Legal Practice Notes

ARCHIVED This archived Practice Note summarises the reforms introduced by the Finance Act 2004 on A-day (6 April 2006) and the principal features of the post A-day pensions tax regime. It is not maintained. For details of the current pensions tax position, see Practice Note: Tax treatment of pensions—an introduction... Changes made on A-day Registration The present pensions tax regime commenced on A-day. Prior to A-day, pension schemes needed to be treated as ‘exempt approved’ by the Inland Revenue (now HMRC) to obtain favourable tax treatment. From A-day onwards, this was replaced with a requirement for both occupational and personal pension schemes to be registered with HMRC. For further details, see Practice Note: Registration of pension schemes. Schemes that held exempt approved status before A-day were registered automatically on A-day, unless the scheme administrator chose not to register. For information on the pre A-day regime, see...

For broader background and practical information on the Isle of Man, refer to Practice Note: Private Client— Isle of Man— Q& A guide. Legal framework Manx trust law stems from English law. It is grounded in long-established common law principles and is further supported and refined by statute which, for the most part, closely mirrors equivalent English measures. The key Manx trust enactments are: Trustee Act 1961 (largely derived from the Trustee Act 1925 of England and Wales) Variation of Trusts Act 1961 Perpetuities and Accumulations Act 1968 Recognition of Trusts Act 1988 (which gives effect in Manx law to the Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition ( Hague Convention)) Trusts Act 1995 Purpose Trusts Act 1996 Trustee Act 2001 (largely derived from the Trustee Act 2000 of England and...

What is the climate change levy? The climate change levy ( CCL) is a compulsory charge on energy used by UK businesses. It is applied at the point of supply, referred to as taxable supplies. HMRC oversees the levy, while energy suppliers add the charge to invoices and collect it. The levy applies to most non-domestic electricity, gas and solid fuels across the United Kingdom. Taxable supply A taxable supply means the provision of a taxable commodity, which can include self-supply, by an energy supplier to a business consumer that is not excluded from, or exempt under, the CCL. What is a business consumer? Business consumers are those operating in: industry commerce agriculture public administration Definition of self-supply A self-supply arises when a gas or electricity supplier, or a producer of other taxable commodities, uses its own output for its own business activities (e.g., heating and...

This Practice Note brings together material on fiscal milestones across the 2018–19 tax year, beginning with publication of draft measures for Finance Bill 2019, moving through the 2018 Budget, the Finance Act 2019’s passage through Parliament, and concluding with the 2019 Spring Statement. For details of the Finance Act 2019—its route to Royal Assent and principal measures—see: Tax— Finance Act 2019—progress through Parliament. For an in-depth outline of the annual Budget and Finance Bill cycle, including the procedures for enacting a Finance Act, see Practice Note: The Budget and Finance Bill process. Spring Statement 2019 The Chancellor of the Exchequer, Philip Hammond, presented his Spring Statement on Wednesday 13 March 2019. Analysis includes: Spring Statement 2019— Tax analysis Spring Statement 2019— Private Client analysis Spring Statement 2019—predictions for tax Finance Act 2019 The government released Finance Bill 2019 ( FB 2019—also referred to as the...

This Practice Note summarises the UK provisions that oblige payers to withhold, and pay over to HMRC, an amount equal to UK basic rate income tax (currently 20%) from consideration for the use of, or the right to use, intellectual property ( IP), including royalties and similar consideration payable under comparable contractual arrangements sets out the notions of IP and UK source, which underpin the requirement to deduct income tax at the basic rate from IP-related payments, in practice across common scenarios describes the reliefs that can be claimed from UK withholding tax on IP-related payments; and examines the anti-abuse measures that may curtail the application of double tax treaty ( DTT) relief to the relevant IP-related payment, including: the principal purpose test; and the anti-treaty shopping rule for connected parties This Practice Note also briefly touches on the subject to tax rule. In this Practice Note,...

The qualifying asset holding company ( QAHC) regime The QAHC is an optional, tax‑favoured framework for specified holding companies—known as asset holding companies ( AHCs)—used within collective and institutional investment structures to own investment assets. Its primary emphasis is on so‑called alternative fund structures, which the OECD labels non‑ CIV funds. These are typically vehicles that: are closed‑ended are non‑retail hold portfolios spanning private market strategies—principally credit, private equity and real estate—ie less liquid, higher‑risk assets Launched on 1 April 2022, the QAHC regime aims to encourage funds to situate their AHCs in the UK where that is otherwise sensible (for example, where the investment manager is UK‑based). Historically, even with the UK’s strong concentration of deal specialists and asset management expertise, Luxembourg has been the preferred domicile for asset holding companies in such structures, reflecting its wide treaty network and suite of tax reliefs. Ireland has also...

