Legal Practice Notes

Companies subject to corporation tax may set qualifying charitable donations ( QCDs) against total profits once all other reliefs have been claimed, except group relief and group relief for carried‑forward losses, allowing profits to be reduced to nil. Any surplus QCDs lapse unless the company has an investment business. Investment businesses may deduct management expenses from total profits, and this deduction must be taken before any other deductions from total profits. Unused management expenses can be carried forward to the next accounting period and set against that period’s total profits or, for losses arising on or after 1 April 2017, surrendered for group relief. Where there are excess QCDs, they can be carried forward as management expenses, but cannot be surrendered for group relief for carried‑forward losses. For accounting periods beginning on or after 1 April 2024, donations to non‑ UK...

This Practice Note This Practice Note sets out the actions to take for SDLT once it has been confirmed that a transaction is chargeable. For an explanation of what a land transaction is, what amounts to acquiring a chargeable interest, and when a chargeable transaction arises, see Practice Note: Land transactions, chargeable interests and chargeable transactions. For additional guidance on notifying land transactions, see Practice Note: SDLT—administration and compliance. From 1 April 2015, SDLT no longer applied to any land transaction involving interests in or over land in Scotland. From that date, land and buildings transaction tax ( LBTT) has applied to those transactions, subject to transitional provisions. As a result, references in this Practice Note to ‘ UK land’ or similar expressions, when considering the scope of SDLT, should be interpreted as excluding any interests in or over land in Scotland from 1 April 2015. For...

This Practice Note summarises Bermuda trust law at a high level and signposts its distinctive characteristics, including expansive reserved powers rules, codified Hastings Bass measures, and adaptable perpetuity provisions. Bermuda’s trust legislation Trustee Act 1975 ( TA 1975) – addresses, among other matters, trustees’ powers, entitlements and duties, together with the Bermuda courts’ supervisory jurisdiction in trust matters. Trusts ( Special Provisions) Act 1989 ( TSPA 1989) – sets out Bermuda’s broad reserved powers regime, firewall protections, and rules on purpose trusts. Perpetuities and Accumulations Act 2009 ( Bermuda) ( PA 2009) – states that trusts created on or after 1 August 2009 may exist indefinitely provided they do not own Bermuda land, and permits the disapplication of the rule against perpetuities for earlier trusts. Trusts ( Regulation of Trust Business) Act 2001 – requires the licensing of persons...

Introduction The strand of domestic law that originally arose from EU obligations and was captured by the European Union ( Withdrawal) Act 2018 ( EU( W) A 2018) as retained EU law ( REUL) is, from 2024, referred to as ‘assimilated law’. This change follows the Retained EU Law ( Revocation and Reform) Act 2023 ( REUL( RR) A 2023). The new label signals notable shifts in the domestic standing and handling of assimilated law. Its objective is to advance the process of bringing former EU rules into the UK’s legal system and to support their reform... Reminder: what was retained EU law ( REUL)? To understand the move from REUL to assimilated law, it is useful to revisit REUL, which was established by EU( W) A 2018. For background on EU( W) A 2018, see Practice Note: Brexit—key legislation explained. After the Brexit...

Effect of contributions on capital allowances for plant and machinery The Capital Allowances Act 2001 sets out rules to stop a person securing capital allowances on costs that have been, or will be, borne or ‘met’ by another party (the contributor). If the contributor’s payment is for the purposes of a trade or certain other activities that they carry on, the contributor may claim the allowances instead. This Practice Note explores how contributions impact plant and machinery allowances, outlining both the limitations on claims by those receiving contributions and the reliefs available to those making them. Although not dealt with in detail here, broadly comparable provisions apply to structures and buildings allowances ( SBAs). Under those rules, a taxpayer may claim SBAs if: a financial contribution is made to another person in respect of SBA-qualifying assets for the purposes of the business carried on by a...

Once a company has confirmed it is carrying on a trade (see Practice Note: What is a trade for tax purposes?), it must work out the profits of that trade or trades for corporation tax by following generally accepted accounting practice, but with the following modifications: exclude any receipt or deduction that is capital in nature disallow any deduction for costs not incurred wholly and exclusively for the purposes of the trade ( WEPT)—ie exclude expenses that are not WEPT apply statutory adjustments for particular items that legislation treats as, or not as, trading receipts or deductions for tax For related guidance on the basis and computation of corporation tax more broadly, see Practice Notes: What is the basis of corporation tax? and Basis of calculation of corporation tax. The basic principles for calculating trading profits A company must compute the profits of its trade or...

