Finance Act 2026

(8) (1) The filing member of a multinational group may for an accounting period make an election under this paragraph in respect of one or more members of the group in a territory. (2) An election may be made only if for the accounting period in question— (a) the specified members are non-material members of the group, (b) the accounting conditions are met, and (c) any of the following is met— (i) the routine profits test; (ii) the de minimis test; (iii) the effective tax rate test. (3) Where an election is made, the total top-up amount for the accounting period for the territory is assumed to be nil for the purpose of determining the liability of any member of the group to multinational top-up tax. (4) Paragraph 2 of Schedule 15 (annual elections) applies to an election under this paragraph. (9) For the purposes of paragraph 8(2)(a), a member of a multinational group is a “non-material member” of the group for an accounting period if for the period in question— (a) the member’s assets, liabilities, income, expenses and cash flows are not included in the consolidated financial statements of the ultimate parent on a line-by-line basis, (b) their non-inclusion in those statements is solely on the grounds of size or materiality, and (c) an external auditor has agreed (without qualification) to their non-inclusion in those statements on those grounds, or if for the period in question the member is a permanent establishment of a member that meets the conditions in paragraphs (a) to (c). (10) (1) For the purposes of paragraph 8(2)(b), “the accounting conditions” for an accounting period are— (a) that consolidated financial statements falling within section 249(1)(a) or (c) have been prepared by the ultimate parent of the group, (b) that those consolidated financial statements have been externally audited, and (c) that financial statements have been prepared in accordance with an acceptable accounting standard or an authorised accounting standard in respect of any specified member whose revenue exceeds 50 million euros. (2) The reference in sub-paragraph (1)(c) to the revenue of a specified member is to its revenue as it would be determined under the country-by-country reporting rules. (11) (1) For the purposes of paragraph 8(2)(c), “the routine profits test” is met for an accounting period if, on the assumption in sub-paragraph (2), the result of Step 4 in section 194 would be nil or less for the period for the relevant territory. (2) The assumption is that for the period in question the adjusted profits of each specified member are equal to the revenue of that member as it would be determined under the country-by-country reporting rules. (12) (1) For the purposes of paragraph 8(2)(c), “the de minimis test” is met for an accounting period if, on the assumption in sub-paragraph (2), an election under section 199 (de minimis exclusion) could be made for the period for the relevant territory. (2) The assumption is that for the period in question— (a) the revenue of each specified member, and (b) the adjusted profits of each specified member, is or are equal to the revenue of that member as it would be determined under the country-by-country reporting rules. (13) (1) For the purposes of paragraph 8(2)(c), “the effective tax rate test” is met for an accounting period if, on the assumption in sub-paragraph (2), the effective tax rate of the standard members of the group in the relevant territory for the period would be 15% or more. (2) The assumption is that for the period in question— (a) the adjusted profits of each specified member are equal to the revenue of the member as it would be determined under the country-by-country reporting rules, and (b) the covered tax balance of each specified member is equal to the member’s income tax expense as it would be determined under the country-by-country reporting rules. (14) In this Part of this Schedule, in relation to an election under paragraph 8— - “the country-by-country reporting rules” means—where legislation implementing the OECD’s guidance on country-by-country reporting has effect in the relevant territory, that legislation;otherwise, that guidance; - “the relevant territory” means the territory in which the specified members are located; - “the specified members” means the members of the group in respect of which the election is made. (15) Nothing in this Part of this Schedule requires a country-by-country report actually to be filed in respect of a multinational group in order for an election under paragraph 8 to be made.

Minor amendments

40

In section 131 (whether de-merged groups meet the revenue threshold), in subsection (3)(b), at the end insert “, or would do ignoring any transitional safe harbour election”.

41

In section 132 (effective tax rate), in subsection (1), in Step 7, at the end insert “and rounded to the nearest fourth decimal place (if it would otherwise have more than four).”

42

In section 144 (adjustments for asymmetric foreign currency income and losses), in subsection (4)(b), for “income” substitute “gain”.

43

In section 197A (operating leases), in subsections (2) and (3), for “operating lease” substitute “property”.

44

In section 210 (transfer of assets or liabilities from a member of a multinational group), in subsection (2), for “transferee” (in each place it occurs) substitute “transferor”.

45

In section 247 (timing of transfers of interests), in subsection (1), in the words after paragraph (b), for “earlier time when the transfer is effective” substitute “other time”.

46

• (1) Section 267 (DTT excluded entities) is amended as follows.

