Other news in brief

Finance Bill 2025-26 was published on 4 December 2025 and had its second reading in the House of Commons on 16 December. The next stage is the Committee of the whole House on 12 and 13 January 2026, where selected Clauses and Schedules will be discussed. After that, the remainder of the Bill will be scrutinised by a Public Bill Committee – it has not yet been confirmed when that will start but the latest date this stage must conclude is 26 February 2026.

The Chancellor has confirmed that she has asked the Office for Budget Responsibility (OBR) to prepare an economic and fiscal forecast for publication on 3 March 2026. At Budget 2025 it was confirmed that the OBR will not make an assessment of the Government’s performance against the fiscal mandate in the spring and will instead provide an interim update on the economy and public finances.

As explained in our earlier article, the 2025-26 Finance Bill includes legislation reforming the UK transfer pricing, permanent establishment (PE) and Diverted Profits Tax (DPT) rules. Although the Finance Bill is still making its way through Parliament and is therefore subject to amendment, most of the changes are operative for accounting periods beginning on or after 1 January 2026. As a consequence, HMRC updated sections of their International Manual before Christmas to ensure guidance was available from when the changes took effect. The main updates to the manual can be found at the following sections:

• INTM414000 et seq. where new guidance on the reform of transfer pricing can be found;
• INTM489100 et seq. which contains guidance on the new Unassessed Transfer Pricing Profits rules which have replaced the old DPT rules; and
• INTM260000 et seq. (non-residents trading in the UK) which has been updated throughout to reflect the changes to the PE rules.

If amendments are made to the Finance Bill as it is scrutinised in Parliament over the next few weeks, it is expected that the manual will be updated again where applicable.

On 17 December 2025, HMRC published the latest in their Guidelines for Compliance (GfC) series: Help with imported hybrid mismatches (GfC16). This guidance is aimed at multinational enterprises to help them in assessing the impact of the ‘imported mismatch’ rules that are contained in Chapter 11 Part 6A TIOPA 2010. The Guidance sets out:

• A summary of the elements/concepts that can result in an imported mismatch;
• HMRC’s recommended methodology to complete the imported hybrid mismatch analysis, including some key triggers to review when year on year changes occur, such as new inter-company transactions, alterations to the group structure, or changes to the tax attributes of group entities;
• Certain complex or special transactions (mergers, acquisitions, changes in business model, partnership structures and private equity structures etc) which might require additional care;
• Best practice recommendations for disclosing a counteraction under Chapter 11 – in particular HMRC recommend a whitespace note to include details of the analysis undertaken and summarise the conclusions made in arriving at the counteraction amounts; and
• Evidence and documentation of compliance work applied to determine the imported mismatch outcome.

HMRC’s Guidelines for Compliance (GfC)7 aim to provide “help with common risks in transfer pricing approaches”. On 19 December 2025, changes were made to GfC7, primarily as follows:

• A new section 2.2.8 was added to Part 2 (common compliance risks) covering value chain analysis in functional analysis;
• A new section 3.8 was added to Part 3 (indicators of transfer pricing policy design risk) covering risks specific to offshore procurement hubs; and
• The introductory ‘purpose, audience and use’ section was updated to reflect the reform to the UK’s transfer pricing, permanent establishment and Diverted Profits Tax rules confirmed at Budget 2025 and included in Finance Bill 2025-26.

As part of their regular process reviews, HMRC are inviting a selection of businesses, via their Customer Compliance Managers (CCMs), to complete a short survey on the Business Risk Review (BRR+) process. Participation in the survey is entirely optional, and will be focussed towards those businesses who are nearing the final stages of the BRR+ process.

The Code of Practice on Taxation for Banks promotes compliance and discourages tax avoidance in the banking sector. The annual report for 2025 showed that, as of 31 March 2025, 314 banks had adopted the Code and none were found to be in breach during the reporting period, nor were any ‘Disclosure of Tax Avoidance Schemes’ (DOTAS) reports made. HMRC's compliance work with banks is dealt with by two different directorates, depending upon the bank’s size. The largest are dealt with by HMRC’s Large Business directorate and compliance with the Code is reviewed as part of an enhanced Business Risk Review (BRR+) process. Smaller banks are dealt with by HMRC’s Wealthy and Mid-Sized Business Compliance directorate. The report names six banks who were within the Code population but had not adopted the Code as at 31 March 2025.

On 18 December 2025, the OECD published updated Frequently Asked Questions (FAQs) in relation to the Crypto-Asset Reporting Framework (CARF) and Common Reporting Standard (CRS), just 13 days before they came into effect in early adopting countries. The updates will be welcome for financial services firms that are issuing or exploring tokenised products as they allow for products which are distributed solely through traditional bank accounts and custody to continue to be reported solely under the CRS. The scope of the FAQs is limited however, and there are likely to be wider discussions on the exact scope. Also welcome for a range of firms, the OECD has recognised the challenges imposed by countries adopting in a staggered fashion and has temporarily reduced the scope of anti-avoidance rules which would have conflicted with data protection requirements. The OECD has also included guidance which reduces the scope of an exemption applicable to stablecoins so anyone who had previously concluded that stablecoins would be treated as Specific Electronic Money Products (SEMPs) will need to revisit that conclusion. Overall, the substantive provisions of CARF and CRS remain the same – the FAQs provide limited relief to banks and asset managers, but crypto-natives and other token issuers will continue to be in scope.

The Government announced at the 2025 Budget that it would consult on secondary legislative changes to update and simplify the CIS by exempting payments made to local authorities or public bodies, and requiring construction contractors to file nil returns when they have not paid any subcontractors in a particular month (unless they notify HMRC in advance that they will not make any such payments in that month). Draft regulations have now been published for consultation to ensure they operate as the Government intends and to identify any areas that need to be clarified in guidance. The consultation will close on 3 February 2026, and the final regulations will come into force on 6 April 2026.

KPMG in the UK’s European Economic Outlook for December 2025 looks at the prospects for the European economy for 2025 and 2026, including analysis of growth prospects, trade outlook, consumer spending, inflation, interest rates and fiscal outlook.