The Chartered Institute of Taxation (CIOT) published its comprehensive response to the Draft Finance Bill 2026 legislation on 17 September 2026, addressing over 40 clauses covering international tax (Pillar Two GloBE rules domestic implementation), R&D tax relief refinements, Construction Industry Scheme (CIS) penalty reforms, pension taxation adjustments, and VAT group registration changes. The CIOT broadly supports the Pillar Two implementation timeline (effective for accounting periods starting on or after 31 December 2026) but flags critical drafting ambiguities in the ‘Qualifying Domestic Minimum Top-up Tax’ (QDMTT) interaction with the UK’s existing diverted profits tax. On R&D, the CIOT welcomes the clarification of’subcontracted R&D’ definitions but warns the new ‘qualifying expenditure’ cap for the merged scheme may disadvantage university spin-outs.
Key Takeaways
- Pillar Two Complexity: The draft legislation spans 120+ pages for Pillar Two alone; CIOT urges HMRC to publish comprehensive guidance and a’safe harbour’ for transitional UTPR/IIR mechanics before the effective date.
- R&D Cap Concerns: The proposed £20m annual cap on qualifying expenditure for the merged R&D scheme (above which relief drops to 10%) creates a ‘cliff edge’ for mid-sized innovators; CIOT recommends a taper.
- CIS Penalty Proportionality: The new tiered penalty regime for CIS return failures (starting at £100/month) lacks a ‘reasonable excuse’ gateway for first-time failures; CIOT proposes a 3-month grace period.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement