Legal Practice Notes

Consortium relief Consortium relief describes an extension of the group relief regime that permits losses to be surrendered and claimed between companies that are not sufficiently connected to constitute a group, but where joint ownership of a company creates a consortium. For details on what amounts to a consortium, and wider guidance on consortium relief, see Practice Note: Consortium relief. The categories of losses that qualify for group relief also qualify for consortium relief; see Practice Note: Group relief—types of losses that can be surrendered. As with group relief claims made by members within a loss relief group, the quantum of any consortium relief claim between companies owned by, and members of, a consortium (including through link companies) is capped in specified circumstances. This Practice Note sets out those caps and conditions in the context of consortium relief for current year losses, and for...

This Practice Note focuses on the precise tax meanings of a company with investment business and of an investment company, and not on broader, everyday uses of the term investment company (such as in relation to Family investment companies) or on other vehicles like investment trust companies. For those, see: Tax and investment trusts—overview. What is a company with investment business? A company with investment business is one whose activities consist, in whole or in part, of holding investments. This definition can be broken down as follows: company—covers any body corporate or unincorporated association, but does not include partnerships, co-ownership schemes (as defined in section 235A of the Financial Services and Markets Act 2000 (see Practice Note: Authorised contractual schemes ( ACSs))), local authorities and associations of local authorities (see Practice Note: What is the basis of corporation tax?) ...

As set out in Scope of distributions for tax purposes, distributions fall into four categories: dividends — covering paragraph A, with fuller guidance in Tax—types of distribution—dividends transfers of assets or liabilities — covering paragraphs B and G, with further detail in Tax—types of distribution—transfers of assets and liabilities interest recharacterised as a distribution — spanning paragraphs E and F, with more detail in Types of distribution—interest recharacterised as a distribution: non-commercial securities and Types of distribution—interest recharacterised as a distribution: special securities bonus issues of shares or securities — covering paragraphs C, D and H and discussed further in this note Paragraphs C and D— Redeemable share capital and securities The third and fourth categories comprise the company issuing any redeemable share capital or any securities: in respect of shares in, or securities of, the company; and otherwise than for new...

FORTHCOMING CHANGE relating to the treatment of forex under UK transfer pricing rules: From 1 January 2026, the Finance Bill 2026 introduces a series of updates to the UK transfer pricing framework. Among the measures are changes that bring foreign exchange gains and losses arising on loan relationships and derivative contracts within the main transfer pricing rules, while leaving the tax rules for forex hedging untouched. Previously, such amounts were adjusted under bespoke provisions in the loan relationships and derivatives regimes addressing non‑arm’s length transactions. The changes also broaden the existing loan relationships anti‑avoidance rule in CTA 2009, s 452, to accommodate a new election allowing companies to be treated as guarantors of a non‑arm’s length borrowing for transfer pricing purposes. For further detail, refer to News Analysis: Budget 2025— Tax analysis— International and Tax—publication of Finance Bill 2026. Numerous entries in a...

Many UK-resident companies are expected to operate solely within the UK, with their entire customer base and supplier network located here, so that all profits and gains arise from UK activity undertaken domestically within national borders. Nevertheless, this is not universal; for a sizeable proportion of UK companies, overall profits also comprise non- UK amounts earned from activities outside the UK......

Purpose of the regime The aim of the foreign branch exemption is to remove from UK corporation tax the profits generated by a UK-resident company's permanent establishments ( PEs) across the globe, worldwide. While the relief applies to the earnings of PEs, it is commonly known and referred to (albeit not strictly correct) as the 'foreign branch exemption', and this is the terminology we have adopted here......

To decide if a payment or transaction sits within any category of distribution (other than paragraph A (dividends)), it is essential to grasp the idea of new consideration in full. At the widest level, the intended role of new consideration is to make sure the definition of a distribution captures only a genuine distribution of profits, in whatever guise it appears, by stipulating that: payments transfers of assets or of liabilities, or issues of shares or securities for which the paying company receives no fresh value, are treated as distributions for corporation tax purposes, i.e. in situations where the value of the company is diminished and only in those cases. Where is new consideration used?......