• (2) In subsection (3C)—

• (a) in the words before paragraph (a), for “An investment entity that” substitute “Where an investment entity”;

• (b) in paragraph (a), at the beginning insert “that entity”;

• (c) in paragraph (b), for “272(8)(e)” substitute “272(3A)”.

• (3) In subsection (3D)(c)—

• (a) omit “(8)(e)”;

• (b) at the end insert “and the section 193A(2) contained in subsection (3A) of that section”.

47

In section 272 (determining top-up amounts of entity that is a member of a group)—

• (a) in subsection (8)(da), for “in section 182(2)(e),” substitute “section 182 (total deferred tax adjustment amount) has effect as if in subsection (2)(e),”;

• (b) in subsection (10)(a), for “(8)(e)” substitute “(3A)”.

48

In section 273 (domestic top-up tax: determining top-up amounts of entity that is not a member of a group), in the section 132 contained in subsection (2)—

• (a) in each of Steps 1 to 3, for “member” substitute “entity”;

• (b) in Step 6, at the end insert “and rounded to the nearest fourth decimal place (if it would otherwise have more than four).”

49

In Schedule 14 (administration of multinational top-up tax)—

• (a) in the italic heading before paragraph 50, after “Multiple” insert “tax-geared”;

• (b) in paragraph 50—

• (i) in sub-paragraph (1), for “in”, in the second place it occurs, substitute “whose amount falls to be determined by reference to the tax payable in relation to”;

• (ii) in sub-paragraph (2), after “penalties” insert “, so far as determined by reference to any particular part of the tax,”;

• (iii) in that sub-paragraph, after “penalty”, in the second place it occurs, insert “(so far as so determined)”.

50

In Schedule 15 (elections) in each of paragraphs 1(1) and 2(1), for the words before paragraph (a) substitute “For the elections to which this paragraph applies, see—”.

51

In Schedule 16 (multinational top-up tax: transitional provision), after paragraph 2 insert—

(2A) (1) Schedule 15 (multinational top-up tax: elections) has effect in its application to a pre-2026 election as if in paragraphs 1(2)(b) and 2(2)(b) of that Schedule for “no later than” there were substituted “before the end of the period of 12 months beginning with the day after”. (2) In sub-paragraph (1), a “pre-2026 election” means an election which specifies an accounting period ending before 31 December 2025 as— (a) in the case of an election to which paragraph 1 of Schedule 15 applies, the first accounting period for which the election is to have effect, or (b) in the case of an election to which paragraph 2 of Schedule 15 applies, the accounting period for which the election is to have effect.

52

• (1) In FA 1989, in section 178 (setting of rates of interest), subsection (2) is amended as follows.

• (2) In paragraph (x)—

• (a) for “51” substitute “33A”;

• (b) after “Finance” insert “(No.2)”;

• (3) In paragraph (y), for “51” substitute “33A”.

Commencement

53

• (1) The amendments made by paragraphs 4 and 5 (elective qualifying domestic top-up taxes) and paragraphs 28 to 31 (qualifying undertaxed profits tax) have effect in relation to accounting periods beginning on or after 31 December 2025.

• (2) The amendments made by paragraphs 20 to 22 (deferred tax assets and liabilities: exclusions) have effect in relation to accounting periods ending on or after 21 July 2025.

• (3) Paragraph 32 (qualifying undertaxed profits tax: periods before regulations come into force) is treated as having come into force on 2 December 2025.

• (4) The amendment made by paragraph 51 has effect in relation to accounting periods beginning on or after 31 December 2023.

• (5) The amendments made by the other provisions of this Schedule have effect in relation to—

• (a) where a retrospection election has been made in relation to a multinational group, a group, or a qualifying entity that is not a member of a group, accounting periods of that multinational group, group or entity beginning on or after 31 December 2023, or

• (b) otherwise, accounting periods beginning on or after 31 December 2025.

• (6) A retrospection election—

• (a) is to be made—

• (i) in the case of a multinational group or group, by the filing member, or

• (ii) in the case of a qualifying entity that is not a member of a group, by that entity,

• (b) must be made on or before the day on which the self-assessment return or below-threshold notification for the first accounting period of the multinational group, group or entity beginning on or after 31 December 2023 is made, and

• (c) may not be revoked.

• (7) But sub-paragraph (8) applies where any member, or former member, of a multinational group or group is, or would be on either or both of the relevant assumptions—

• (a) a person chargeable to domestic top-up tax that has top-up amounts or additional top-up amounts for any accounting period beginning before 31 December 2025 as a result of the person’s membership of the multinational group or group, or

• (b) a qualifying entity that has top-up amounts or additional top-up amounts for any accounting period beginning before 31 December 2025 as a result of the entity’s membership of the multinational group or group in respect of which a person is chargeable to domestic top-up tax.

