Corporate tax update - May 2026

Welcome to the latest edition of our Corporate Tax Update covering key developments from March and April 2026, written by members of RPC's tax team.

In this update we look at recent consultations on the uncertain tax treatment regime and corporate re-domiciliation, as well as recent tax changes to the Construction Industry Scheme, tax rules applicable to so-called 'umbrella' companies and EMI share option scheme rules. We also cover recent decisions on multiple / single supplies for VAT purposes and on tax treatment of contributions to an EBT.

1. Consultation on extension of uncertain tax treatment regime

On 12 March 2026, the UK government launched a consultation proposing to expand the uncertain tax treatment (UTT) rules. The changes would extend the UTT rules to more taxes—such as SDLT, national insurance, CGT, the Construction Industry Scheme and potentially IHT—and to more taxpayers, including individuals and trusts (where uncertain legal interpretation gives rise to a tax advantage in excess of £5m).

The UTT regime was introduced in 2022 with the aim of bringing uncertain legal interpretations to HMRC's attention. The regime currently applies to large businesses only.

The consultation also proposes:

• A new notification trigger where multiple reasonable legal interpretations exist and HMRC’s view is unclear.
• A single annual deadline for all UTT notifications to simplify reporting.
• Making the current exemption (where HMRC already has the information) dependent on HMRC confirming awareness of the uncertainty.

If adopted, the measures would be included in the next Finance Bill and apply to returns filed after 1 April of the following year. The consultation closes on 4 June 2026.

Access to consultation here.

2. Corporate re-domiciliation: DBT consultation

On 25 March 2026, the Department for Business and Trade published a consultation on introducing a corporate re-domiciliation regime, allowing foreign companies to move their place of incorporation to the UK while keeping their legal identity.

The proposals largely follow recommendations from a 2024 expert panel and include:

• Allowing solvent companies that intend to operate in the UK to re-domicile, with flexibility to become either private or public UK companies.
• Treating re-domiciled companies the same as those originally incorporated in the UK.
• Setting eligibility criteria broadly in line with the panel’s suggestions, but without granting powers to block companies from specific countries.
• Requiring directors to provide a solvency statement similar to that used in capital reductions.
• Ensuring legal continuity, including retention of existing rights, obligations, and liabilities.
• Considering administrative requirements, such as issuing share certificates within two months and keeping pre-existing records for ten years.
• Reviewing tax implications, including possible double charges under stamp duty rules.
• Addressing insolvency rules and creditor protections.

The consultation closes on 19 June 2026.

Access to consultation here.

3. Supply can be "ancillary" to multiple principal supplies – FTT decision

In Clearwater Hampers Ltd v HMRC^[1], the First-tier Tribunal considered whether wicker baskets used in gift hampers were a separate standard-rated supply or part of a composite supply with the food and drink.

The taxpayer sold hampers containing both zero-rated and standard-rated food and drink items and applied a composite VAT rate. It argued that the baskets were merely ancillary and should not be taxed separately. HMRC disagreed, relying on VAT guidance to treat the baskets as distinct supplies.

The Tribunal found in favour of the taxpayer and made two key rulings:

• The basket was not an end in itself for the average customer, who is buying a gift of food and drink; it simply enhanced presentation and protection. Therefore, the basket was ancillary to the main supplies.
• Importantly, a supply can be ancillary to more than one principal supply. The Tribunal confirmed that the principle from Card Protection Plan Ltd v HMRC can apply even where there are multiple principal supplies (here, both zero-rated and standard-rated items). The ancillary element should follow the VAT treatment of those supplies proportionately.

The Tribunal rejected the alternative argument based on Levob, as that requires a single indivisible supply, which was not the case here. It also criticised HMRC’s reliance on VAT Notices, emphasising that guidance is not law and cannot override established legal principles.

Source: Clearwater Hampers Ltd v HMRC [2026] UKFTT 567 (TC)

4. Court of Appeal holds contribution to EBT not taxable as earnings

In HMRC v M R Currell Ltd^[2], the Court of Appeal considered whether a company’s contribution to an employee benefit trust (EBT), used to fund a genuinely repayable loan to a director, constituted taxable earnings under s.62(2) ITEPA 2003.

The company paid £800,000 into an EBT, which immediately advanced the same amount as a loan to a director to acquire shares. The loan was real, interest-free, secured, and repayable. HMRC argued that the payment into the EBT was effectively remuneration and should be taxed as employment income.

The Court of Appeal dismissed HMRC’s appeal and upheld the Upper Tribunal, confirming that:

• A payment is not automatically “earnings” simply because it is made because of an employee’s work or used to fund a benefit for them.
• The legal character of the payment must be assessed independently; its purpose is not determinative of whether it is remuneration.
• A genuine loan does not normally constitute earnings, because it carries a repayment obligation and the loan principal itself is not a benefit that can be taxed as income (only the use of the funds may be taxable under separate rules).