Corporation tax Corporation tax is imposed on the profits of a company’s accounting period where the company is within the charge to UK corporation tax. For more on who must pay corporation tax and on what, see Practice Note: What is the basis of corporation tax? The eventual liability is influenced by the profits shown in the relevant company’s accounts for that period, but is also determined by specific tax rules (eg see Practice Note: Taxation of trading profits—basis, receipts and deductions). These tax rules set out, among other things: which types of income and gains are chargeable to corporation tax (eg trading income) what reliefs are available whether those reliefs can reduce: a particular amount of income or gains total profits or the...

This Practice Note: sets out the principal UK tax considerations for a company looking to raise capital through a rights issue, and unless indicated otherwise, proceeds on the basis that: the issuing company is UK incorporated and UK tax resident and, for VAT, is treated as belonging in the UK only new non-redeemable shares are offered as part of the rights issue the shares to be issued are in the same currency as the issuer’s functional currency (ie the currency the company uses to prepare its accounts)—where the functional currency differs from the share currency and certain conditions are satisfied, any profit or loss on a derivative used by the issuer to hedge exchange rate risk is disregarded for...

Practice Note This Practice Note sets out the principal tax considerations where a company facing difficulty repaying external borrowings looks to reorganise and restructure its external debt commitments. Companion Practice Notes in this series address tax matters connected with and arising in relation to: acquisitions of non-performing loans the enforcement of debts Additionally, the checklist ‘ Tax and distressed debt—checklist of points to consider’ summarises the main tax points to bear in mind when dealing with distressed debt more generally......

A core tenet of the corporate intangible assets regime in Part 8 of the Corporation Tax Act 2009 is that companies are charged to tax on dealings in intangible fixed assets by reference to the profits and losses recorded in their financial statements prepared under applicable standards. Put another way, the gains and losses of an IFA under the relevant accounting rules will, as a general rule, drive the credits and debits taken into account for corporation tax within the corporate intangible assets regime. Further, the initial test for whether a particular IFA falls within the ambit of that regime is the accounting-based definition of an intangible asset adopted in the accounts. This Practice Note reviews the accounting framework and principles pertinent to the taxation of IFAs that come within the corporate intangible assets regime, and specifically addresses the...

The capital gains regime allows corporate groups to organise the offset of allowable losses arising in one group company against taxable gains arising in another. The most straightforward route is to elect to move a gain or a loss between companies within the group. That election rests on the premise that group members function, in many ways, as a single economic unit, and that the tax code ought to mirror that reality. The purpose of the provisions is to enable groups to net gains and losses against each other where both the gains and the losses arise within the same group. This treatment is not meant to apply to companies acquired into a group specifically because they already carry losses. The pre-entry loss rules exist to stop groups from cutting their gains by purchasing losses in this fashion. Although intended to counter...

Enhanced relief for R& D-intensive loss-making SMEs (post-1 April 2024) FORTHCOMING CHANGE: R& D tax reliefs advance clearances: Following a first announcement at Autumn Budget 2024 within the government’s Corporate Tax Roadmap, and a consultation issued at Spring Statement 2025, Budget 2025 set out the consultation outcome confirming a pilot of a targeted R& D advance assurance service. This will cover specified aspects of small and medium-sized enterprises’ R& D claims and is scheduled to commence from spring 2026. The pilot will run alongside the current R& D advance assurance. This Practice Note covers the enhanced research and development ( R& D)-intensive support ( ERIS) for R& D‑intensive, loss-making SMEs, applying to accounting periods starting on or after 1 April 2024, subject to transitional provisions. For details of the merged R& D expenditure credit generally applicable for accounting periods beginning on or after 1 April 2024 (the...

For anyone carrying on a trade of developing property in the UK, a primary issue is the UK tax charged on the profits arising from that activity. This Practice Note examines what amounts to a trade and the imposition of UK corporation tax and income tax on trading profits. In this Practice Note, CGT denotes both capital gains tax and corporation tax on chargeable gains. Trading vs investment For companies within the charge to corporation tax, the corporation tax regime governing trading profits generally applies as well to the profits of a trade of property dealing and development. The specific rules for profits from trading in and developing UK land, introduced on 5 July 2016, do not apply where the relevant profit or gain is already brought into account as income for corporation tax purposes. For further details, see Practice Note:...

