This week’s miscellaneous updates – 3 February 2026

In this week’s detailed updates which you can read more about below, the House of Lords Finance Bill Sub-Committee has published its report into the Finance Bill 2025/26 and the Government recently announced that indirect emissions associated with the production of Carbon Border Adjustment Mechanism (CBAM) goods will not be included in the scope of the UK CBAM at implementation on 1 January 2027. In other news this week:

• The Courts and Tribunals Judiciary has published a Practice Statement which gives guidance to the First Tier Tribunal Tax and Chancery Chamber on the procedure to adopt towards applications for extension of time,
• The House of Commons Library has published a research briefing ‘Income tax: freezing the personal allowance and the higher rate threshold’ and an updated briefing on the Autumn Budget and the Finance Bill 2025/26, and
• HMRC’s Guideline for Compliance (GfC) team has updated GfC7 ‘Help with Common Risks in Transfer pricing Approaches.’ 

Finance Bill Sub-Committee publishes report on Finance Bill 2025/26

The House of Lords Finance Bill Sub-Committee has published its report into the Finance Bill 2025/26 ‘Inheritance tax measures: unused pension funds and agricultural and business property reliefs’. Last October, the Institute submitted evidence to Committee as part of its inquiry into the Bill which set out our concerns in relation to the original draft legislation on the changes to the Inheritance Tax (IHT) reliefs agricultural property relief and business property relief and its impact on farms and family owned businesses in Northern Ireland. Subsequently, the Institute’s UK Tax Manager Leontia Doran gave evidence to the Committee last October.

The report from the Committee welcomes the subsequent changes announced by the UK Government in both the Autumn Budget 2025 and on 23 December 2025 to the draft legislation. However, it highlights that the changes are not by themselves sufficient to resolve many of the Committee’s concerns about what the reforms will mean in practice. The Committee also highlighted how continued revision of these measures reflects underlying problems with the Government’s approach to tax policy making, in particular in relation to its approach to consultation. The report also sets out a range of recommendations in relation to both policy changes, many of which reflect recommendations previously made by the Institute.

Update on UK CBAM

Finance Bill 2025/26 includes the final CBAM primary legislation which contains a number of technical legislation changes including that indirect emissions associated with the production of CBAM goods will not be included in the scope of the UK CBAM at its implementation on 1 January 2027. This has been delayed until 2029 at the earliest which, according to an email from HMRC, reflects ‘continued support for the Energy Intensive Industries (EII) Compensation Scheme’.  HMRC has also published a CBAM Policy Update.

Recognising that refineries play a role in energy security and the UK's industrial base, a Call for Evidence will be published at some point this year on the fuel sector. The Government is also considering the feasibility and impact of including refined products in the scope of the CBAM in the future. 

 A number of technical changes have also been made to the draft CBAM legislation following a consultation last April, the consultation outcome for which has now been published. These changes include:    

• the free allowance adjustment in the CBAM rate calculation will be based on a sectoral average of emissions covered by Free Allowances over a baseline period, which will be adjusted annually to reflect the phase out of Free Allowances under the UK Emissions Trading Scheme, 
• carbon price relief has been extended to enable recognition of carbon prices incurred under carbon border adjustment mechanisms,
• inclusion of an exemption for emissions embodied in UK-produced precursor goods, imported into the UK as part of a complex CBAM good. This aims to prevent a carbon price being paid twice on the same goods, and also aims to reduce the administrative burdens for businesses, 
• inclusion of an exemption for emissions embodied in CBAM goods under temporary admission in the UK, with full relief from customs duties which aims to ensure the CBAM only applies if goods enter the UK market and present a carbon leakage risk, 
• a time limit for repayment claims set at three years for taxpayers who have made an error on their return and overpaid the CBAM, and
• removal of the group treatment provision following feedback that this would provide limited benefits to businesses.   

Anyone wishing to keep up to date with policy developments in this space should contact cbampolicyteam@hmrc.gov.uk.