• (8) Where this sub-paragraph applies, a retrospection election may not be made without the written consent of each such person.

• (9) For the purposes of sub-paragraph (7), “the relevant assumptions” are—

• (a) that the retrospection election had been made, and

• (b) that no election under section 271 of F(No.2)A 2023 had been made.

• (10) Where—

• (a) the filing member of a multinational group is not a responsible member of that multinational group, or

• (b) there is more than one responsible member of that multinational group,

a retrospection election may not be made without the written consent of each responsible member.

• (11) Sub-paragraph (12) applies where—

• (a) the filing member of a multinational group or group has made a retrospection election,

• (b) at the time the election was made it was reasonable for the filing member to consider that the consent of a person was not required,

• (c) that consent was not given,

• (d) the filing member becomes aware that the consent of that person was, or may have been, required, and

• (e) the written consent of that person is given within the period of 60 days beginning with the day on which the condition in paragraph (d) is first met.

• (12) The consent of that person is to be treated as having been given before the election was made.

• (13) References in this paragraph to a “group”, other than in the expression “multinational group”, are to a group for the purposes of Part 4 of F(No.2)A 2023 (domestic top-up tax).

Schedule 9 — Tainted charity donations

Income tax

1

Chapter 8 of Part 13 of ITA 2007 (tainted charity donations) is amended as follows.

2

In section 809ZH (overview), in subsection (2), for “section 257A” substitute “sections 257A and 257B”.

3

In section 809ZI (relievable charity donations), in subsection (3)(b), for “section 257A” substitute “sections 257A and 257B”.

4

• (1) Section 809ZJ (tainted donations) is amended as follows.

• (2) In subsection (1)—

• (a) the words from “is a tainted donation” to the end become paragraph (a);

• (b) after that paragraph insert

, and (b) becomes a tainted donation at the earliest time when all those conditions are met.

• (3) In subsection (2)(b), at the end of sub-paragraph (i) (but before the “and” that follows it) insert “as at the later of the time when the donation is made and the time when the arrangements are entered into”.

• (4) In subsection (4), in the words before paragraph (a), for the words from “a time” to “the following times” substitute “any time after the earliest of the following times”.

• (5) In subsection (8), in the definition of “qualifying charity-owned company”, for “potentially advantaged person” (in both places it occurs) substitute “linked person”.

• (6) In subsection (10), for “advantages” substitute “assistance”.

5

Omit section 809ZK (circumstances in which financial advantage deemed to be obtained).

6

• (1) Section 809ZL (certain financial advantages to be ignored) is amended as follows.

• (2) In the heading, for “advantages” substitute “assistance”.

• (3) In subsection (1)—

• (a) for “a financial advantage” substitute “financial assistance”;

• (b) for “(2)” substitute “(2A)”.

• (4) Omit subsection (2).

• (5) Before subsection (3) insert—

(2A) Financial assistance is within this subsection if it constitutes a payment made by a charity, on arm’s length terms, in respect of— (a) work carried out by a person for or on behalf of the charity, or (b) expenses incurred by a person in the course of such work.

• (6) In each of subsections (3), (4) and (5), for “A financial advantage” substitute “Financial assistance”.

• (7) In subsections (4)(b) and (5)(b), for “the advantage” substitute “the assistance”.

• (8) In subsection (6), at the appropriate place insert—

• “financial assistance” has the same meaning as in section 809ZJ;

7

• (1) Section 809ZM (removal of income tax relief in respect of tainted donations etc) is amended as follows.

• (2) In the heading, for “in respect of tainted donations etc” substitute “where donation becomes tainted in same tax year”.

• (3) For subsection (1) substitute—

(1) This section applies where— (a) a person makes a relievable charity donation, and (b) the donation becomes a tainted donation in the same tax year in which it is made.

• (4) Omit subsection (3).

• (5) In subsection (4), omit the definitions of “associated donation”, “qualifying charity-owned company”, “relevant housing provider” and “the relevant arrangements”.

