Legal Practice Notes

A UK limited liability partnership ( LLP) For company law purposes, a UK limited liability partnership ( LLP) is a corporate body, but for tax it is generally treated like a partnership—that is, it is tax transparent. Where an LLP carries on a trade, profession or business with a view to profit, profits and gains are ordinarily taxed on the members, not on the LLP itself. Transparency also means members are taxed on the LLP’s profits and gains as they arise, whether or not any amounts have been distributed. In some cases this treatment may not apply, or can be lost; see When is an LLP not tax transparent? below. Members are taxed on their shares of the LLP’s profits in the same way as partners in other forms of partnership; see Practice Note: Taxation of general...

A UK tax resident bank should weigh the following tax matters when extending credit to an overseas borrower: local withholding taxes, including: the lender’s entitlement to double tax treaty ( DTT) relief; and the procedure required to access DTT relief UK tax treatment of the loan stamp, transfer, registration and comparable taxes value added tax ( VAT) the US Foreign Account Tax Compliance Act ( FATCA) and analogous regimes worldwide bank levies financial transaction taxes Local withholding tax and a lender’s ability to claim double tax treaty relief Local withholding tax A principal tax point for a UK lender financing a non- UK borrower is whether any overseas withholding will cut the interest actually received and, if so, whether that...

The stamp duty land tax ( SDLT) rules that apply when a tenant holds over a lease are complex. Since SDLT came into force, the regime has been amended, and differing situations can produce different outcomes. Which provisions apply will depend on, among other factors: whether the original lease was a stamp duty or SDLT lease (ie it was chargeable to stamp duty or SDLT when granted) the date on which the original lease was granted the date on which the original lease came to an end when the new lease is granted, and the commencement date expressed for the term of the new lease The relevant provisions are found in paragraphs 3, 3A and 9A of Schedule 17A to the Finance Act 2003 ( FA 2003). SDLT ceased to apply to any land transaction involving interests in or over land in...

On 17 July 2014, the Finance Act 2014 ( FA 2014) brought in the mechanism of a follower notice. The aim is for follower notices to be used against taxpayers who have entered into a tax avoidance arrangement that has been found to fail in another party’s litigation. Under this regime, a follower notice can be given where there is a final, relevant judicial decision that is not appealable or the time to appeal has expired (including decisions of the First-tier Tax Tribunal ( FTT)), and the reasoning in that decision would negate the tax benefit claimed by the taxpayer. Where there is an open HMRC enquiry into the taxpayer’s return (or claim) or the taxpayer has lodged an appeal (and that appeal remains live), HMRC may issue a follower notice requiring the taxpayer to amend their return (or claim) or withdraw their appeal to...

This Practice Note explains HMRC’s authority to visit and examine business premises to verify an individual’s tax affairs, and the limits on that authority. Their rights to seek information and records are addressed in Practice Note: HMRC information powers. Comparable inspection powers exist for Revenue Scotland and the Welsh Revenue Authority in respect of devolved taxes. Where fraud is suspected, HMRC can draw on more extensive powers. For further detail, see Practice Note: HMRC criminal investigations and dawn raids. HMRC may likewise use inspection powers when acting in its anti-money laundering role. For guidance, see Practice Note: HMRC guidance under the Money Laundering Regulations 2017 [ Archived]. What are the purposes for which HMRC may use its inspection powers? HMRC may deploy these powers where it is reasonably necessary to check a person’s tax position......

Offence of fraudulent evasion of VAT It is an offence under section 72(1) of the Value Added Tax Act 1994 ( VATA 1994) for any person to be knowingly involved in taking steps intended to fraudulently evade Value Added Tax ( VAT), whether for themselves or for someone else. The offence is triable either way. This conduct is sometimes referred to as VAT fraud. The provision concerns those knowingly concerned in steps aimed at evasion. There is also a lesser offence under VATA 1994, s 72(10), which provides that a person commits an offence if they: acquire or handle goods, or accept the provision of any services; and have reason to believe that VAT on the supply of those goods or services, or on the importation of the goods, has been or will be evaded This lesser offence is summary only with a maximum...

Employment-related loans The benefits code in ITEPA 2003, Part 3 contains tailored provisions for ‘employment-related loans’ which, in some circumstances, give rise to income tax and National Insurance contributions ( NICs) for directors and employees, and employer’s NICs for employers, in respect of such borrowing. This Practice Note explains what amounts to an employment-related loan for the purposes of the benefits code. The concept is broadly framed and is treated as covering loans made by the employer and by other associated persons. Lending by prospective employers also falls within the definition. As with any other form of employment reward, where a third party rather than the employer provides the loan, it is prudent to consider whether the disguised remuneration rules in ITEPA 2003, Part 7A apply, as those provisions take precedence over most other employment income charging rules (including the benefits code). For further...

