Legal Practice Notes

This Practice Note addresses the UK activities gateway and safe-harbour under the controlled foreign company ( CFC) regime. As set out in the meaning of gateways, a CFC tax charge applies solely where profits are routed through the CFC charge gateway. A CFC’s assumed total profits ( ATP) reach the CFC charge gateway only where they first pass the chapter 3 gateway and/or one of the gateways in chapters 4–8 of Part 9A of the Taxation ( International and Other Provisions) Act 2010 ( TIOPA 2010). When does the chapter 4 UK activities gateway need to be considered?......

When an individual disposes of an asset and realises a profit of a capital nature, a taxable capital gain may arise. In determining whether a charge to tax is triggered, consider: whether the asset, the act of disposal, and the disposer are of kinds within CGT’s scope whether the ‘consideration minus costs’ computation in Practice Note: How is a capital gain calculated? produces a positive figure whether any exemption or relief is available whether losses exist to set off against the gain These points are outlined below. For what distinguishes capital from revenue profits, see Practice Note: Taxation of trading profits—basis, receipts and deductions— Receipts— Capital v revenue. Note that particular corporate tax regimes override the chargeable gains rules in some cases, notably the intangible fixed asset rules and the loan relationships rules. For more detail, see: Intangible fixed assets and...

Tax relief for expenditure on fixtures A taxpayer can often obtain tax relief for expenditure on fixtures by claiming plant and machinery allowances. For wider guidance on the availability of plant and machinery allowances in general, see Practice Note: Plant and machinery allowances—types and rates, and for further detail on how allowances are claimed and calculated, see Practice Notes: How plant and machinery allowances are claimed—income tax and How plant and machinery allowances are claimed—corporation tax. To qualify for allowances, expenditure on fixtures must satisfy the same conditions that apply to other categories of plant, together with additional rules that are specific to fixtures......

THIS PRACTICE NOTE APPLIES TO TRUST- BASED OCCUPATIONAL PENSION SCHEMES Trustees can face personal liability if a breach of trust leads to loss for the pension scheme. This may arise where trustees: operate beyond the powers set out in the scheme’s trust deed and rules, or fail to comply with legislation or the law of trusts. Trustees should ensure that sufficient safeguards exist to protect them against personal liability. With pensions legislation becoming increasingly complex, trustees who do not seek appropriate advice and who lack the necessary knowledge and skills are liable to make errors when administering pension schemes. Directors of a corporate trustee are generally considered to have stronger protection from personal liability than individual trustees. In the absence of dishonesty, the court is unlikely to permit a claim against those directors for a breach of trust by the trustee company, mainly because of the...

What is a security agent? The security agent plays a pivotal role in syndicated transactions. In a syndicated loan, the security agent (often referred to as the ‘security trustee’) holds the transaction security on trust for the lenders and any other secured creditors, including hedging counterparties. Although commonly labelled a security agent, the function is not an agency role but a trusteeship. Using a trust structure to hold the transaction security offers significant benefits in syndicated lending, where the creditor group usually shifts over time as lenders transfer their loans to new lenders (see Practice Note: Introductory guide to loan transfers). The key advantages are as follows: the trust structure removes the need for security to be granted separately to each creditor, which can be costly and time‑consuming; and the security is vested in the security trustee for the benefit of the...

This Practice Note outlines: the principal corporation tax consequences when a UK‑incorporated company enters administration in the UK; and certain other tax considerations that may arise during the course of the administration Administration is a highly adaptable procedure and has become a popular means of addressing, and in many instances rescuing, insolvent businesses. It provides breathing space to enable a rescue or a restructure, or to achieve a better outcome for all creditors than would be possible on liquidation. Administration is an entirely statutory process. When reforms were introduced by the Enterprise Act 2002 ( En A 2002), inserting Schedule B1 into the Insolvency Act 1986 ( IA 1986) for administration, HMRC also brought in specific tax rules to cover certain matters, although these are not comprehensive. For fuller discussion of the administration process, see:...

FORTHCOMING CHANGE relating to a new SDRT exemption: As set out at Budget 2025, Finance Bill 2026 will create a new relief from the principal (but not the higher rate) SDRT charge, known as the UK listing relief. It will apply to contracts to transfer any chargeable securities in a company during the three years following the company’s initial admission of its shares (or depositary interests in shares) to trading on a UK regulated market, provided that first UK listing takes place on or after 27 November 2025. For further detail, see Practice Note: UK listing relief from principal charge to SDRT and News Analyses: Finance Bill 2026— UK listing relief— Stamp duty reserve tax holiday for new listings and Budget 2025— Tax analysis— Stamp and transfer taxes. FORTHCOMING CHANGE relating to the modernisation of stamp taxes on shares...