8

After section 809ZM insert—

(809ZMA) (1) This section applies where— (a) a person makes a relievable charity donation in a tax year (“the donation year”), (b) the donation becomes a tainted donation in a later tax year (“the tainting year”), and (c) if the donation had become a tainted donation in the donation year, the person’s liability to income tax for the donation year would have been greater than it in fact was for that year. (2) Income tax is charged under this section, for the tainting year, of an amount equal to the difference between— (a) the amount of income tax for which the person who made the donation would have been liable for the donation year had the donation become a tainted donation in that year, and (b) the amount of income tax for which that person was in fact liable for the donation year. (3) The person liable for tax charged under this section is the person who made the donation. (4) Section 101 of FA 2009 (late payment interest) has effect in relation to tax charged under this section as though the tax had become due and payable on 1 February in the tax year following the donation year. (809ZMB) (1) This section applies where— (a) a person makes a relievable charity donation that becomes a tainted donation, and (b) a person makes an associated donation in relation to the tainted donation. (2) If the donation mentioned in subsection (1)(a) becomes a tainted donation before the end of the tax year in which the associated donation is made, any income tax relief that would otherwise be available in respect of the associated donation is not available. (3) Section 809ZM(5) to (8) (treatment of donation where entitlement to relief is withdrawn) applies to the withdrawal of relief under subsection (2) as it applies to the withdrawal of relief under that section. (4) Subsection (5) applies where— (a) the donation mentioned in subsection (1)(a) becomes a tainted donation after the end of the tax year in which the associated donation is made, and (b) if the donation mentioned in subsection (1)(a) had become a tainted donation before the end of that tax year, the liability to income tax for that tax year of the person who made the associated donation would have been greater than it in fact was for that tax year. (5) Income tax is charged under this section, for the tax year in which the donation mentioned in subsection (1)(a) becomes a tainted donation, of an amount equal to the difference between— (a) the amount of income tax for which the person who made the associated donation would have been liable for the tax year in which the associated donation was made had the tainted donation become a tainted donation before the end of that tax year, and (b) the amount of income tax for which that person was in fact liable for the tax year in which the associated donation was made. (6) The person liable for tax charged under subsection (5) is the person who made the associated donation. (7) Subsection (5) does not apply in relation to an associated donation if the person who would be liable for tax charged under that subsection— (a) is already liable for tax charged under that subsection by reference to the tax year in which the associated donation was made, or (b) is liable for tax charged under section 809ZMA(2) by reference to that tax year, and for that purpose the tax year “by reference to which” tax is charged is the earlier tax year for which the person’s liability falls to be considered under (as the case may be) subsection (5)(a) and (b) or section 809ZMA(2)(a) and (b). (8) Section 101 of FA 2009 (late payment interest) has effect in relation to tax charged under subsection (5) as though the tax had become due and payable on 1 February in the tax year following the one in which the associated donation was made. (9) In this section— - “associated donation”, in relation to a tainted donation, means a relievable charity donation made—in accordance with the arrangements by reference to which Conditions A and B in section 809ZJ are met, andby a person other than—a qualifying charity-owned company in relation to that relievable charity donation, ora relevant housing provider linked (within the meaning of section 809ZJ(7)) with the charity to which that donation is made; - “income tax relief” has the same meaning as in section 809ZM; - “qualifying charity-owned company” has the meaning given by section 809ZJ(8) (except that paragraph (b) of that definition does not apply); - “relevant housing provider” has the meaning given by section 809ZJ(8).

9

• (1) Section 809ZN (income tax charge where gift aid is withdrawn) is amended as follows.

• (2) In subsection (1)—

• (a) in paragraph (a), for “tainted donation” substitute “relievable charity donation”;

• (b) after paragraph (a) insert—

(aa) the donation becomes a tainted donation (whether in that tax year or a later tax year),

• (3) After subsection (2) insert—

(2A) Tax charged under this section is charged for the tax year in which the donation mentioned in subsection (1)(a) becomes a tainted donation.

• (4) In subsection (4), for paragraph (c) substitute—

(c) each linked person (as defined in section 809ZJ(3)) by reference to whom Condition B in section 809ZJ(5) is met in relation to the tainted donation,

• (5) In subsection (5)—

• (a) in paragraph (a), for “the relevant arrangements relating to” substitute “the arrangements by reference to which Conditions A and B in section 809ZJ are met in relation to”;

• (b) for paragraph (b) substitute—

(b) was aware or ought reasonably to have been aware, at the time it entered into those arrangements, that Condition B in section 809ZJ was or would be met by reference to the arrangements.

• (6) In subsection (7)—

• (a) in the definition of “associated donation”, for “809ZM” substitute “809ZMB”;

• (b) omit the definition of “the relevant arrangements”.

10

• (1) Section 809ZO (income tax charge where payment of trust income to charity) is amended as follows.

