L-Day: Other measures of interest

Individual Savings Accounts (ISAs) compliance package

Draft legislation was published which will give effect to HMRC’s plan to change ISA reporting from April 2028. The compliance package aims to introduce a “modern, fair and effective” ISA compliance framework for ISA providers that “supports digital reporting” and makes sure the ISA system “operates as intended”. The new requirements will require digital monthly and annual returns. These rules introduce a points-based penalty regime and HMRC will be able to apply new sanctions where inaccuracies in ISA returns are identified. From April 2027, HMRC will also be able to suspend ISA managers in situations where withdrawal of approval is not appropriate.

Reforms to HMRC information powers and modernising computer records law

Draft legislation was published to reform HMRC’s civil tax information and inspection powers (Schedule 36 Finance Act 2008) and modernise the definitions about computer records (s114 Finance Act 2008). The proposals will be of most interest to the financial sector as they include reforms to Financial Information Notices (FINs), including expansion to cryptoasset service providers and the removal of the obligation for an annual report on the use of FINs.

Defined benefit pension scheme surplus payments to members

The L-Day provisions include proposed legislation governing the tax treatment where a pension scheme makes a discretionary payment out of surplus to members (previously, provisions for a payment of surplus to be an authorised payment only existed in relation to payments of surplus to the employer). Broadly speaking, such payments will not result in an unauthorised payment charge arising to the scheme administrator and the payments will be fully taxed as pensions income in the hands of the recipient.

Local Government Pension Scheme (LGPS) SDLT relief

As part of the Government’s 'LGPS: Fit for the Future' reforms, concerns were raised during consultation that the mandatory pooling of Local Government Pension Scheme (LGPS) investments could give rise to significant stamp duty land tax (SDLT) costs where property assets are transferred into pooled investment vehicles. In response, the draft legislation introduces a new, targeted and time-limited SDLT relief designed to facilitate the transfer of LGPS property assets into qualifying pooling structures. Broadly, the relief applies where a ‘qualifying fund’ acquires a major interest in land that is held, directly or indirectly, by one or more LGPS administering authorities for the purposes of the LGPS. Qualifying funds are limited to co-ownership authorised contractual schemes, Reserved Investor Funds and exempt unauthorised unit trusts that are established or managed by a ‘vendor-related asset pool company’ and all of the shares in the fund are held, directly or indirectly by LGPS administering authorities or 'vendor-related asset pool companies'. A 'vendor-related asset pool company' for these purposes is an asset pool company (as defined under the Pension Scheme Act 2026) which has any of its shares held, directly or indirectly, by the transferring LGPS administering authority.

The relief is available only where a ‘major interest’ in land is transferred. While this generally includes freehold and leasehold interests, the legislation specifically excludes the grant of a lease. However, the relief is extended to cover transfers of undivided shares in major interests, certain partial disposals by joint tenant LGPS authorities and transfers involving property investment partnerships holding major land interests, ensuring that common LGPS investment structures can access the exemption.

The legislation also contains a number of targeted anti-avoidance provisions. Relief is denied where the arrangements have a tax avoidance purpose or where relief has already been claimed in respect of the same underlying land interest. In addition, while the draft legislation prevents relief from applying more than once to the same property, it contains specific provisions to facilitate commercial restructuring steps undertaken as part of the pooling process. Notably, where a qualifying transfer is preceded by a preparatory buy-in – for example, the acquisition of shares in a property-holding company before the underlying property is transferred into a qualifying fund – the transaction is disregarded for the purposes of s75A FA 2003. The legislation also disapplies the SDLT pre-completion transaction rules in these circumstances, meaning that no sub-sale relief would be available to a person sub-selling the property to the fund.

The relief is available for transactions with an effective date on or after Budget Day 2026 and before 1 April 2032, and must be claimed in an SDLT return. As the measure is specifically intended to remove SDLT friction arising from the Government’s LGPS pooling reforms, it does not extend to wider local authority property holdings or non-pension investment structures.

Reforms to the Cultural Gift Scheme

The Cultural Gift Scheme allows UK taxpayers to receive a tax credit in return for a donation of important works of art and other heritage objects to be held for the benefit of the public or the nation. Draft legislation was published to remove the restriction on joint ownership of objects so that joint owners can each claim relief on their share, and to allow donors one opportunity within the five-year limit period to amend their remaining tax credit allocation. This change will take effect from 6 April 2027. The aim is to improve the flexibility and accessibility of the Scheme to boost donations.

Consultation on simplifying treaty relief from withholding tax on interest paid overseas

One of the consultations published alongside the draft Finance Bill clauses on L-Day was on simplifying treaty relief from withholding tax (WHT) on interest paid overseas. The current system in relation to treaty relief involves a requirement to withhold tax at the time of the payment of interest unless advance clearance is obtained. This is in addition to various exemptions from withholding that are available under UK domestic law (which are outside the scope of this consultation).

HMRC have acknowledged that the current treaty relief processes can: be costly with unnecessary cash-flow impacts; be challenging to navigate; result in an administrative burden with risks for lenders, borrowers and HMRC; and may compare unfavourably to some international comparators as well as the UK system for payments of royalties.

The consultation considers broadly the following areas:

• The current process (i.e. where taxpayers must obtain a direction from HMRC before claiming treaty relief from WHT on interest payment to overseas lenders) seeking examples of delays, costs and administrative burdens that arise and whether (or not) it provides easy and certain access to treaty relief;
• A proposed self-assessment process under which taxpayers determine whether treaty relief applies (with no prior HMRC clearance), and HMRC review the assessment through normal compliance activity. This would broadly align with the current approach for WHT on royalties; and
• Alternative options for simplifying the withholding process for interest (these may be based on overseas regimes that taxpayers find effective).

The consultation does not include the currently ‘paused’ concessionary treatment where tax, which otherwise would be assessed on the UK payer following a failure to operate the withholding process, is not pursued to the extent that it is clear that any tax collected would be repaid to the lender under the terms of a Double Taxation Agreement.

The consultation closes on 7 September 2026.

Aligning the time limits for recovery of National Insurance contributions with income tax

HMRC have also published a consultation on aligning the assessment, recovery, and repayment time limits for National Insurance Contributions with those of income tax. This consultation closes on 12 October 2026.

For further information please contact:

• Tim Sarson
• Stefanie Redmond