This Practice Note outlines a practical method for properly assessing a business-to-business commercial contract (for example, an intellectual property licence arrangement) in relation to UK VAT purposes......

Forthcoming change: Sections 6–7 of the Finance Act 2026 provide that, with effect from 6 April 2027, an individual’s property income will be subject to income tax at the property basic rate of 22%, the property higher rate of 42%, and the property additional rate of 47% for a given tax year. A person’s property income is treated as the highest portion of their income, save where they also have savings and/or dividend income. Where savings and/or dividend income arises, the property income is taken to be the portion of the person’s income that falls immediately before the savings and/or dividend income. FA 2026, Schedule 1, makes consequential amendments to ITA 2007. For these purposes, property income means income that is: chargeable under Chapter 3 of Part 3 of ITTOIA 2005 (profits of a UK property business or an overseas property...

FORTHCOMING CHANGES : At Budget 2025, the government confirmed it will legislate through Finance Bill 2026 (also known as Finance ( No 2) Bill 2024–26) to introduce new powers for HMRC aimed at tackling fraud by businesses operating within the CIS. Reflecting VAT rules that restrict input tax recovery where a supplier knew or should have known a supply was linked to the fraudulent evasion of VAT, the forthcoming CIS rules will: permit the immediate removal of a business’s gross payment status make a business accountable for tax that has been lost, and allow a penalty of 30% of the lost tax to be charged to the business, its directors, and other connected persons where it can be demonstrated that the business knew or should have known it entered into a transaction connected with the fraudulent evasion of tax In...

Depending on the facts, a sum paid or a benefit given on the termination of an office or employment can be taxed in full, taxed in part, or, in limited cases, be wholly exempt. For a summary of the potential tax treatments of termination payments, see Practice Note: Termination payments and tax. The starting point for any termination sum is to consider whether it is chargeable, on basic principles, as earnings from, or an emolument of, an office or employment under section 62 of the Income Tax ( Earnings and Pensions) Act 2003 ( ITEPA 2003) or instead falls within other provisions of ITEPA 2003 that deem specified categories of termination payments to be earnings. For instance, since 6 April 2018, ITEPA 2003, s 402B has treated non-contractual payments in lieu of notice ( PILONs) as earnings for tax purposes under UK law......

FORTHCOMING CHANGE: The Welsh government continues to review the ongoing availability of multiple dwellings relief, with a formal announcement anticipated in Spring 2025. This Practice Note outlines land transaction tax ( LTT), which replaced stamp duty land tax ( SDLT) in Wales with effect from 1 April 2018. Three related companion Practice Notes examine particular aspects of the tax in greater detail, as set out below: Wales: Land transaction tax ( LTT)—chargeable consideration and rates of LTT Wales: Land transaction tax ( LTT)—particular transactions and tax payers, and Land transaction tax ( LTT)—administration and compliance Background The Wales Act 2014 provides for SDLT to be disapplied in Wales with effect from 1 April 2018 and enables the Welsh Government to introduce its own tax on transactions in land in Wales. The legislative framework for LTT is set out in the Land...

From 1 April 2018, land transaction tax ( LTT) took the place of stamp duty land tax ( SDLT) in Wales. This Practice Note outlines how LTT applies to specific scenarios where its treatment diverges from SDLT, including the following: Residential leases Mixed use claims—garden and grounds Leases held over beyond their contractual end date Multiple dwellings relief ( MDR) Cross border transactions, including cross title properties Anti-avoidance, covering the LTT targeted anti-avoidance rule ( TAAR) and the general anti-avoidance rule ( GAAR) Property authorised investment funds ( PAIFs) and co-ownership authorised contractual schemes ( Co ACS) Partnerships Brexit Where appropriate, it contrasts LTT with SDLT. It also builds on the fundamentals in the Practice Note: Wales: Land transaction tax ( LTT)—the basics. LTT is legislated for in the Land Transaction Tax and...

Land transaction tax ( LTT) superseded stamp duty land tax ( SDLT) in Wales with effect from 1 April 2018. This Practice Note considers how LTT is worked out, the meaning of chargeable consideration for LTT purposes and the applicable rates. Where relevant, comparisons with SDLT are noted. The Practice Note builds on the basics in Practice Note: Wales: Land transaction tax ( LTT)—the basics. LTT is contained in the Land Transaction Tax and Anti-avoidance of Devolved Taxes ( Wales) Act 2017 ( LTTADT( W) A 2017). Statutory references are to LTTADT( W) A 2017 unless stated otherwise. How is LTT calculated? LTT is charged on the acquisition and disposal of an interest in freehold or leasehold land. It applies not only to the purchase of freehold land or the grant of a lease (the creation of an interest) but also to the release of an...