• (2) In subsection (1)—

• (a) in paragraph (a), for “tainted donation” substitute “relievable charity donation”;

• (b) after paragraph (a) insert—

(aa) the donation becomes a tainted donation (whether in that tax year or a later tax year),

• (3) After subsection (2) insert—

(2A) Tax charged under this section is charged for the tax year in which the donation mentioned in subsection (1)(a) becomes a tainted donation.

• (4) In subsection (4), for paragraph (d) substitute—

(d) each linked person (as defined in section 809ZJ(3)) by reference to whom Condition B in section 809ZJ(5) is met in relation to the tainted donation,

• (5) In subsection (5)—

• (a) in paragraph (a), for “the relevant arrangements relating to” substitute “the arrangements by reference to which Conditions A and B in section 809ZJ are met in relation to”;

• (b) for paragraph (b) substitute—

(b) the charity was aware or ought reasonably to have been aware, at the time it entered into those arrangements, that Condition B in section 809ZJ was or would be met by reference to the arrangements.

• (6) In subsection (7)—

• (a) in the definition of “associated donation”, for “809ZM” substitute “809ZMB”;

• (b) omit the definition of “the relevant arrangements”.

Corporation tax on income

11

Part 21C of CTA 2010 (tainted charity donations) is amended as follows.

12

In section 939A (overview), in subsection (2), for “section 257A” substitute “sections 257A and 257B”.

13

In section 939B (relievable charity donations), in subsection (3)(b), for “section 257A” substitute “sections 257A and 257B”.

14

• (1) Section 939C (tainted donations) is amended as follows.

• (2) In subsection (1)—

• (a) the words from “is a tainted donation” to the end become paragraph (a);

• (b) after that paragraph insert

, and (b) becomes a tainted donation at the earliest time when all those conditions are met.

• (3) In subsection (2)(b), at the end of sub-paragraph (i) (but before the “and” that follows it) insert “as at the later of the time when the donation is made and the time when the arrangements are entered into”.

• (4) In subsection (4), in the words before paragraph (a), for the words from “a time” to “the following times” substitute “any time after the earliest of the following times”.

• (5) In subsection (8), in the definition of “qualifying charity-owned company”, for “potentially advantaged person” (in both places it occurs) substitute “linked person”.

• (6) In subsection (10), for “advantages” substitute “assistance”.

15

Omit section 939D (circumstances in which financial advantage deemed to be obtained).

16

• (1) Section 939E (certain financial advantages to be ignored) is amended as follows.

• (2) In the heading, for “advantages” substitute “assistance”.

• (3) In subsection (1)—

• (a) for “a financial advantage” substitute “financial assistance”;

• (b) for “(2)” substitute “(2A)”.

• (4) Omit subsection (2).

• (5) Before subsection (3) insert—

(2A) Financial assistance is within this subsection if it constitutes a payment made by a charity, on arm’s length terms, in respect of— (a) work carried out by a person for or on behalf of the charity, or (b) expenses incurred by a person in the course of such work.

• (6) In each of subsections (3), (4) and (5), for “A financial advantage” substitute “Financial assistance”.

• (7) In subsections (4)(b) and (5)(b), for “the advantage” substitute “the assistance”.

• (8) In subsection (6), at the appropriate place insert—

• “financial assistance” has the same meaning as in section 939C;

17

• (1) Section 939F (removal of corporation tax relief in respect of tainted donations etc) is amended as follows.

• (2) In the heading, for “in respect of tainted donations etc” substitute “where donation becomes tainted in same accounting period”.

• (3) For subsection (1) substitute—

(1) This section applies where— (a) a company makes a relievable charity donation, and (b) the donation becomes a tainted donation in the same accounting period in which it is made.

• (4) Omit subsection (3).

• (5) In subsection (4), omit the definitions of “associated donation”, “qualifying charity-owned company”, “relevant housing provider” and “the relevant arrangements”.

