Reform of the Advance Corporation Tax regime
Published 6 March 2026
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Who is likely to be affected
Companies within the charge to Corporation Tax with unrelieved surplus Advance Corporation Tax (ACT) balances.
General description of the measure
The measure will repeal the shadow ACT rules so that unrelieved surplus ACT balances may be offset against Corporation Tax liabilities without these restrictions.
Policy objective
The measure allows companies to utilise remaining surplus ACT balances at a faster rate than previously possible and simplifies the tax code by removing complex legislation.
Background to the measure
The measure was announced at Budget 2025.
Detailed proposal
Operative date
This measure will have effect for accounting periods ending on or after 1 April 2026.
Current law
The current law is included in the Corporation Tax (Treatment of Unrelieved Surplus Advance Corporation Tax) Regulations S.I.1999/358.
Proposed revisions
Secondary legislation was introduced on 4 March 2026 to amend the Corporation Tax (Treatment of Unrelieved Surplus Advance Corporation Tax) Regulations S.I.1999/358.
The legislation removes the requirement to calculate and account for shadow ACT on relevant distributions made for an accounting period. Shadow ACT balances are extinguished.
Summary of impacts
Exchequer impact (£ million)
| 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 |
|---|---|---|---|---|---|
| — | -10 | -15 | -15 | -10 | -10 |
These figures are set out in Table 4.1 of Budget 2025 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2025.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
There is no impact on individuals as this measure only affects businesses.
Equalities impacts
This measure only affects businesses, therefore, it is not anticipated that there will be disproportionate impacts on those in groups sharing protected characteristics. A full equality impact assessment is not recommended.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on fewer than 100 businesses that have unrelieved surplus ACT balances. This measure will ease administration burdens on businesses as they will no longer be required to calculate and account for shadow ACT on distributions. One-off costs will include familiarisation with the changes. There are not expected to be any continuing costs.
This proposal is expected overall to have no impact on business’ experience of dealing with HMRC as this does not change any processes or tax administration obligations.
This proposal is not expected to impact civil society organisations.
Operational impact (£ million) (HMRC or other)
The additional costs or savings for HMRC in implementing the proposed revisions set out in this measure are anticipated to be negligible.
Guidance will be updated to reflect the changes made.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
Consideration will be given to monitoring this measure through information collected from return data and kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, please email: ACTreform@hmrc.gov.uk.