This Practice Note addresses the VAT treatment of partnerships, joint ventures and other vehicles in the context of property development and investment. It considers: companies, general partnerships, limited partnerships, limited liability partnerships ( LLPs), real estate investment trusts ( REITs), co-owners and joint ventures which entity must be VAT registered which entity should opt to tax the treatment of dealings between the parties contributions and distributions dealings with third parties Why does this matter? It is often not obvious how collaborative arrangements should be treated for VAT purposes, or who ought to charge VAT to whom. In some situations the position is genuinely uncertain, and the VAT supplies may fail to mirror commercial reality. It is therefore vital that contracts address the position...

This Practice Note sets out the particular rules governing VAT on costs that fall to be the subject of either summary or detailed assessment before the High Court. The applicable provisions are contained in CPR PD 44. Entitlement to This is addressed at CPR PD 44, para 2.3 through to CPR PD 44, para 2.6. The party seeking recovery of costs bears responsibility for ensuring that VAT is claimed only if, and only to the extent that, it cannot recover from HMRC the VAT it has incurred ( CPR PD 44, para 2.4). if the VAT is recoverable from HMRC, it should not be included in a claim for costs if only a proportion of the VAT is recoverable from HMRC, include only that proportion which is not recoverable from HMRC in the claim for costs The legal adviser’s VAT registration number must appear in a...

ARCHIVED: Due to the reforms envisaged by The Windsor Framework, the details of which were announced by the UK government on 27 February 2023, this Practice Note has been archived and is not maintained. The information in this Practice Note was correct as at 1 January 2021. For further details on The Windsor Framework and how it affects VAT in Northern Ireland, see: The Windsor Framework. This Practice Note addresses VAT on purchases of goods by VAT-registered businesses in Northern Ireland from EU businesses from 1 January 2021, and how the rules applied to all VAT-registered businesses in the UK on or before 31 December 2020. Where goods are dispatched from one Member State and received in another, there is an EU cross-border movement of goods. In this context, the supplier makes a dispatch and the customer recognises an acquisition. VAT is not charged in the...

VAT issues that arise in residential developments This Practice Note examines VAT matters encountered in residential development projects. It addresses, among other points, the following areas: different and varying forms of development the potential consequences of granting short-term leases relevant planning obligations and local infrastructure various incentives available to buyers disposals of surplus land and incomplete developments, matters arising from subsequent grants of overriding leases and sales of reversions For VAT considerations in commercial schemes, see the separate Practice Note: Commercial development— VAT issues. This Practice Note also includes references to case law from the EU Court of Justice. For further guidance on whether rulings of the Court of Justice bind the UK courts, see Practice Note: Assimilated law— Assimilated case law. For commentary on assimilated law (previously retained EU law) and tax more broadly, including the bespoke approach now applied in VAT law, see...

ARCHIVED: Following the changes proposed under The Windsor Framework, the details of which the UK government publicly set out on 27 February 2023, this Practice Note has been formally archived and is no longer updated. The material within this Practice Note remains correct as at 1 January 2021. For additional detail on The Windsor Framework and what it means for VAT in Northern Ireland, see: The Windsor Framework. This Practice Note addresses VAT in relation to the movement of goods between Northern Ireland ( NI) and the EU from 1 January 2021 (and how it applied to all VAT-registered businesses in the UK on or before 31 December 2020). Distance selling arises where a VAT-registered EU supplier sells and ships goods to a customer in another EU country who is not registered for VAT. The customer might be a private person, or an...

The most common reasons for entering into derivatives are for the purposes of: Speculation — when a party seeks exposure to a given variable, for example taking a view on a commodity’s future price on the assumption it will rise or fall over a chosen period Hedging — aiming to offset exposure to the risk of an unfavourable shift in a variable, or to stabilise expected outcomes over time Arbitrage — seeking to take advantage of price discrepancies (between markets, or within the same market over time) to earn profit or cut costs, or where one participant can reach a price or market unavailable to another, including where prices differ over time Exposure to asset classes — obtaining access to a target market (eg commodities, shares, property) without incurring the expense, complexity and formalities associated with those markets, avoiding the same costs and...