This Practice Note sets out how to compute a controlled foreign company ( CFC) tax charge. For a particular accounting period, once it is confirmed that a company: is a CFC has chargeable profits and cannot claim any exemption (the exempt period, excluded territories, low profits, low profit margin, or tax exemptions) it is then necessary to apportion: the chargeable profits, as outlined below, and the creditable tax, as outlined below among all persons who held a relevant interest in the CFC at any point in that accounting period (the relevant persons). Reliefs cannot be set against the CFC tax charge. This note explains: what constitutes the CFC’s chargeable profits the actions required to: identify the relevant persons determine the CFC’s creditable tax ...

ARCHIVED: This archived Practice Note summarises which elements of UK tax law were impacted by the UK’s departure from the European Union ( EU) during the period between exit day (31 January 2020) and IP completion day (31 December 2020), and also the period immediately after IP completion day. It is not maintained and is provided solely for background purposes. For more information, see: Brexit, assimilated law and tax—overview. From exit day (11 pm on 31 January 2020), the UK ceased to be an EU Member State and no longer took part in the EU’s political institutions or governance structures. However, under the transitional measures in Part 4 of the Withdrawal Agreement, exit day initiated an 11-month implementation period ( IP) during which, for many purposes, the EU continued to treat the UK as if it were a Member State. For broader...

ARCHIVED : This Practice Note is archived and no longer maintained, and is not being updated further. It set out the anti-avoidance regime for transactions in land, created to subject gains of a capital character arising on the disposal of land to income tax or to corporation tax on income. First introduced in 1969, the provisions were located in sections 815–833 of the Corporation Tax Act 2010 (for corporation tax) and in sections 752–778 of the Income Tax Act 2007 (for income tax). The measure considered in this Practice Note was later replaced and widened by the offshore property developer rules, which took effect from 5 July 2016. For additional information on those rules, see Practice Note: Transactions in UK land—tax rules. As a consequence, CTA 2010, ss 815–833 (for corporation tax) and ITA 2007, ss 752–778 (for income tax) ceased to have effect from 5 July...

ARCHIVED: This Practice Note has been archived and is no longer maintained. It addresses the controlled foreign company ( CFC) rules that apply to accounting periods of CFCs beginning before 1 January 2013. For guidance on creditable tax under the new rules, see: CFC rules—calculating the CFC tax charge— Step 2—determine the creditable tax of the CFC Once, for a particular accounting period, it is determined that a company: is a controlled foreign company; and cannot apply any of the exceptions, it becomes necessary to apportion: the chargeable profits (see CFC chargeable profits); and the creditable tax (outlined in this note), amongst those persons who had an interest in the CFC at any time during that accounting period. Creditable tax A CFC’s creditable tax is apportioned to the same persons as the chargeable profits. A CFC’s creditable tax is the aggregate of: the double...

A company seeking admission to trading on AIM ( AIM admission) must satisfy the AIM Rules for Companies ( AIM Rules) and also comply with: the UK legal requirements for offers of securities restrictions on financial promotions any legal obligations in a jurisdiction where the securities are being offered if incorporated outside the UK, the corporate and securities laws of its country of incorporation This Practice Note explains how these obligations apply to a company incorporated in the UK that is not a ‘quoted applicant’. The London Stock Exchange provides a fast-track route to AIM for certain companies whose securities have been traded on an AIM Designated Market (including the Official List) for at least 18 months before applying to AIM (described as quoted applicants in the AIM Rules). For more detail, see Practice Note: Admission to AIM—fast track...

This Practice Note explains the VAT treatment of non-residential service charges. General position Service charges are ordinarily payable to the landlord under a lease or licence, much like rent, and therefore reflect the same VAT treatment as the rent. This is because there is no distinct supply—the rent and service charge together constitute payment for a letting of serviced premises. Certain charges may, however, need alternative treatment: there may be a separate supply, typically where the tenant pays solely according to its own consumption—metered utility charges are an example the amount may be a disbursement, where the landlord settles and recharges a cost that is legally the tenant’s responsibility—business rates are an example, if the tenant is the rateable person These and other specific categories of charge are considered in more detail below. Exceptions to the general position The position differs: if a party other than the landlord, such as a...

Article 12 of the Organisation for Economic Co- Operation and Development ( OECD)’s model tax convention ( MTC) Article 12 addresses how royalties arising in cross-border situations are taxed. It sets out how taxing rights are apportioned between two jurisdictions: the state where the recipient of the payment is resident (the recipient state), and the state where the payer is resident (the source state) This Practice Note examines: what constitutes royalties under a double tax treaty or convention ( DTT) the model convention’s method for taxing royalties targeted anti–treaty shopping measures how individual DTTs deviate from the model approach, and the practical scenarios in which the royalties article must be considered The EU Interest and Royalties Directive, which eliminated withholding tax on royalty payments between associated companies in different EU Member States and was implemented in UK law, was...