Practice Note: bonus plans for employees and directors This Practice Note explores how bonus arrangements operate for employees and directors. It considers the two principal forms of scheme: discretionary and contractual. It looks closely at discretionary awards, covering eligibility, the exercise of discretion, limitations and expectations. The Note also addresses tax aspects of bonus plans and what follows when they are ended. It sets out points relevant to scheme design, drafting issues and regulatory matters, including compliance with the UK Corporate Governance Code. Finally, it considers how pregnancy or maternity leave, part-time or fixed-term status, long‑term sickness and linked discrimination concerns affect bonus schemes and payments, available remedies, and the routes for bringing bonus claims in the employment tribunal or the court. Bonuses can strongly motivate and help retain staff while enabling employers to manage wage costs. In some sectors and...

Where a company, within the charge to corporation tax, receives a dividend or other distribution from a company, it is taxed as income for corporation tax purposes unless the distribution qualifies for exemption. Two distinct exemption regimes apply to corporate distributions: one for small companies for companies that are not small For guidance on the reliefs available to small companies, see Practice Note: How are small companies taxed on distributions received? For an explanation of what counts as a small company for these exemption rules, refer to Practice Note: What is a small company for the purposes of the distribution exemption?......

FORTHCOMING CHANGE: A consultation, which closed on 7 July 2025, invited views on ways to streamline, modernise and reform HMRC’s approach to dispute resolution, aiming to raise awareness of the processes and to enhance access to, and uptake of, alternative dispute resolution ( ADR) and statutory review routes. It also proposes harmonising and simplifying appeal processes to bring together the advantages of the different methods currently used for direct and indirect tax disputes. For more information, see News Analysis articles: Tax update spring 2025— Tax analysis— Taxes management and dispute resolution and Tax update spring 2025— Improving HMRC’s approach to dispute resolution. This Practice Note is written by Anne Redston, Barrister. The views expressed are personal; she is not authorised to speak for the Tribunals Service or the judiciary. The Note sets out the procedure for challenging an HMRC decision and signposts further notes that...

HMRC has power to require security from a registered person if it considers that there is a risk that a business will not fully meet its obligations to pay: Insurance Premium Tax Landfill Tax Aggregates Levy Climate Change Levy Once a Notice of Requirement to provide security is issued, continuing to trade constitutes a criminal offence. Specific offences are: Insurance Premium Tax — entering into taxable insurance agreements (as defined by section 73(1) of the Finance Act 1994) without providing security Landfill Tax — undertaking taxable activities (as defined by section 69(1) of the Finance Act 1996) without providing security Aggregates Levy — being responsible for the commercial exploitation of aggregates within the UK (as defined by section 17 of the Finance Act 2001) without providing security Climate Change Levy — being liable to account for the levy on a...

ARCHIVED: This Practice Note has been archived and is no longer maintained. It considers the relationship between EU law and the direct tax rules of EU Member States, and, in particular, what occurs where a domestic direct tax provision appears to be incompatible with an EU fundamental freedom. The Note also describes the effect that EU law had on the UK’s direct tax regime while the UK was bound by EU obligations, ie up to the end of the Brexit implementation period on 31 December 2020 ( IP completion day). Unless expressly stated otherwise, references here to judgments of the EU Court of Justice are to judgments handed down before IP completion day. For guidance on the extent to which EU law continued to influence UK direct tax rules after IP completion day and until 31 December 2023, see Practice Note: Retained EU law and tax. For an...

ARCHIVED: This Practice Note is archived and is not being actively maintained any longer. Thin capitalisation and transfer pricing closely overlap yet are nonetheless distinct concepts in practice. Some regard thin capitalisation rules as a specific manifestation of wider transfer pricing rules in effect. EU law is relevant to thin capitalisation and transfer pricing as such because, while direct taxation falls wholly outside the EU’s competence, national measures must still observe the general principles of EU law and the treaty then in legal force (currently the Treaty of the Functioning of the European Union) (the Treaty). The principal Treaty provisions pertinent to thin capitalisation and transfer pricing are those addressing non-discrimination in relation to the fundamental freedoms. Potentially applicable freedoms are: freedom of establishment free movement of capital, and free movements of goods and services What are transfer pricing and thin...

Many assume pension schemes are outside the tax net. In fact, for numerous funds, investment taxation can be material, notably withholding taxes arising on share dividends. That said, avenues may exist to reclaim part or all of this burden. This Practice Note sets out the legal framework permitting recovery of EU withholding taxes that would otherwise be lost. Why is EU withholding tax reclaimable? A range of European Union ( EU) Member States ( Member States) levy withholding tax ( WHT) on domestically sourced dividend distributions made to pension funds that are not resident. This often contrasts with the position of domestic pension funds, which may benefit from an exemption from the same WHT. Although taxing powers sit outside EU competence, the EU free movement of capital is sufficiently wide to catch national tax rules that, subject to the tests listed below, treat resident and...

