Arbitrage meaning

FORTHCOMING CHANGE relating to UK transfer pricing legislation Finance Bill 2026 (as introduced) outlines a suite of amendments to the UK’s transfer pricing framework. Once enacted, and applying to accounting periods starting on or after 1 January 2026, the package will, amongst other measures, switch off UK‑to‑UK transfer pricing—subject to defined exclusions designed to prevent tax arbitrage—adjust the participation condition, confirm that the OECD Model Tax Convention and the OECD Transfer Pricing Guidelines function as interpretative aids, and recast aspects of the rules for financial transactions so that the UK approach is brought into closer alignment with the OECD Transfer Pricing Guidelines. In parallel, the government announced at Budget 2025 that it will move ahead with a new obligation for in‑scope multinational groups to report, each year, information on cross‑border related party dealings. This reporting applies for accounting periods beginning on or after 1 January 2027, and the detailed technical rules for the ‘International Controlled Transactions Schedule’ (ICTS) are expected to be released in spring 2026...

HMRC v Burlington Loan Management DAC [2024] UKUT 152 (TCC) Background of the dispute After LBIE’s collapse, trading in its debt claims sprang up on a secondary market. The administrators ultimately realised enough assets to discharge all liabilities in full, creating a surplus from which statutory interest on those debts was paid. The Supreme Court determined that the statutory interest arising in the LBIE administration constituted yearly interest and was therefore subject to UK income tax withholding unless an exemption or relief applied (see News Analysis: Administration—Supreme Court confirms statutory interest can be yearly interest (HMRC v Joint administrators of LBIE)). In the circumstances here, a claim against LBIE was transferred by SICL—then in liquidation—to Burlington, via an interim assignment to a broker engaged by SICL’s liquidators to sell the claim. As LBIE’s liquidators had already returned the £142m principal to SICL, the right assigned related solely to unpaid statutory interest of £90.7m. UK income tax of £18.15m was deducted from the interest paid to Burlington. The question...

On 31 January 2024, Economic Secretary to the Treasury Bim Afolami informed a committee of MPs that ministers intend to curb possible regulatory arbitrage arising from differences between the frameworks for superfunds and insurance firms, seeking to address the gap between regimes. Since 2020, the nascent defined benefit (DB) superfund market has been working to interim rules set out by The Pensions Regulator. Despite repeatedly promising a lasting framework via primary legislation, the government has yet to deliver, close to four years later, and a permanent regime remains outstanding...

FB 2025 has now been released, accompanied by explanatory notes. It received its first reading on 6 November 2024 and will continue its passage through Parliament. The Bill runs to 280 pages, containing 86 clauses and 13 Schedules. Clause 86 provides that the short title is the Finance Act 2025. Any clause and Schedule references in this analysis use the numbering as at introduction. Draft provisions for three measures in FB 2025 were initially issued on Legislation Day (L Day) on 29 July 2024. These comprised: the abolition of the furnished holiday lettings regime (as announced in the Spring Budget 2024) the introduction of an anti-arbitrage limit on the transitional country-by-country reporting safe harbour within the UK’s Pillar Two rules the removal of the value added tax (VAT) exemption for private school fees FB 2025 also features measures first flagged before the Autumn Budget 2024, including: changes to the tax treatment of carried interest (with a consultation launched on...

The most common reasons for entering into derivatives are for the purposes of: Speculation — when a party seeks exposure to a given variable, for example taking a view on a commodity’s future price on the assumption it will rise or fall over a chosen period Hedging — aiming to offset exposure to the risk of an unfavourable shift in a variable, or to stabilise expected outcomes over time Arbitrage — seeking to take advantage of price discrepancies (between markets, or within the same market over time) to earn profit or cut costs, or where one participant can reach a price or market unavailable to another, including where prices differ over time Exposure to asset classes — obtaining access to a target market (eg commodities, shares, property) without incurring the expense, complexity and formalities associated with those markets, avoiding the same costs and complications Derivatives are commonly used alongside lending arrangements for hedging purposes in practice. In this context, the primary...

FORTHCOMING CHANGE relating to UK transfer pricing legislation: Finance Bill 2026 (as introduced) proposes a suite of amendments to the UK’s transfer pricing framework. Once enacted, and applying to accounting periods beginning on or after 1 January 2026, the reforms will, amongst other steps, disapply UK‑to‑UK transfer pricing (with targeted exclusions to prevent tax arbitrage), revise the participation condition, confirm that the OECD Model Tax Convention and OECD Transfer Pricing Guidelines operate as interpretative aids, and update the financial transactions provisions so UK rules more closely align with the OECD Transfer Pricing Guidelines. In parallel, at Budget 2025 the government confirmed it will proceed with an obligation for in‑scope multinationals to report annually on cross‑border related party transactions for accounting periods beginning on or after 1 January 2027. Technical regulations for the new ‘International Controlled Transactions Schedule’ (ICTS) are expected in spring 2026. For further detail on the reforms, see News Analyses: Finance Bill 2026—reform of UK law in relation to transfer pricing, permanent establishment and diverted...

FORTHCOMING CHANGE relating to UK transfer pricing legislation: Finance Bill 2026 (as introduced) sets out a suite of amendments to the UK’s transfer pricing rules. Subject to enactment, for accounting periods commencing on or after 1 January 2026, the package will, amongst other matters, do the following when enacted: switch off UK‑to‑UK transfer pricing (with exclusions to prevent tax arbitrage opportunities), revise the participation condition, confirm that the OECD Model Tax Convention and OECD Transfer Pricing Guidelines serve as interpretative aids, and introduce several changes to the provisions governing financial transactions so as to align the UK rules more closely with the OECD Transfer Pricing Guidelines. Alongside these reforms, the government announced at Budget 2025 that it will proceed with a requirement for in-scope multinationals to report information annually on cross‑border related party transactions for accounting periods beginning on or after 1 January 2027; the technical regulations for the new ‘International Controlled Transactions Schedule’ (ICTS) are expected to be published...