18

After section 939F (but beneath the same italic heading) insert—

(939FA) (1) This section applies where— (a) a company makes a relievable charity donation in an accounting period (“the donation period”), (b) the donation becomes a tainted donation in a later accounting period (“the tainting period”), and (c) if the donation had become a tainted donation in the donation period, the company’s liability to corporation tax for the donation period would have been greater than it in fact was for that period. (2) The company’s liability to corporation tax for the tainting period is increased by an amount equal to the difference between— (a) the amount of corporation tax for which it would have been liable for the donation period had the donation become a tainted donation in that period, and (b) the amount of corporation tax for which it was in fact liable for the donation period. (3) Section 87A of TMA 1970 (interest on overdue corporation tax etc) has effect in relation to tax for which a company is liable by virtue of subsection (2) as though the tax had become due and payable on the day following the expiry of 9 months from the end of the donation period. (939FB) (1) This section applies where— (a) a person makes a relievable charity donation that becomes a tainted donation, and (b) a company makes an associated donation in relation to the tainted donation. (2) If the donation mentioned in subsection (1)(a) becomes a tainted donation before the end of the accounting period of the company in which the associated donation is made, any corporation tax relief that would otherwise be available in respect of the associated donation is not available. (3) Subsection (4) applies where— (a) the donation mentioned in subsection (1)(a) becomes a tainted donation after the end of the accounting period of the company in which the associated donation is made, and (b) if the donation mentioned in subsection (1)(a) had become a tainted donation before the end of that accounting period, the company’s liability to corporation tax for that accounting period would have been greater than it in fact was for that period. (4) The liability of the company to corporation tax for the accounting period in which the donation mentioned in subsection (1)(a) becomes a tainted donation is increased by an amount equal to the difference between— (a) the amount of corporation tax for which it would have been liable for the accounting period in which the associated donation was made, had the tainted donation become a tainted donation before the end of that period, and (b) the amount of corporation tax for which it was in fact liable for the accounting period in which the associated donation was made. (5) Subsection (4) does not apply in relation to an associated donation if the company— (a) is already liable for tax by virtue of that subsection by reference to the accounting period in which the associated donation was made, or (b) is liable for tax by virtue of section 939FA(2) by reference to that accounting period, and for that purpose the accounting period “by reference to which” the company is liable for tax is the earlier accounting period for which the company’s liability falls to be considered under (as the case may be) subsection (4)(a) and (b) or section 939FA(2)(a) and (b). (6) Section 87A of TMA 1970 (interest on overdue corporation tax etc) has effect in relation to tax for which a company is liable by virtue of subsection (4) as though the tax had become due and payable on the day following the expiry of 9 months from the end of the accounting period in which the associated donation was made. (7) In this section— - “associated donation”, in relation to a tainted donation, means a relievable charity donation made—in accordance with the arrangements by reference to which Conditions A and B in section 939C are met, andby a person other than—a qualifying charity-owned company in relation to that relievable charity donation, ora relevant housing provider linked (within the meaning of section 939C(7)) with the charity to which that donation is made; - “corporation tax relief” has the same meaning as in section 939F; - “qualifying charity-owned company” has the meaning given by section 939C(8) (except that paragraph (b) of that definition does not apply); - “relevant housing provider” has the meaning given by section 939C(8).

