Finance Bill: Details of advance tax certainty service published

The draft legislation provides further information on the scope of the ATCS, the eligibility criteria for making an application, the nature of the clearances which may be awarded, and certain other procedural matters including potential penalties. However, detail is limited in terms of how the clearance process will operate in practice.

Just as we went to 'print' on this edition of Tax Matters Digest, HMRC published their draft guidance. The guidance seeks to provide more information on eligibility, scope, process, and governance of the ATCS. This article highlights the key measures as set out in the draft legislation. We will comment on the guidance in a separate article in the New Year.

The consultation originally envisaged that corporation tax would be the ‘core’ tax to which the ATCS would apply. However, alongside corporation tax, the draft legislation also includes VAT, stamp duty land tax (SDLT), income tax, the PAYE Regulations, and the Construction Industry Scheme as areas where clearances may be given. Further taxes or matters relating to tax may be added (or removed) from the scope via statutory instrument.

The draft legislation also contains provision for HMRC to set out, by way of notice, matters on which HMRC may not give a clearance. Notices may also set out factors which HMRC must, may or may not take into consideration when deciding whether to give, modify or extend a clearance.

Only investment projects expected to incur at least £1 billion of UK expenditure over their lifetime will qualify for the ATCS. The first iteration of the draft legislation provided a 10-year window for this expenditure to be incurred in and therefore the removal of this limitation in the Finance Bill is to be welcomed as it should better accommodate longer-term and phased investment projects.

Whilst several respondents to the consultation, including KPMG, indicated that projects which would significantly contribute to the Government’s industrial or infrastructure strategy (e.g., through the creation of jobs or regeneration of disadvantaged areas) should be considered for eligibility despite falling below the £1 billion threshold, there is currently no provision in the draft legislation for this. The £1 billion threshold will therefore only allow applications from the very largest investment projects. However, the Government has indicated that it will hold a review of the ATCS after one year, with a view to potentially reducing the threshold.

The definition of ‘UK expenditure’ includes expenditure on goods, intangible assets and services (other than the provision of financing), which are used or consumed in the UK. Expenditure on immovable property in the UK (or the UK sector of the continental shelf) is also included. Whilst expenditure on plant and machinery would seem to be absent from the definition, the Explanatory Notes to the Finance Bill state that ‘all capital and revenue spending in the UK’ (with the exception of spending on financing and acquiring shares or ownership interests in other businesses) is included.

Applications may only be made by a ‘qualifying person’. This is the person incurring, or who will incur, the UK expenditure. Applications may also be made by the owner (or future owner) of a qualifying person. This accommodates applications by consortia members, joint ventures, and partners in a partnership which control the qualifying person. It also accommodates applications made in respect of an entity (e.g., an SPV) which will be set up to incur the expenditure but has not yet been incorporated.

Clearances will bind HMRC for a period of five years unless there has been a relevant change in the law or intervening final decision of an appeal court. Any clearance given may be extended by HMRC upon application for a period of up to five years.

The applicant will not be bound by the clearance; however, the ‘nominated person’ (generally the applicant) is required to notify HMRC as soon as reasonably practicable of any material change to the facts set out therein. HMRC may then modify or revoke the clearance. A penalty of £5,000 applies for failure to notify HMRC of a material change to the facts as set out in the clearance. It will therefore be important for applicants to maintain appropriate internal governance processes to monitor changes in the project which could affect the validity of the clearance.

The applicant is also required to provide HMRC with any information reasonably requested in conjunction with the application. A £5,000 penalty applies in respect of a failure to provide information requested by HMRC. An increased penalty of £10,000 applies for carelessly or deliberately providing false or misleading information.

Next Steps

The ATCS has the potential to form a welcome addition to the UK tax system, helping to drive forward the Government’s growth agenda. The information published in Finance Bill 2025-26 is a start; however, the guidance will also be critical in ensuring the service works for taxpayers and HMRC alike. The annual review scheduled to take place in July 2027 should also help to identify any areas for improvement in the ATCS’s operation.

The Government is now aiming to identify a pipeline of projects interested in applying for clearance from July 2026. Businesses seeking clarity on the tax treatment of an investment project meeting the relevant criteria should get in touch with their usual KPMG in the UK contact to discuss how KPMG can support.

For further information please contact:

• Sharon Baynham
• Stefanie Redmond