Stop Press: Section 49 and Schedule 7 of the Finance Act 2026 revise the UK’s domestic rules on UK permanent establishments of non- UK companies, applying to accounting periods (for corporation tax) and tax years (for income tax) that start on or after 1 January 2026. The measures update both the definition of a UK permanent establishment and the methodology for attributing profits to a UK permanent establishment, each intended to align more closely with the OECD Model Tax Convention. They also adjust how the investment manager exemption operates. For further details, see News Analysis: Budget 2025— Tax analysis — International. A non- UK resident company trading in the UK may either incorporate a UK subsidiary or trade through a permanent establishment ( PE), commonly a branch. This Practice Note sets out the key UK tax considerations relevant to that choice, while...

Before disposing of a business or trade When planning a disposal, a corporate seller must choose the most suitable deal structure. Commercial drivers should lead, yet securing a tax-efficient outcome will inevitably be a key concern. The initial choice is whether to transfer: the business and its underlying assets (a business sale), or the shares in a subsidiary that holds the business and assets (a share sale) Broadly, sellers tend to prefer a share sale: it offers a straightforward exit and, where the substantial shareholdings exemption ( SSE) applies, any gain is exempt from tax. An asset deal is more likely to crystallise tax charges and leaves any pre-completion tax liabilities with the seller. This Practice Note does not address individual sellers or business asset disposal relief ( BADR). For more on BADR, see Practice Note: CGT—business asset disposal relief (formerly...

The corporate interest restriction ( CIR) framework is extensive and intricate. This Practice Note concentrates on the elections a group can choose to make within its interest restriction return. Readers are also directed to: Practice Note: Corporate interest restriction—quick guide for a brief, high-level overview of the CIR and the background to its introduction Practice Note: Corporate interest restriction—glossary of key terms for the meanings of key terms and concepts used throughout the CIR legislation Practice Note: Corporate interest restriction—the main rules for a closer look at the principal operative provisions of the CIR Practice Note: Corporate interest restriction—administration for the more administrative aspects of the CIR, including the interest restriction return The CIR rules permit groups to make specific elections that change the computation of group-interest and other amounts that feed into the group ratio method....

Under the corporate intangible assets regime in Part 8 of the Corporation Tax Act 2009 ( CTA 2009), the default position is that a company’s gains and losses on intangible fixed assets ( IFAs) are determined, and recognised as credits and debits for corporation tax, in accordance with how those IFAs are treated in the accounts. Put simply, the company’s financial statements, prepared in line with generally accepted accounting practice ( GAAP), form the starting point for identifying the taxable and deductible items and amounts relating to the company’s IFAs. This is commonly described as ‘tax following the accounts’. Nonetheless, there are a number of exceptions to this overarching approach, where the corporate intangible assets rules require a move away from the accounts and dictate that IFA credits and debits are worked out on an alternative footing. For a broader...

A demerger is the division of a company’s business into two or more segments, usually continued by successor entities that remain under the original ownership. Typical commercial reasons include: splitting a business ahead of a sale or other deal bringing in different shareholders (or option holders) to one venture but not another separating activities with differing risk, regulatory or commercial profiles resolving a shareholder dispute releasing value from an underlying business carving out a non-core activity as the group matures, or using a demerger as an alternative to a sale There may also be tax advantages, for example: investment businesses can be split from trading businesses so trading businesses can qualify for: business asset disposal relief (formerly entrepreneurs' relief) the...

FORTHCOMING CHANGE relating to UK transfer pricing legislation: Finance Act 2026 ( FA 2026) introduces a suite of revisions to the UK’s transfer pricing regime. Effective for accounting periods commencing on or after 1 January 2026, once enacted, the rules will, among other reforms, disapply UK-to- UK transfer pricing (with limited carve-outs to block tax arbitrage), revise the participation condition, and implement a range of updates to the financial transactions provisions so that UK requirements are closely aligned with the OECD Transfer Pricing Guidelines. In parallel, the government also confirmed at Budget 2025 that it will move ahead with an obligation for in-scope multinationals to submit annual information on cross-border related party dealings for accounting periods beginning on or after 1 January 2027—the detailed regulations for the new ‘ International Controlled Transactions Schedule’ ( ICTS) are anticipated in spring 2026 in due course. For...