Capital gains tax and corporation tax on chargeable gains

19

In TCGA 1992, for section 257A (tainted charity donations) substitute—

(257A) (1) Section 257 does not apply in relation to a relievable charity donation that becomes a tainted donation in the same tax year in which it is made. (2) Subsection (3) applies if— (a) a person makes a relievable charity donation in a tax year (“the donation year”), (b) the donation becomes a tainted donation in a later tax year (“the tainting year”), and (c) if the donation had become a tainted donation in the donation year, the liability to tax for the donation year of the person who made the donation would have been greater than it in fact was for the donation year. (3) The liability to tax for the tainting year of the person that made the donation is increased by an amount equal to the difference between— (a) the amount of tax for which the person would have been liable for the donation year had the donation become a tainted donation in the donation year, and (b) the amount of tax for which the person was in fact liable for the donation year. (4) Section 101 of FA 2009 (interest on CGT etc) has effect in relation to capital gains tax for which a person is liable by virtue of subsection (3) as though the tax had become due and payable on 1 February in the tax year following the donation year. (5) Section 87A of TMA 1970 (interest on overdue corporation tax etc) has effect in relation to corporation tax for which a company is liable by virtue of subsection (3) as though the tax had become due and payable on the day following the expiry of 9 months from the end of the accounting period of the company in which the donation mentioned in subsection (2)(a) was made. (6) In this section— - “relievable charity donation” means a relievable charity donation within the meaning of Chapter 8 of Part 13 of ITA 2007 or Part 21C of CTA 2010; - “tainted donation” means a tainted donation within the meaning of Chapter 8 of Part 13 of ITA 2007 or Part 21C of CTA 2010; - “tax” means—in relation to a company, corporation tax on chargeable gains;otherwise, capital gains tax; and a reference to a donation “becoming” a tainted donation is to be read with section 809ZJ(1)(b) of ITA 2007 and 939C(1)(b) of CTA 2010. (7) In relation to any donation made by a company, references in this section to a tax year are to be read as references to an accounting period. (257B) (1) This section applies where— (a) a person makes a relievable charity donation that becomes a tainted donation, and (b) a person makes an associated donation in relation to the tainted donation. (2) If the donation mentioned in subsection (1)(a) becomes a tainted donation before the end of the tax year in which the associated donation is made, section 257 does not apply in relation to the associated donation. (3) Subsection (4) applies where— (a) the donation mentioned in subsection (1)(a) becomes a tainted donation after the end of the tax year in which the associated donation is made, and (b) if the donation had become a tainted donation before the end of that tax year, the liability to tax for that tax year of the person who made the associated donation would have been greater than it in fact was for that tax year. (4) The liability to tax of the person who made the associated donation, for the tax year in which the donation mentioned in subsection (1)(a) becomes a tainted donation, is increased by an amount equal to the difference between— (a) the amount of tax for which the person would have been liable for the tax year in which the associated donation was made had the donation mentioned in subsection (1)(a) become a tainted donation before the end of that tax year, and (b) the amount of tax for which the person was in fact liable for the tax year in which the associated donation was made. (5) Subsection (4) does not apply in relation to an associated donation if the person who makes the associated donation— (a) is already liable for tax by virtue of that subsection by reference to the tax year in which the associated donation was made, or (b) is liable for tax by virtue of section 257A(3) by reference to that tax year, and for that purpose the tax year “by reference to which” a person is liable for tax is the earlier tax year for which the person’s liability falls to be considered under (as the case may be) subsection (4)(a) and (b) or section 257A(3)(a) and (b). (6) Section 101 of FA 2009 (interest on CGT etc) has effect in relation to capital gains tax for which a person is liable by virtue of subsection (4) as though the tax had become due and payable on 1 February in the tax year following the tax year in which the associated donation was made. (7) Section 87A of TMA 1970 (interest on overdue corporation tax etc) has effect in relation to corporation tax for which a company is liable by virtue of subsection (4) as though the tax had become due and payable on the day following the expiry of 9 months from the end of the accounting period of the company in which the associated donation was made. (8) In this section— - “associated donation” means an associated donation within the meaning of section 809ZMB of ITA 2007 or section 939FB of CTA 2010; - “relievable charity donation” means a relievable charity donation within the meaning of Chapter 8 of Part 13 of ITA 2007 or Part 21C of CTA 2010; - “tainted donation” means a tainted donation within the meaning of Chapter 8 of Part 13 of ITA 2007 or Part 21C of CTA 2010; - “tax” means—in relation to a company, corporation tax on chargeable gains;otherwise, capital gains tax; and a reference to a donation “becoming” a tainted donation is to be read with section 809ZJ(1)(b) of ITA 2007 and 939C(1)(b) of CTA 2010. (9) Where the associated donation mentioned in subsection (1)(b) is made by a company, references in this section to a tax year are to be read as references to an accounting period of the company.

Consequential amendments

20

In CAA 2001, in section 63 (cases in which disposal value is nil), in subsection (4)(b)—

• (a) for “section 809ZM” substitute “sections 809ZM and 809ZMB”;

• (b) for “section 939F” substitute “sections 939F and 939FB”.

21

In ITEPA 2003, in section 713 (donations to charity: payroll deduction scheme), in subsection (6), for “section 809ZM” substitute “sections 809ZM and 809ZMB”.

22

In ITTOIA 2005, in section 108 (gifts of trading stock to charities etc), in subsection (5)(b), for “section 809ZM” substitute “sections 809ZM and 809ZMB”.

23

• (1) ITA 2007 is amended as follows.

• (2) In section 30 (additional tax), in subsections (1) and (2), at the appropriate place insert—

• section 809ZMA (tainted donations: clawback where tainting occurs in later year),
• section 809ZMB (tainted donations: associated donations)

• (3) In section 58 (meaning of “adjusted net income”), for subsection (4) substitute—

(4) This section is subject to section 809ZM(6) and section 809ZMB(3) (which prevent tainted donations and associated donations from being deducted at Step 2 in subsection (1)).

• (4) In section 413 (gift aid: overview), in subsection (4A), for “section 809ZM” substitute “sections 809ZM and 809ZMB”.

• (5) In section 431 (gifts of shares, securities and real property to charities etc), in subsection (7), for “section 809ZM” substitute “sections 809ZM and 809ZMB”.

