UK Government Narrows AI Schedule Under National Security and Investment Act, March 2026

On 12 March 2026, the Cabinet Office published CP 1529, the consultation response to its proposed updates to the National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021 (NARs). The consultation had been open from 22 July 2025 to 14 October 2025 and sought views on changes to seventeen sector schedules. The response confirms that the government will revise Schedule 3 (Artificial Intelligence) to narrow its scope and reduce mandatory notification obligations for certain categories of AI-related acquisition. Secondary legislation implementing all changes across the NARs will be laid before Parliament "later this year."

The NSI Act 2021 establishes a mandatory notification regime for acquisitions of qualifying entities in sensitive sectors. Schedule 3 of the NARs sets out the AI-related activities that trigger mandatory notification. Under the consultation proposals, Schedule 3 Condition A was to be amended to add development of AI systems where that development creates or improves the capabilities of AI, or increases the speed of computation. The consultation response confirms that, following respondent feedback, the government will go further: it will revise the regulations to exclude from mandatory notification the use of non-consumer AI systems for routine business activities, the use of licensed third-party AI systems, and certain modifications and testing of AI systems made as part of routine business deployment activities and IT policies. The government will also refocus and split Condition A to bring into scope only entities that create or modify AI systems themselves, with the result that entities involved solely in end-use of AI systems will in most cases fall outside mandatory notification requirements.

For AI companies and investors active in the UK, the revised Schedule 3 is directly material. Acquirers of entities that develop or modify AI systems will continue to face mandatory notification obligations before completing a transaction. Acquirers of entities that only deploy AI systems — including those running third-party or licensed AI tools for internal operational purposes — will generally fall outside mandatory notification under the updated rules. This distinction matters for due diligence scoping: deal counsel must assess whether the target entity creates or modifies AI systems, or merely uses them as deployed software. No mandatory notification applies until secondary legislation is in force; the current NARs remain operative until the Statutory Instrument is laid.

CP 1529 is a consultation response and has no direct legal effect. The existing NARs, which have not been updated since coming into force in January 2022, remain in force until the government lays amending secondary legislation. No draft Statutory Instrument has been published as of 19 March 2026, and no date for laying has been specified beyond "later this year." The response also notes that the Artificial Intelligence schedule guidance will be updated to support industry understanding; however, that guidance is not yet published. Parties completing AI-sector acquisitions before the new regulations take effect must continue to apply the current Schedule 3 criteria.

Source: Cabinet Office, "National Security and Investment Act (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021 — Consultation response," CP 1529, 12 March 2026, https://www.gov.uk/government/consultations/consultation-on-the-nsi-act-notifiable-acquisition-regulations/outcome/national-security-and-investment-act-notifiable-acquisition-specification-of-qualifying-entities-regulations-2021-consultation-response. Confirmed current as of 19 March 2026.

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