Legal Practice Notes

STOP PRESS relating to new MTT and DTT draft legislation : Section 50 and Schedule 8 of the Finance Act 2026 make changes across the MTT and DTT rules. In particular, the draft legislation adopts the OECD’s Administrative Guidance ( January 2025), restricting the degree to which pre-entry deferred tax assets and liabilities—arising from tax benefits granted by governments—can be recognised when working out a group member’s effective tax rate, and thus considered in that calculation. That element will be treated as in force for accounting periods ending on or after 21 July 2025. Most other measures will apply to accounting periods beginning on or after 31 December 2025, although certain provisions may, at the election of affected taxpayers, take effect from an earlier date. For more information, see News Analysis: Budget 2025— Tax analysis—...

STOP PRESS relating to new MTT and DTT draft legislation : Section 50 and Schedule 8 of the Finance Act 2026 significantly reshape several elements of the MTT and DTT rules. Among the updates and clarifications, in particular, the draft rules expressly embed the OECD’s Administrative Guidance ( January 2025), narrowing the extent to which pre-entry deferred tax assets and liabilities, arising from government‑granted tax reliefs, may properly be recognised when calculating or assessing a group member’s effective tax rate. That particular component is treated as commencing for accounting periods ending on or after 21 July 2025. Most of the other measures will apply to accounting periods beginning on or after 31 December 2025, although certain provisions may, at the taxpayer’s election, be adopted earlier by impacted taxpayers. For additional detail, see: News Analysis: Budget 2025— Tax analysis—...

STOP PRESS relating to new MTT and DTT draft legislation : Section 50 and Schedule 8 of the Finance Act 2026 revise multiple elements of the MTT and DTT rules. Notably, the draft law also folds in the OECD’s Administrative Guidance ( January 2025), curbing how far pre-entry deferred tax assets and liabilities, stemming from government-granted tax reliefs, may ultimately be recognised when computing a group member’s effective tax rate. That element is to be regarded as being operative for accounting periods ending on or after 21 July 2025. Most of the remaining measures are primarily intended to commence for accounting periods starting on or after 31 December 2025, although certain provisions might be allowed to apply earlier where the affected taxpayers so elect. For further information and detail, see: News Analysis: Budget 2025— Tax analysis—...

STOP PRESS relating to new MTT and DTT draft legislation Section 50 and Schedule 8 of the Finance Act 2026 revise multiple elements of the MTT and DTT framework. In particular, the draft law embeds the OECD’s Administrative Guidance ( January 2025), which limits the extent to which pre-entry deferred tax assets and liabilities—arising from government-granted tax benefits—can be recognised when determining a group member’s effective tax rate. That element will be treated as applying to accounting periods ending on or after 21 July 2025. Most other measures will take effect for accounting periods beginning on or after 31 December 2025, with some provisions able to start earlier at the election of affected taxpayers. For details, see News Analysis: Budget 2025— Tax analysis— International. STOP PRESS relating to new HMRC manual on MTT and DTT On 5 August 2025, HMRC released a new MTT and DTT...

This Practice Note explains the petroleum revenue tax ( PRT) framework. Historically, oil companies were liable to PRT on the value of oil and gas extracted and on receipts for using qualifying infrastructure, after deducting specified costs and reliefs. PRT was charged at varying rates following its introduction in 1975. It stood at 50% from July 1993, then was reduced to 0% with effect from 1 January 2016. Despite the nil rate, losses can still be generated and carried back to recover PRT previously paid. For guidance on the corporation tax, supplementary charge and energy profits levy rules applying to companies in the oil and gas sector, see Practice Note: Oil and gas—corporation tax, supplementary charge and energy profits levy. PRT post 1 January 2016 Under a 0% regime, losses computed under the PRT rules, whether arising on...

An individual can deliver their services in several distinct forms indeed. The predominant model is an employment relationship, broadly requiring the employer to run PAYE on sums paid to the employee, comply with real time information ( RTI) reporting duties, pay employer National Insurance contributions ( NICs), and observe a wide range of relevant employment law obligations. The employee is typically paid earnings only after income tax and employee NICs. A notable minority in the UK operate as self-employed, often providing their services straight to their customers and clients. These individuals must personally report and settle their own income tax and NICs liabilities independently. It is, in the end, a (sometimes intricate) factual assessment in every case whether a worker is self-employed or not. For further detail on how this is assessed, see Practice Note: Establishing employment status—from a tax and NICs...

Practice Note overview This Practice Note sets out the conditions that must be met by companies, other than the note issuer, to: qualify as securitisation companies—this Practice Note outlines the criteria a company must meet to be: an asset-holding company an intermediate borrowing company a warehouse company a commercial paper funded company meet the additional requirements for such securitisation companies to be taxed on their returns from securitisation activities in accordance with the permanent securitisation regime For guidance on the tax treatment of securitisation companies within the permanent securitisation regime, see Practice Note: Asset-backed securitisations—the UK tax treatment. For the conditions a company must meet to qualify as a...

