ICAEW has responded to the government’s technical consultation on draft legislation for the Finance Bill 2025/26, and to its consultation on the design of land remediation relief, published on 21 July 2025. The key points from ICAEW’s responses are summarised below.  

Measures directly affecting agents 

ICAEW’s responses to the draft legislation providing for mandatory agent registration and giving HMRC new powers to tackle agents facilitating non-compliance and promoters of marketed tax avoidance are summarised in a separate article.  

IHT: unused pension funds 

In ICAEW REP 67/25, ICAEW has expressed major concerns with the way in which the government intends to implement its policy of bringing most unused pension funds and death benefits into the scope of inheritance tax (IHT) from 6 April 2027.  

ICAEW suspects that the measures will be unworkable where the pension beneficiaries are different to the estate beneficiaries. Personal representatives (PRs) will have to pay IHT on pensions funds they do not control, and they will struggle to enforce the right of recovery from pension beneficiaries. The estate beneficiaries will be worse off if they have to bear tax that should be borne proportionately by the pension beneficiaries. To ensure parity amongst beneficiaries and to improve the chances of IHT being paid on time, ICAEW believes that the government should consider requiring pension scheme administrators to make a fixed deduction of IHT from pension funds. 

ICAEW anticipates that the proposals, as currently drafted, may deter probate firms from acting as professional PRs or advising lay PRs. ICAEW warns that if PRs are unable to obtain appropriate advice, there will be delays in finalising estates and incorrect IHT returns will be submitted.  

IHT: reform of reliefs 

In ICAEW REP 68/25, ICAEW has reiterated its warning made in May 2025, that the government’s changes to IHT business property relief (BPR) and agricultural property relief (APR) from April 2026 could have severe consequences for businesses, and has called on the government to urgently reconsider its policy.  

ICAEW has also expressed its disappointment that the government has given little regard to the legitimate concerns ICAEW raised during the earlier consultation about the practical aspects of the proposals, such as the lack of transferability of the £1m allowance between spouses. 

Making Tax Digital for income tax 

The draft legislation confirms several policy announcements made previously, including the reduction of the income threshold for Making Tax Digital (MTD) for income tax to £20,000 from April 2028. Further details are provided in an earlier article.  

In ICAEW REP 65/25, ICAEW has repeated its calls for quarterly updates to be optional rather than mandatory and for HMRC to provide a free service for taxpayers to submit their digital tax returns. ICAEW has also made several specific points on the draft legislation, including that the government: 

• considers removing references to partnerships from the draft legislation; and
• looks again at an extra-territorial deeming provision that ICAEW suggests may apply more broadly than intended. 

ICAEW has advised the government to reconsider its decision to legislate for the reduction in the income threshold to £20,000 from April 2028. ICAEW believes that the extension should require a ministerial direction once the government has had sufficient time to assess the impact of MTD for income tax on the taxpayers joining from April 2026.  

Land remediation relief 

Although ICAEW does not recommend wholesale changes to the overall design of land remediation relief, it has made a number of suggestions for improving the relief in ICAEW REP 66/25, including: 

• using the relief to encourage certain types of activity, for example,  providing an enhanced relief or credit for works undertaken on sites given over to affordable housing;
• removing the requirement for the land to have been derelict since 1 April 1998;
• extending the regime to bodies that invest in or carry out work involving land remediation but are not currently eligible for relief, such as real estate investment trusts; and
• reviewing the timing of the relief. ICAEW believes that giving relief for the period in which the expenditure is incurred may help to make the relief more attractive in some cases. 

Employee car ownership schemes 

ICAEW has set out a few concerns with the draft legislation to bring employee car ownership scheme (ECOS) arrangements into the scope of the benefit in kind rules for company cars in ICAEW REP 73/25. ICAEW believes that the legislation may have unintended consequences, including bringing genuine, commercial arrangements of household members into charge as a benefit in kind for employees of car manufacturers.  

ICAEW has recommended that the government considers introducing transitional provisions to aid the smooth implementation of the new rules and withdrawal of existing schemes, as well as allowing employers sufficient time to revise policies or remuneration structures. 

Better use of third-party data 

In ICAEW REP 72/25, ICAEW has expressed its support for draft legislation intended to help HMRC make better use of new and improved third-party data. ICAEW has also welcomed the changes made by the government in response to feedback it provided during an earlier consultation. 

Charities

A separate article was published earlier this month that summarised ICAEW’s views on changes to the tax compliance rules for charities.