It is market practice for a tax covenant, sometimes referred to as a tax deed, to be included within the transaction documents for a sale of the entire share capital of a company (the target), where the target is: a private company incorporated in the UK; or a private company incorporated outside the UK with a UK connection (ie, where the buyer is UK tax resident or the share purchase agreement ( SPA) is to be governed by English law) This Practice Note sets out: what a tax covenant is what a tax covenant does—broadly, it allocates, by reference to a specified date, responsibility between seller and buyer for the tax liabilities of a target company or group; and how sums paid under a tax covenant are treated for UK tax purposes What is a tax...

This Practice Note explains the tax treatment of carried-forward income losses for corporation tax purposes. The framework for using carried-forward income losses was overhauled by Finance ( No 2) Act 2017 ( F( No 2) A 2017). The changes introduced two distinct regimes, under which, in broad terms: For losses arising on or after 1 April 2017 (post-1 April 2017 losses), a company may, in general, carry them forward and set them off against its total profits in later accounting periods. Moreover, carried-forward post-1 April 2017 losses can be surrendered via group relief. This flexibility is commonly described as the ‘loss relaxation’. For losses incurred before 1 April 2017 (pre-1 April 2017 losses), they can, as a rule, only be carried forward to be set off against profits of the same category. For instance, where a trading loss arose before 1 April 2017 and was not...

ARCHIVED: This Practice Note is archived and is not being actively maintained at this time. It provides detailed information on the Finance Act 2026 ( FA 2026), which obtained Royal Assent on 18 March 2026. It is preserved for historical reference and context, tracing the legislation’s journey from draft publication, through Parliament, to enactment. It also sets out the principal provisions and signposts major events and documents—such as any published amendments—relevant to the legislation’s progress and development. The tracker is divided into two parts as follows: Progress of FA 2026 FA 2026—measure by measure As outlined below, the government released draft legislation twice for public consultation ahead of its possible inclusion in FB 2026. For analysis of those drafts, see News Analyses: Tax update spring 2025— Tax analysis— Corporation tax and international and Legislation Day: Draft Finance Bill 2026— Tax...

This Practice Note considers receivers appointed under the Law of Property Act 1925 ( LPA 1925) or by an express power in a charge (for ease of reference, both are referred to in this Practice Note as LPA receivers, or simply receivers). This Practice Note does not address administrative receivers, nor receivers appointed by the court. VAT issues for receivers A receiver’s principal task is the collection and application of monies that come to them during their appointment. The factual circumstances may, in practice, be straightforward or intricate, depending on the nature of the property over which the receiver is appointed, the powers conferred by the mortgage deed under which the receiver is appointed, and the appropriate steps the receiver must take to maximise the return to the appointing mortgagee. A receiver, as a general rule, ordinarily controls the property in question for which they are...

Where a employee may have prospective claims against the employer under the Employment Rights Act 1996 ( ERA 1996) or other employment legislation, or might otherwise pursue a breach of contract claim, the parties can conclude a settlement agreement to terminate the employment on the terms specified in that document (although, on a limited number of occasions under employment law, certain claims cannot be compromised by a settlement agreement). Senior managers/shareholders can likewise execute settlement agreements if they depart when the employing business is sold. For a model settlement agreement (with drafting notes), see Precedents: Settlement agreement (employment) or Settlement agreement (employment) (short form). By agreeing a settlement, the employer gains assurance that the employee will not bring a future claim against the employer. Among other matters, the settlement agreement will address all sums and benefits due, or agreed, to be paid to the...

Whether dealings amount to trading or investment fundamentally drives the correct tax analysis for land and property transactions. Unlike many assets, indeed more than most other assets, land can be held either as an investment (that is, a capital asset) or as trading stock. A taxpayer may acquire a property with a particular purpose, only for that purpose to alter over the course of ownership. This note explains the idea of a supervening trade and outlines the tax effects when land or property is appropriated to, or removed from, trading stock. In this note, CGT refers to both capital gains tax and corporation tax on chargeable gains. Supervening trade Land acquired as a capital asset or investment may later be developed or otherwise dealt with in such a way that it is then converted into the stock of a newly commenced trade—this is a...

The derivative contracts rules The derivative contracts regime determines how a company’s profits and losses arising from its derivative arrangements are taxed. The core provisions are contained in Part 7 of the Corporation Tax Act 2009 ( CTA 2009), which this Practice Note refers to simply as Part 7. Relevant secondary legislation also applies, in particular the regulations commonly called the ‘ Disregard Regs’ (the Loan Relationships and Derivative Contracts ( Disregard and Bringing into Account of Profits and Losses) Regulations 2004, SI 2004/3256). This Practice Note considers the entities involved, together with the categories of instruments and transactions that fall within the ambit of the derivative contracts regime. For rules on computation—covering how profits and losses on derivative contracts are calculated and brought into account for corporation tax—see Practice Note: Taxation of derivatives—the main rules......