsection (1) is treated as having come into force on 6 April 2025.
75 Foreign diplomats etc: periods of UK residence to be disregarded
(1) In IHTA 1984, after section 155 insert—
Foreign diplomats etc
Foreign diplomats etc
155ZA (1) In determining whether a person is a long-term UK resident for the purposes of this Act, the person is treated (so far as would not otherwise be the case) as not having been resident in the United Kingdom for any tax year in which they were subject at any time to a relevant international exemption.
(2) For that purpose a person is “subject to a relevant international exemption” at a given time if, were the person to die at that time, an exemption in respect of inheritance tax would apply in relation to any of the person’s property by virtue of any of the following—
the Diplomatic Privileges Act 1964
the Consular Relations Act 1968
the International Organisations Act 1968
the European Communities Act 1972
the International Criminal Court Act 2001.
(2) The amendment made by subsection (1) is treated as having come into force on 6 April 2025 (and has effect in relation to tax years ending before that date as it has effect in relation to later tax years).
(1) IHTA 1984 is amended in accordance with subsections (2) and (3).
(2) In section 267ZD (further provision about elections under section 267ZC), in subsection (8), for “a lifetime election” substitute “an election under section 267ZC”.
(3) In section 157 (non-residents’ bank accounts), in subsection (3), in each of paragraphs (c) and (d), omit “not”.
(4) The amendment made by subsection (2) is treated as having come into force on 6 April 2025.
(5) The amendment made by subsection (3) is treated as having come into force on 26 November 2025.
(6) Section 157(3) of IHTA 1984 is treated as having had effect for the period beginning with 6 April 2025 and ending with 26 November 2025 with the omission of its paragraphs (c) and (d) (and the insertion of “or” after paragraph (a)).
77 Power to make provision about infected blood compensation payments
(1) The Treasury may by regulations made by statutory instrument make provision conferring relief from inheritance tax in respect of infected blood compensation payments.
(2) The provision that may be made under subsection (1) includes provision about the treatment of dispositions of amounts received by way of, or that are otherwise referable to, infected blood compensation payments.
(3) Regulations under subsection (1) may—
(a) amend or otherwise modify Schedule 15 to FA 2020 (tax relief for scheme payments etc);
(b) include retrospective provision that does not increase any person’s liability to tax;
(c) make different provision for different cases;
(d) include consequential, transitional or saving provision.
(4) In this section—
“infected blood compensation payment” means a payment that—
is made under an infected blood compensation scheme, and
is a qualifying payment for the purposes of Schedule 15 to FA 2020 (tax relief for scheme payments etc) by virtue of regulations made under paragraph 2(5) of that Schedule;
“infected blood compensation scheme” means—
the infected blood compensation scheme established by virtue of section 49 of the Victims and Prisoners Act 2024, or
the scheme known as the Infected Blood Interim Compensation Payment Scheme (a non-statutory scheme established before that mentioned in paragraph (a)).
(5) A statutory instrument containing regulations under subsection (1) that amend or otherwise modify Schedule 15 to FA 2020 may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.
(6) A statutory instrument containing any other regulations under subsection (1) is subject to annulment in pursuance of a resolution of the House of Commons.
78 Scope of exemption for gifts to charities and registered clubs
(1) IHTA 1984 is amended as follows.
(2) In section 23 (gifts to charities or registered clubs), in subsection (6)—
(a) in paragraph (a), omit “or is held on trust for charitable purposes only”;
(b) in paragraph (b), omit “or is held on trust for purposes of registered clubs only”.
(3) In section 29A (abatement of exemption where claim settled out of beneficiary’s own resources), in subsection (6), in paragraph (b) of the definition of “the exempt beneficiary”, omit sub-paragraph (ii) and the “or” before it.
(4) In section 142 (alteration of dispositions taking effect on death)—
(a) in subsection (3A), for “the appropriate person” substitute “the charity or registered club to which the property is given”;
(b) omit subsection (3B).
(5) The amendments made by this section have effect—
(a) in relation to a transfer of value made on a person’s death, if the person dies on or after 6 April 2026;
(b) in relation to a transfer of value made at any other time, if the transfer is made on or after 26 November 2025.
References in this subsection to the making of a transfer of value are to be construed in accordance with IHTA 1984.
79 Section 78: transitional protection for existing interests in possession
(1) Subsection (2) applies in relation to a transfer of value (“the original transfer”) to the extent that the value transferred by it is attributable to property which meets each of the following conditions, namely—
(a) that immediately before the original transfer a person was beneficially entitled to an interest in possession in the property to which section 49(1) of IHTA 1984 (interests treated as part of estate) applied;
(b) that the person became beneficially entitled to the interest in possession before 26 November 2025;
(c) that by virtue of the original transfer the property is held on trust—
(i) only for charitable purposes, or
(ii) only for purposes of registered clubs,
but is not given to charities or registered clubs;
(d) that the property is given to charities or registered clubs within the period of 2 years beginning with the date of the original transfer (“the subsequent gift”).
(2) For the purposes of IHTA 1984—
(a) the original transfer is treated as attributable (and as always having been attributable) to property given to charities or registered clubs, and
(b) the subsequent gift is disregarded.
(3) Subsections (1) and (2) have effect—
(a) where the original transfer is made on a person’s death, if the person dies on or after 6 April 2026;
(b) where the original transfer is made at any other time, if the transfer is made on or after 26 November 2025.
(4) Subsections (1) to (3)are to be construed as though they were contained in section 23 of IHTA 1984.