Other news in brief

As explained in our earlier article at the time of the Spring Statement, the Government has set out plans to use the existing UK legislation for Advance Pricing Agreements (APAs) as a basis for a new unilateral APA programme providing certainty over the validity of a UK entity’s participation in a Development Cost Contribution Agreement (CCA). HMRC have now updated the International Manual with guidance and a sample agreement, which confirms that the scope of the APA would not extend to measuring and pricing contributions to a CCA. CCAs have existed between members of multinational groups for many years as a means of sharing the contributions and risks involved in developing assets. They have been particularly popular amongst US multinationals operating in research and development (R&D) intensive sectors and the participation of UK entities in CCAs increased in the wake of the original BEPS measures. The introduction of the new APA programme for CCAs has come in response to a number of long running enquiries where the participation of a UK entity in a CCA was being scrutinised by HMRC by reference to the guidance on determining CCA participants in section C.2 of Chapter VIII of the OECD Transfer Pricing Guidelines. The OECD guidelines state that, to be a valid participant, a party assuming development related risks under a CCA must control the specific risks it assumes under the CCA. Applying the control of risk guidance to CCAs can be difficult and contentious so it is a positive development that HMRC are now willing to provide a unilateral APA confirming their acceptance of the contractual basis for a UK entity’s participation in a Development CCA applying an alternative commercial viability test. The guidance issued by HMRC confirms that groups with existing Development CCAs (whether under enquiry or not) can request an APA and HMRC are also open to agreeing a longer APA term than five years taking account of the expected duration of the development projects subject to the CCA. HMRC have already received a number of applications for the new APA programme. If you would like to discuss a potential APA for an existing or contemplated Development CCA please reach out to Phil Roper or your usual KPMG UK tax contact.

The Individual Savings Account and Child Trust Funds (Amendment) Regulations 2025 have been laid before Parliament. The ISA regulations do not include the proposed changes allowing for ISA digitalisation to start from 2026, although those are still expected to be published in due course. Otherwise, the changes are as previously communicated to the ISA Manager network, including confirmation of the requirement to collect National Insurance Numbers or confirmation that the investor is not eligible, and rules for flexible ISAs and Long Term Asset Funds (LTAFs). Of note, the rules permit funds which are authorised under the UK’s temporary permissions regime to remain qualifying investments until the end of 2026. After that date, ISA Managers will need to remove investments in EU UCITS (undertaking for collective investment in transferable securities) funds which don’t register in the UK. That will also apply to historic investments, acceptable at the time of investment, that don’t register in the UK post-Brexit which may cause challenges for many ISA managers.

The Private Intermittent Securities and Capital Exchange System (Exemption from Stamp Duties) Regulations 2025 were made on 10 June 2025, following an earlier consultation on a draft. These regulations provide an exemption from Stamp Duty and Stamp Duty Reserve Tax (SDRT) for transfers of shares in connection with trading activity that takes place on a Private Intermittent Securities and Capital Exchange System (PISCES) under the PISCES sandbox arrangements. They come into force on 3 July 2025.

On 16 June 2025, HMRC published a new map of the Freeport customs sites for Thames. The incentives for making investments in this area include simplified VAT and customs arrangements.

A new devolved tax on the commercial exploitation of aggregates in Scotland - the Scottish Aggregates Tax (SAT) - is intended to replace UK Aggregates Levy (UKAL) from 1 April 2026. On 23 June 2025, the Scottish Government published a consultation seeking views on how to approach cross-border taxation for SAT, focussed on the treatment of cross-border movement of aggregate and minimising risks of double taxation and tax avoidance. The consultation is open for comment until 18 August 2025. This consultation neatly illustrates the potential complexities created by the devolution of aggregates levy to Scotland. For the first ten or more years of this century, we watched the difficulties caused by having aggregates levy in one part of the island of Ireland (Northern Ireland) but not in the other (the Republic of Ireland). In that case, the issues were around competitiveness between quarry companies in the two countries separated by a land border. The simple fact that rock, sand and gravel are commonly moved across borders makes this a difficult issue for business and for tax authorities alike. Scotland needs to consider what it wants from the levy. Is it tax revenues? If so, would some sort of hypothecation work better than running the tax itself?

KPMG International and Jericho Chambers hosted a roundtable discussion in March 2025 to explore how to rethink the UK’s fiscal rules to breathe life into the economy. A write-up of the conversation published by KPMG International summarises the personal views of the participants, including discussions on: Fiscal rules in the UK and the international context; Are fiscal rules effective and are they rational?; Fiscal rules vs fiscal standards; The growth problem; Will AI help or hinder economic growth?; and What are the solutions?

The amendments to UK GAAP lease accounting will take effect from January 2026, aligning with IFRS principles. In a recent blog post, Michael Everett, Director at KPMG in the UK, takes a closer look at right-of-use assets, transitional options, and potential HMRC focus areas. Key considerations for affected businesses are likely to include getting to grips with the basic concepts, satisfying HMRC that the tax deductions being taken in tax returns are permissible, the transitional spreading rules (if these need considering), and unpicking the accounting of more complex transactions related to real estate, such as landlord contributions and sale and leaseback arrangements.

‘Make Work Pay’ is the UK Government initiative on workplace reform. In a recent blog post, KPMG Law’s Head of Employment Law Donna Sharp and KPMG’s Employer Reward Services Caroline Laffey explore the cost impacts on employers of the announcements and publications from the Department of Business and Trade, including the Employment Rights Bill.