A ‘loan relationship’ broadly denotes a monetary debt that stems from the lending of funds. Yet that definition does not capture every arrangement or transaction taxed within the loan relationships regime. The regime’s scope is expressly widened to include particular arrangements and transactions treated as akin to debt finance. These are often described as ‘deemed loan relationships’ and cover arrangements which, although outside the literal definition of a ‘loan relationship’, generate a return that is economically the same as interest (frequently called an interest-like return). For further detail on the definition of loan relationship and the different types of ‘deemed loan relationships’ within the regime, see Practice Note: Loan relationships—what are they? For the computational rules on how profits and losses from loan relationships are computed and recognised for corporation tax, see Practice Note: Loan...

Trustees and trust assets In numerous ways, obtaining security from trustees over trust property resembles taking security from chargors who hold the applicable asset outright. Factors that arise when securing obligations from an individual equally arise when securing obligations from individual trustees, and the same principle applies to their corporate counterparts. This Practice Note does not aim to address matters of general application when taking security; instead, it concentrates on particular points to keep in view when security is taken over trust assets. It highlights nuances specific to trust-held assets for lenders and advisers. This Practice Note addresses the following topics: the nature of trusts the powers of trustees to borrow and grant security specific issues to assess where security is taken over land regulatory aspects, and documentary considerations Please note, this Practice Note deals with issues concerning the taking of security from trustees generally and not charity...

What is judicial review? Judicial review is the means by which the courts exercise a supervisory jurisdiction over the performance of public functions by public bodies. This supervisory jurisdiction should not be mistaken for, or treated as, a right of appeal. CPR 54.1 states that a 'claim for judicial review' means a claim to assess the lawfulness of: an enactment a decision, action, or failure to act in relation to the exercise of a public function. Proceedings usually take place in the Administrative Court, which forms part of the King's Bench Division of the High Court. Judicial review proceedings are governed by a number of Civil Procedure Rules, Practice Directions and a pre-action protocol. Further detailed and practical guidance is provided in the Administrative Court Judicial Review Guide. The guide is intended to assist parties pursuing judicial review claims in the...

FORTHCOMING CHANGE relating to the modernisation of stamp taxes on shares framework: From 2027, stamp duty and SDRT will be replaced by a single, self-assessed tax on securities—the securities transfer charge ( STC)—which will be paid and reported via a new online portal. The STC’s features will largely reflect the proposals for that tax set out in the 2023 consultation. Finance Bill 2026 ( FB 2026) provides a power, commencing on Royal Assent, to introduce secondary legislation so taxpayers can pilot the digital service by self-assessing their stamp taxes on securities liabilities and submitting transactions electronically. For more on the modernisation of stamp taxes on securities, see: News Analyses: Budget 2025— Tax analysis— Stamp and transfer taxes Tax update spring 2025— Stamp taxes on shares modernisation Tax update spring 2025— Tax analysis— Stamp and transfer taxes TAMD 2023— Stamp taxes on shares...

This Practice Note provides a checklist in the form of a high-level summary of the key anti-avoidance rules that may apply to restrict the tax deductibility of loan interest for a corporate borrower within the charge to UK corporation tax. They include: the loan relationships regime-wide anti-avoidance rule ( RAAR) the unallowable purpose rule the rules recharacterising interest as a distribution the corporate interest restriction the transfer pricing rules the hybrid and other mismatches rules non-market loans the general anti-abuse rule For these purposes, assume the borrower and lender are unrelated and deal strictly on a commercial arm’s length basis in relation to a bilateral or syndicated loan arrangement......

The substantial shareholdings exemption ( SSE) removes corporation tax on chargeable gains arising on certain disposals of shares by companies. It does not extend to individuals or other non-corporate bodies. The purpose is to simplify corporate restructuring and strengthen the UK’s competitiveness against the ‘participation exemption’ regimes found in some other European countries. Under the general rule that an exempt asset’s disposal cannot create an allowable loss, any loss realised on a shareholding that qualifies for SSE is not allowable for capital gains. The exemption applies automatically; there is no requirement to claim it, and no option to disapply it where a loss claim would be beneficial. This Practice Note sets out the scope of the SSE, the conditions that must be satisfied, and the specific rules for institutional investors, company groups, share exchanges and...