ARCHIVED: This Practice Note has been archived and is not maintained. This Practice Note sets out: the overarching concept of controlled foreign company ( CFC) rules the UK’s CFC regime before its reform (ie from 2013) the application of EU rules to the UK’s CFC regime via the cases of Cadbury Schweppes, Vodafone 2 and the CFC and dividend GLO how EU principles could apply to the UK’s new CFC rules What are controlled foreign company rules? CFC rules are anti-avoidance measures adopted by countries concerned that domestic companies might artificially move profits to companies situated in low-tax jurisdictions......

This page brings together EU resources that cover matters of commercial law. For general guidance on EU law, consult: EU structure ( EU Law)—overview EU legislative process ( EU Law)—overview EU judicial system ( EU Law)—overview EU rights and policies ( EU Law)—overview EU public procurement ( EU Law)—overview Agency, distribution and franchising Agency, distribution and franchising ( EU Law)—overview The European Franchise Federation ( EFF) The EU Commercial Agents Directive The EU unfair business-to-business trading practices in the agricultural and food supply chain Directive Key EU competition law issues in distribution/reseller agreements Article 101(1) TFEU—the prohibition on restrictive agreements Article 102 TFEU—the prohibition on abuse of dominance Introduction to the application of Article 101 TFEU to vertical agreements The Vertical Block Exemption Regulation 2022/720 Analysing vertical...

FORTHCOMING CHANGE: This Practice Note sets out the law as it currently stands, though elements could be affected by the Digital Omnibus proposals released on 19 November 2025 under the European Commission’s ‘simplification’ agenda. For details, see Practice Note: EU Digital Omnibus—tracker. It introduces the EU’s General Data Protection Regulation, Regulation ( EU) 2016/679 ( EU GDPR), and the United Kingdom General Data Protection Regulation, Assimilated Regulation ( EU) 2016/679 ( UK GDPR). The UK data protection law collection and the EU data protection law collection compile further core guidance on these regimes and are recommended starting points for research. In brief, data protection law across the EEA (the EU together with Iceland, Norway and Liechtenstein) and the UK aims to ensure that information about living individuals (‘personal data’) is treated fairly and responsibly. To that end, both EEA and UK data protection laws impose...

Environmental, Social and Governance ( ESG) considerations have rapidly gained prominence in the business world over the last decade. At first, ESG was chiefly linked to corporate social responsibility and sustainability initiatives. Now, it matters far more to tax practitioners, with taxation embedded in every pillar of the ESG agenda. A range of forces is binding ESG and tax together, making it crucial for tax professionals to understand and steer this shifting landscape. A leading reason for ESG’s rising importance to tax teams is the wave of new rules and compliance obligations. Governments globally are steadily building ESG considerations into tax legislation and reporting regimes, and the UK follows the same path. For example, authorities may grant tax reliefs to businesses that satisfy defined sustainability thresholds, while failures to meet reporting duties can trigger monetary sanctions. Advisers must keep pace with these changes so their...

This Practice Note addresses the tax rules applicable to freeports in England. The UK government has been working with the devolved administrations on the processes for creating new freeports in Scotland, Wales and Northern Ireland. The Scottish and UK governments jointly selected two Scottish green freeports: the Firth of Forth Green Freeport and Inverness and Cromarty Firth Green Freeport. Special tax sites have been designated at the Inverness and Cromarty Firth Green Freeport with effect from 8 April 2024, and at the Forth Green Freeport with effect from 12 June 2024. The Welsh and UK governments jointly agreed to create two freeports in Wales: Anglesey Freeport and Celtic Freeport. Special tax sites have been designated at the Celtic Freeport with effect from 26 November 2024, and at the Anglesey Freeport with effect from 23 January 2025. On 26 March 2024, the previous...

This Practice Note This Practice Note addresses the particular provisions in sections 446X–446Z of the Income Tax ( Earnings and Pensions) Act 2003 ( ITEPA 2003) ( Part 7, Chapter 3D) that bite where employment-related securities are disposed of for more than their market worth. The measures extend to all forms of employment-related securities, regardless of whether they are restricted, convertible, or obtained under a securities option (see Practice Note: What is an employment-related security?). They rest on the premise that shares or other securities would ordinarily be sold at market value, so any element of consideration above that level must derive from their employment connection. Accordingly, an income tax exposure (and potentially National Insurance contributions ( NICs)) arises on the excess over market value for the relevant employee or director (and the employing company may owe employer’s NICs). This income tax...