The court distinguished Rangers (RFC 2012 Plc), noting that in that case it was accepted the payments were remuneration, whereas here that was the central issue in dispute.

The decision reinforces that EBT-funded genuine loans are not automatically taxable as earnings, although arrangements of this type may fall within the disguised remuneration rules, which were not in force at the relevant time.

Source: HMRC v M R Currell Ltd [2026] EWCA Civ 445 (17 April 2026) (Singh, Falk and Foxton LJJ).

5. HMRC consultation on close company reporting obligations

On 19 March 2026, HMRC launched a consultation on introducing a new reporting requirement for close companies to disclose transactions with their participators.

The aim is to reduce the tax gap by improving transparency around dealings that can blur the line between company and personal finances. HMRC notes that while such companies already keep records, a more structured reporting system is intended to improve compliance without creating disproportionate administrative burdens.

The proposal would require close companies to report details of a wide range of participator transactions, including:

• loans and repayments
• dividends and other distributions
• asset or value transfers
• debts, write-offs, and similar arrangements

Information to be reported would include the identity of the participator, transaction amounts, and dates, enabling HMRC to cross-check against personal tax returns. Employment income already reported via PAYE would generally be excluded.

HMRC is consulting on how often reporting should occur (likely annually, but potentially more frequently) and on the format, such as updates to existing corporation tax forms or a new digital system. It is also considering whether specific penalties may be needed.

The consultation forms part of HMRC’s wider tax administration modernisation programme, with responses due by 10 June 2026.

Access to consultation here.

6. Umbrella companies: joint and several liability

Umbrella companies are required to operate PAYE in the normal way, deducting income tax and National Insurance Contributions (NICs) from workers’ pay.

An umbrella company is broadly defined as a labour supply business that employs workers and contracts within a supply chain to provide their services, provided the worker does not hold a significant ownership or control interest.

Due to concerns about widespread tax avoidance through umbrella company structures, new legislation has been introduced to strengthen accountability across labour supply chains.

From 6 April 2026, a new joint and several liability regime has been introduced for PAYE. This means that UK recruitment agencies or end clients in a labour supply chain can be held equally liable with an umbrella company for any unpaid PAYE on payments made to workers. A “relevant party” in the supply chain—typically the UK agency closest to the end client or the end client itself in simpler structures—is designated as potentially liable alongside the umbrella company.

Anti-avoidance rules also ensure that entities attempting to disguise their status or structure to avoid these rules may still be treated as umbrella companies, triggering liability.

The liability regime is strict: agencies and end clients remain responsible even if they performed due diligence or were unaware of fraud or non-compliance by the umbrella company.

In parallel, National Insurance Contributions are brought into the same framework (joint and several liability) through separate regulations also with effect from 6 April 2026.

7. Updates to the Construction Industry Scheme

CIS fraud measures and guidance

HMRC updated its Construction Industry Scheme Manual in March 2026 to explain new anti-fraud provisions introduced by the Finance Act 2026. The guidance focuses on how HMRC will assess whether a business “knew or should have known” about non-compliance in its supply chain, including how this test can apply to company officers personally.

It also sets clearer expectations around due diligence. Businesses are expected to carry out thorough risk assessments when entering into contracts and to act on any warning signs. Failure to do so may lead to penalties.

The guidance outlines how penalties will be applied and mitigated. A standard penalty rate of 30% applies, and reductions will generally not be made simply to reflect the seriousness of the behaviour. It also explains when HMRC may delay issuing penalties (for example, during dispute resolution) and how penalties can be attributed to and adjusted for company officers.

Source: CISR85000 - CIS fraud measures: contents

CIS regulatory changes (nil returns and public bodies)

From April 2026, contractors are again required to submit monthly nil returns where no payments are made—but only if they have previously made, or would normally make, CIS payments.

The new regulations also exclude payments made to certain public bodies from the scope of CIS, meaning these payments are no longer treated as reportable contract payments.

Notably, while nil returns are reintroduced, the updated rules do not explicitly add new penalties for failing to submit them.

Source: The Income Tax (Construction Industry Scheme) (Amendment) Regulations 2026

8. EMI options: changes from 6 April 2026

From 6 April 2026, the Enterprise Management Incentive (EMI) rules have been reformed to better reflect modern company growth. The previous framework was designed for smaller, earlier-stage businesses with shorter timelines to exit. In practice, many companies now scale over longer periods, making the previous 10-year option limit increasingly restrictive.

The Government's view is that employees could be forced to exercise options too early or risk losing favourable tax treatment. The reforms also expand eligibility so more growing businesses can access EMI.

The EMI gross assets limit has increased from £30m to £120m, and the employee cap has risen from 250 to 500.The maximum company option pool has also doubled from £3m to £6m.

Overall, the changes seek to shift EMI from a startup-focused scheme toward one that supports scale-ups and longer-term growth.