This Practice Note explains when the VAT option to tax is disapplied under anti-avoidance provisions (see Practice Note: The option to tax land and buildings). Why does this matter? Where the conditions set out in this Practice Note are satisfied, the option to tax is switched off automatically. The parties have no discretion, and no tax avoidance purpose is required. As a result, the option can be turned off in routine commercial deals, so significant caution is often necessary. The rules operate to override an option to tax and render a sale or letting exempt, preventing the vendor or landlord from reclaiming VAT attributable to the property. The consequences can be especially severe for property developers. The regime is also pertinent to transfers of a going concern ( TOGC) (see Practice Note: VAT—transfers of a going concern involving land and buildings), and it is...

A company is UK tax resident if it is: incorporated in the UK (subject to exceptions), or centrally managed and controlled in the UK, provided it is not considered resident outside the UK under a double tax treaty (ie not treaty non-resident). The central management and control assessment is commonly known as the CMC test. For guidance on treaty non-residence, see Practice Note: Tie breakers—when tax treaties impact on the UK tax residence of companies. For details on moving a UK tax resident company from the UK, and the tax effects of doing so, see Practice Notes: Company migration or corporate inversion—how to change tax residence in practice and Consequences of company migration— UK exit charges and post-migration UK tax considerations and Corporate migration by shifting tax...

Employers may, at times, make loans available to directors or staff, either as part of the overall remuneration package or on particular occasions to assist with major outlays. This Practice Note looks in detail at the income tax and National Insurance contributions ( NICs) consequences where the lender later writes off or releases such borrowing. It sets out the specific provisions within the benefits code in ITEPA 2003, Part 3 that govern ‘employment‑related loans’. For what amounts to an employment‑related loan, see Practice Note: Employment‑related loans—defined. Alongside the write‑off charges outlined below, if an employee or director (or a relative of either) receives an employment‑related loan that counts as a taxable cheap loan, there is an annual income tax and Class 1A NICs charge on the cash equivalent of the benefit enjoyed by the employee or director (subject to certain...

Liquidation Following enforcement of security by fixed charge creditors for their own benefit, the order of distributions in a winding up is: if liquidation commences within 12 weeks of a moratorium, any unpaid moratorium debts and ‘priority pre‑moratorium debts’ to which no payment holiday applied during the moratorium expenses properly incurred in the winding up (including the liquidator’s remuneration) ordinary preferential debts secondary preferential debts the prescribed part for unsecured creditors (where not disapplied) debts secured by floating charges unsecured debts statutory interest postponed debts (i.e. non‑provable liabilities) return of any surplus to members (subject to adjustment between members) For further details, see Practice Note: Waterfall of payments in liquidation......

This Practice Note This Practice Note sets out the principal administrative duties, including the deadlines for: filing information returns; and remitting tax to HMRC in relation to the categories of payments in section 946 of the Income Tax Act 2007 ( ITA 2007) from which UK income tax must be withheld by the payer (section 946 payments), namely yearly interest, certain IP-rights related payments (including royalties), and annual payments It does not address: the administrative framework for withholding tax: that must be deducted by a person other than a UK tax resident company—in many such instances, the withheld amount is accounted for to HMRC via the payer’s self-assessment return, though in some cases HMRC collects it through direct assessment; or levied on other income types, for example...

This Practice Note explains what constitutes a scheme of reconstruction for tax purposes. Defining a scheme of reconstruction matters because certain group reorganisations only achieve tax neutrality—that is, avoid triggering a tax liability—if they proceed by way of such a scheme. Accordingly, to secure no immediate tax charge, the transaction must be implemented as a scheme of reconstruction in practice. Company reconstructions The core principle is that where a company, or a company’s business, is moved to another company and the acquiring company issues shares to the existing shareholders so they retain an interest in the original undertaking, then, provided specified conditions are met, those shareholders are, for tax, treated as not having disposed of their original shares......

Practice Note This Practice Note examines how UK tax rules apply to securitisation companies encompassed by the parameters of the permanent securitisation regime......

This Practice Note: sets out the principal conditions that must be met for a non- UK lender to qualify for relief from UK withholding tax on interest paid under an applicable double tax treaty with the UK, drawing particular attention to the potential difficulty posed by the beneficial ownership test, and offers drafting ideas to reinforce a borrower's position As noted in: Practice Note: Tax considerations on a loan agreement—the tax gross up clause, and Checklist: Reviewing a loan with a view to alleviating UK withholding tax risk—checklist withholding tax is a central issue for a loan. The possibility that UK withholding tax could apply to an interest payment—and therefore that a borrower may need to gross up that payment for the withholding—heightens where the lender is not UK tax resident. Some lenders that are not UK tax resident are based in a...