Broadly speaking, tax applies to UK registered pension schemes in three different areas: the tax treatment of member and employer contributions, including any repayment of member contributions the tax treatment of assets held by the scheme, including the investment returns generated by those assets the tax treatment of benefits paid out by the scheme Where an individual participates in more than one registered scheme, the contributions paid to—and the benefits received from—each arrangement are combined and considered together when establishing that person’s overall tax liability. This Practice Note concerns registered private sector pension schemes. Public sector pension schemes are predominantly governed by separate legislation. Their tax position is broadly similar, though not invariably the same, as that which applies to registered private pension schemes......

ARCHIVED: This archived Practice Note outlines the pensions tax framework and the former Inland Revenue ceilings that applied prior to 6 April 2006 ( A-day), and which may, in part, still remain pertinent. It is not kept up to date. The pensions tax system established by the Finance Act 2004 took effect on 6 April 2006, also called A-day. The pre A-day rules can still matter for schemes, many of which have preserved some or all of the restrictions that existed under the earlier system. This Practice Note concentrates on the tax regime that operated before A-day......

This guide is intended mainly for trainees, newly qualified lawyers and anyone else who is new to, or not familiar with, pensions law. A- Day The registered pension scheme framework began on A- Day (6 April 2006). Under this framework, described in Part 4 of the Finance Act 2004 ( FA 2004), pension schemes of any kind are classed as either registered or unregistered. Schemes that held ‘tax approval’ before A- Day, under the then existing approval systems, were switched automatically to registered pension scheme status on A- Day, unless they chose to opt out. Since A- Day, other schemes have been able to seek registration under FA 2004, s 153, provided they meet the regime’s conditions. To benefit from the tax reliefs available under the registered pension scheme regime, it is not enough for a person merely to belong to a...

Since A‑day (6 April 2006), key features of the UK tax regime for employees and others in foreign pension schemes are: Migrant member tax relief may reduce UK tax on contributions to a ‘qualifying overseas pension scheme’ ( QOPS) in specified cases. See: UK tax relief on pension contributions to an overseas pension scheme—migrant relief, below Members of overseas pension schemes ( OPS) or relevant non‑ UK schemes ( RNUKS) can incur UK tax charges in some situations, even if not UK resident. See: Tax treatment of pension benefits paid by a foreign pension scheme (not being a HMRC‑registered pension scheme), below Overseas individuals in HMRC‑registered pension schemes are subject to different rules. See: Tax treatment of overseas individuals who are members of HMRC‑registered pension schemes, below. UK tax relief on pension contributions to an overseas pension...

Levying penalties against those who enable defeated tax avoidance arrangements is intended to deter the architects, sellers and intermediaries of abusive avoidance structures and arrangements. Rolling out and strengthening this statutory framework forms part of a wider governmental drive, developed over a number of years, to eradicate tax evasion and aggressive tax planning. Complementary actions in this sphere encompass the general anti‑abuse rule ( GAAR); issuing conduct notices to promoters of tax avoidance schemes ( POTAS); creating criminal offences for promoters and offshore tax evaders; and publishing a further revised edition of the Professional Conduct in Relation to Taxation guidance (see General principles of tax avoidance— Private Client—overview for further details). At Spring Statement 2025 on 26 March 2025, the government opened a consultation on a package of measures aimed at tightening the net around promoters (and other enablers) of marketed tax...

Pay As You Earn ( PAYE) The PAYE system is the mechanism by which an employer or pension provider withholds specified statutory deductions from an employee’s pay or a pensioner’s income. These comprise: deductions towards the employee’s income tax liability National Insurance contributions ( NICs) other pay-related deductions such as student loan repayments In effect, PAYE is HMRC’s approach to collecting income tax and NICs from individuals on an ongoing basis, instead of requiring everyone to complete a tax return to notify HMRC of what they owe. PAYE is not a precise calculation of an employee’s tax liability; it is an approximation of the tax the employee should pay, derived from HMRC’s view of the pay and benefits they are expected to receive. The tax is worked out using notices of coding that HMRC issues to employers and pension...

Pay as you earn ( PAYE) Pay as you earn ( PAYE) is the system through which employers (and other payers) must withhold and account to HMRC for income tax, National Insurance contributions ( NICs) and other statutory deductions on specified payments of PAYE income, namely: employment income pension income social security income Together, these are treated as PAYE income. For further details, see Practice Note: Scope of the PAYE system. PAYE income covers cash amounts paid to employees or directors (e.g. salaries, bonuses and termination payments). Non-cash remuneration is generally outside the scope of PAYE. An important exception is where payments are, or are treated as, readily convertible assets, which are subject to PAYE. This Practice Note outlines the definition of readily convertible assets, which is very broad. It includes assets (such as shares) that are tradeable on a...