• (6) In Schedule 4 (index of defined expressions), omit the entry for “potentially advantaged person (in Chapter 8 of Part 13)”.

24

In CTA 2009, in section 105 (gifts of trading stock to charities etc), in subsection (6), for “section 939F” substitute “sections 939F and 939FB”.

25

In CTA 2010, in Schedule 4 (index of defined expressions), omit the entry for “potentially advantaged person (in Part 21C)”.

Schedule 10 — Winter fuel payment charge

The winter fuel payment charge

1

• (1) Part 10 of ITEPA 2003 (social security income) is amended as follows.

• (2) At the end of the heading insert “etc”.

• (3) In section 655 (structure of Part 10), in subsection (1), at the end insert—

• Chapter 9 makes provision for the winter fuel payment charge.

• (4) After Chapter 8 insert—

(681I) (1) A person (“P”) is liable to a charge to income tax for a tax year if— (a) P is entitled to a winter fuel payment in respect of the qualifying week, and (b) P’s total income for the tax year exceeds £35,000. (2) The charge is to be known as the “winter fuel payment charge”. (3) The amount of the charge is equal to the amount of the winter fuel payment. (4) But P is not liable for the charge if P is entitled to a relevant benefit on any day in the qualifying week. (5) The following are “relevant benefits”— (a) income support under section 124 of SSCBA 1992 or section 123 of SSCB(NI)A 1992; (b) an income-based jobseeker’s allowance under section 1 of JSA 1995 or Article 3 of JS(NI)O 1995; (c) state pension credit under section 1 of SPCA 2002 or section 1 of SPCA(NI) 2002; (d) an income-related employment and support allowance under section 1(2)(b) of WRA 2007 or Part 1 of the Welfare Reform Act (Northern Ireland) 2007; (e) universal credit under Part 1 of WRA 2012 or Part 2 of the Welfare Reform (Northern Ireland) Order 2015. (6) In this section— (a) a “winter fuel payment” means a payment under the Social Fund Winter Fuel Payment Regulations 2025, the Winter Heating Assistance (Pension Age) (Scotland) Regulations 2024 or the Social Fund Winter Fuel Payment Regulations (Northern Ireland) 2025; (b) the “qualifying week”, in relation to a tax year, means the week beginning on the third Monday in the September of that tax year. (681J) (1) The Treasury may by order substitute another amount for the amount for the time being specified in section 681I(1)(b). (2) An order under this section has effect for tax years beginning after the order is made. (3) A statutory instrument containing an order under this section which increases any person's liability to income tax may not be made unless a draft of it has been laid before and approved by a resolution of the House of Commons.

Consequential amendments

2

In section 7 of TMA 1970 (notice of liability to income tax and capital gains tax), in subsection (3)(c), at the end insert “other than Chapter 9 of Part 10 of ITEPA 2003 (winter fuel payment charge)”.

3

• (1) ITEPA 2003 is amended as follows.

• (2) In section 1 (overview of contents of this Act), in subsection (3), after paragraph (aa) insert—

(ab) makes provision for the winter fuel payment charge (see Chapter 9 of Part 10),

• (3) In section 684 (PAYE regulations), in subsection (2), after Item 2ZA insert—

(2ZB) Provision— (a) for deductions to be made, if and to the extent that the payee does not object, with a view to securing that income tax payable for a tax year by the payee by virtue of section 681I (winter fuel payment charge) is deducted from PAYE income of the payee paid during that year, (b) for repayments to be made in a tax year, if and to the extent that the payee does not object, in respect of any amounts overpaid on account of income tax under that section for that tax year, and (c) as to the circumstances and manner in which a payee may object to the making of deductions or repayments.

• (4) In section 717 (orders and regulations made by Treasury or Commissioners), in subsection (4)—

• (a) after “section 681F(3)” insert “or 681J(3)”;

• (b) after “benefit” insert “or winter fuel payment”.

4

• (1) ITA 2007 is amended as follows.

• (2) In section 1 (overview of the Income Tax Acts), in subsection (1)(a), after “benefit” insert “and winter fuel payment”.

• (3) In section 30 (additional tax), in subsection (1), after “Chapter 8 of Part 10 of ITEPA 2003 (high income child benefit charge),” insert—

• Chapter 9 of Part 10 of ITEPA 2003 (winter fuel payment charge),

Commencement

5

The amendments made by this Schedule have effect for the tax year 2025-26 and subsequent tax years.

Schedule 11 — Tax treatment of carried interest

Part 1 — Carried interest: interpretation of key terms

1

Before Schedule 1 to ITTOIA 2005 insert—