Pay as you earn ( PAYE) Pay as you earn ( PAYE) is the system through which income tax (together with National Insurance contributions ( NICs) and certain other statutory deductions) must be withheld by employers (and other payers) and accounted for to HMRC in respect of specified payments of, namely the following categories: employment income pension income social security income (together, PAYE income). For further information and guidance, see the Practice Note titled Scope of the PAYE system. PAYE income typically covers cash amounts paid to employees or directors (eg salaries, bonuses and termination payments). Non-cash remuneration is generally outside the operation of PAYE, but an important exception applies where amounts are provided as (or treated as) readily convertible assets for PAYE purposes. In the sphere of employment-related securities, whether PAYE obligations arise depends largely—though not entirely—on the securities in point being readily...

FORTHCOMING CHANGE : At the Spring Budget 2023, the government revealed plans to deliver IT systems enabling tax agents to payroll benefits-in-kind for employers. This step is intended to cut burdens on employers and to enable agents to support their clients more effectively, and sits within the government’s long-term strategy to simplify the tax system for taxpayers and their agents. Alongside salary and other pay elements, such as overtime and bonuses, many employers repay employees for work-related costs and offer benefits for both motivation and recognition, providing support as well as incentivisation. The tax treatment of non-cash earnings is covered in Practice Note: How employment income is taxed—non-cash earnings or benefits. This Practice Note explains how payroll currently operates for expenses and benefits, reflecting the simplification that applied from 2016. It therefore reflects the position as it has applied since 2016. It also includes a short...

Pay as you earn ( PAYE) Pay as you earn ( PAYE) is the system through which employers (and other payers) must deduct income tax, National Insurance contributions ( NICs) and certain other statutory withholdings, and account for them to HMRC from specified payments of PAYE income. PAYE income comprises payments of: employment income pension income social security income See Practice Note: Scope of the PAYE system. PAYE income includes cash amounts paid to employees or directors, for example salaries, bonuses and termination payments. Although non-cash remuneration generally falls outside PAYE, a significant exception applies where the payment is, or is deemed to be, a readily convertible asset. Whether PAYE obligations arise on the acquisition of securities when an employment-related securities option is exercised depends on whether those securities constitute readily convertible assets. For comprehensive guidance on the meaning of readily convertible assets, refer to Practice Note:...

The Pay As You Earn ( PAYE) regime depends on a range of reporting duties, paperwork and compliance. Employers must declare employee pay on a monthly and an annual basis. There are also several in-year notifications, for example for starters, leavers and when certain benefits are provided. Real time information ( RTI) has been in place for all employers and pension providers since October 2013. It replaced many of the earlier rules linked to PAYE filing and compliance. This Practice Note sets out an overview of the principal compliance obligations connected with PAYE, and outlines how these have been shaped by RTI. RTI reporting Historically, the PAYE framework created an issue (for HMRC, and potentially for taxpayers as well) because HMRC did not know how much should have been deducted from employees under PAYE until after the close of the relevant tax year. This arose...

Patent box The patent box is an elective regime that delivers an effective corporation tax rate of 10% on worldwide profits attributable to qualifying patents and comparable intellectual property ( IP) rights. Profits that qualify for the relief are, in substance, charged to corporation tax at the reduced rate of 10%. The relief is given effect through legislation that permits a deduction when calculating a company’s trading profits for a particular accounting period. For general background on the patent box, see Practice Note: Patent box—key features of the regime. To align with BEPS Action Plan 5, the patent box rules were revised on 1 July 2016 to introduce an R& D fraction restriction, which can curtail the value of patent box claims for businesses that have acquired relevant IP and/or sub-contracted development of relevant IP to affiliates. A series of ancillary...

The tax regime for property authorised investment funds ( PAIFs) The PAIF tax framework applies to UK open-ended investment companies ( OEICs) that satisfy specified criteria. In some cases, falling short of these requirements can result in removal from the PAIF regime, while a PAIF may equally opt to depart voluntarily. The outcome of any failure hinges on the precise condition involved and, in certain instances, whether the failure is a repeat occurrence. The PAIF conditions are explained in detail in Practice Note: PAIFs—the conditions. This Practice Note covers: what follows when one or more PAIF conditions are not met, and the tax consequences of an exit from the PAIF regime For a high-level summary of the overall PAIF framework, see Practice Note: Tax and property funds—overview. For the tax treatment of PAIFs and their investors, alongside associated compliance...