Legal Practice Notes

This Practice Note: describes what a whole business securitisation is—sometimes referred to as an operating asset securitisation sets out the principal tax considerations that arise on a whole business securitisation because the companies involved sit within a broader corporate group, including that: it is customary for the wider corporate group to provide a tax deed of covenant (a tax covenant) in favour of the securitisation group in general, entities participating in the securitisation should not be members of a VAT group with companies that are outside the securitisation group (see further below) indicates how tax-effective hedging can be achieved where the issuer does not qualify as a note-issuing company for the permanent securitisation regime For a guide to the contents of a tax...

Shari’a‑compliant finance arrangements (often referred to as Islamic finance arrangements) appear in several forms. The UK has enacted targeted provisions, called the alternative finance arrangement rules, to address the direct tax treatment of particular Shari’a finance structures. These UK rules are designed to ensure Shari’a‑compliant finance is, for UK direct tax, treated as if it were a standard loan. That outcome applies only where the arrangements meet the specific statutory conditions for alternative finance arrangements. At present, the rules extend to five distinct categories of financing. Certain parts of the tax code, such as VAT, have not created bespoke provisions for Islamic finance, which may give rise to uncertainty and to circumstances where Shari’a‑compliant finance is not aligned with the treatment of conventional finance. The direct tax regime for alternative finance arrangements is not confined solely to Islamic finance. Non‑ Shari’a...

This Practice Note This Practice Note sets out the function and fiscal treatment relevant to the general partner in a private equity fund organised as a UK limited partnership. It focuses, in particular, on the following: the responsibilities performed by the general partner the manner in which the general partner is remunerated the fiscal treatment of fund expenses the management charge key points where the fund (and general partner) is constituted outside the UK, and matters to address if the general partner is a limited liability partnership or a Scottish limited partnership (instead of a UK limited company) For broader guidance on the overall structure of UK private equity funds generally, including the fund manager’s role and certain wider tax matters, refer to Practice Note: Tax and private equity funds—fund structure. Please note that this Practice Note does not cover the...

What is a scrip dividend and why do companies make them? A scrip dividend—also known as a scrip or stock issue, a share dividend, or a scrip alternative—arises when a company gives its shareholders the choice to choose between receiving either: a cash dividend; or new shares (usually) of a value broadly equivalent to the cash dividend Such distributions are more prevalent in challenging economic conditions, when companies ordinarily seek to lessen the amount of any cash dividend they need to pay out. Shareholders may often favour the scrip option because it enables them to obtain new shares without having to pay: broker’s fees; or stamp taxes In addition, certain companies put forward ‘enhanced scrip dividends’ to encourage take-up by shareholders. Under an enhanced scrip dividend, the value of the shares issued exceeds the value of the...

Shari’a-compliant financing arrangements Shari’a‑compliant financing arrangements (often described as Islamic financing) can be implemented in a range of formats. The UK has enacted dedicated provisions, termed the alternative finance arrangement rules, to address the direct tax treatment of specified Shari’a finance structures. These rules are intended to ensure that, for UK direct tax purposes, qualifying Shari’a finance is treated in the same way as a conventional loan. That outcome applies only where the financing arrangement satisfies the statutory conditions set out for alternative finance arrangements. At present, the regime encompasses five distinct categories of financing structures. By contrast, some parts of the tax code, such as VAT, have not introduced bespoke measures for Islamic finance. As a consequence, there can be uncertainty about the appropriate VAT treatment where the legal form diverges from the underlying substance, including situations in which...

Business In periods of economic unpredictability (eg arising from high inflation and/or wider instability), organisations frequently cut costs. This can involve shedding contractual obligations and resolving legal disputes, but also purchasers seeking to withdraw from deals—for example, where a business or asset acquisition that seemed compelling to a buyer a couple of years or even months earlier becomes far less attractive. Yet unpicking an acquisition is rarely straightforward and, if not managed with care, can produce unforeseen tax consequences. This Practice Note outlines the tax issues that may emerge where a business or asset sale is unwound after signing and after certain assets and liabilities have already been transferred. It proceeds on the assumption that the buyer and seller are unconnected, are both UK tax resident, and are large corporate entities. For detail on the tax considerations relevant to undoing a share sale, see...

This Practice Note sets out the tax implications of entering into marriage and civil partnership, including in relation to income tax, capital gains tax and inheritance tax. Seek specialist advice where appropriate. The tax treatment of civil partners mirrors that of spouses. For UK tax purposes, an individual is regarded as married or as a civil partner if they have undergone a formal marriage or civil partnership ceremony, or, from 10 December 2014, have converted a civil partnership into a marriage by formal declaration. Simply living together, or being in a so‑called common law relationship, does not amount to marriage or civil partnership. Income tax and capital gains tax ( CGT) rules refer to spouses/civil partners who are “living together”. This phrase does not require sharing the same home—or even the same country. It covers all spouses/civil partners unless one of the following...

This Practice Note sets out the tax treatment for key managers in a company seeking growth finance where they are required to acquire shares as a condition of a funding round. In the growth capital market, investors often provide money through successive rounds and will typically expect central figures in the business to take part by subscribing for shares in the issuing company... Growth capital—seed, venture and development capital Unquoted businesses regularly need capital at each phase of their journey, from start-up to full establishment and profitability. Many turn to the private equity and venture capital community, where outside backers supply funding in exchange for an ownership stake in companies with the potential for rapid growth. For businesses at an early stage or aiming to scale further, the funding may comprise: seed capital, being finance provided to entirely new...

FORTHCOMING CHANGE relating to the rates of business asset disposal relief ( BADR): Following announcements at the Autumn Budget 2024, the capital gains tax rate applying to disposals qualifying for business asset disposal relief ( BADR) is set to rise to 18% for disposals completed on or after 6 April 2026, aligning with the lower main capital gains tax rate. This comes after an interim increase to 14% (up from 10%) for disposals occurring on or after 6 April 2025. Legislation implementing these changes has been included in the Finance Act 2025. A management buyout (often termed an ‘ MBO’) is the purchase of a business by its existing management team (or selected members of that team), usually with private equity-backed finance. Under such arrangements, the private equity investor acquires a stake in the business (typically a majority interest), and the incumbent...

This Practice Note examines UK tax considerations for the operation and termination of a joint venture conducted through a partnership. For the purposes of this note, it is assumed that: the joint venture parties are UK tax resident corporate entities the joint venture partnership vehicle is also UK tax resident, and the venture’s activities are undertaken in the UK For information on: the establishment of a joint venture partnership, see Practice Note: Tax implications of establishing a joint venture partnership, and joint ventures with a non- UK element, see Practice Note: Tax implications of international joint ventures This Practice Note does not address certain investment partnerships that are unit trust schemes which may not be treated as transparent for tax purposes. Tax implications of operating a joint venture partnership In broad terms, a joint venture partnership operates in the same manner as any other...

The UK has two approaches to taxing IP transactions: The corporate intangibles tax rules: these cover IP that a company develops or purchases on or after 1 April 2002 (except where the asset was acquired before 1 July 2020 from a related party that owned it before 1 April 2002). This regime broadly follows the accounting treatment and, in particular, enables the company to set the acquisition cost against tax over its useful economic life through amortisation deductions. A mixture of general tax rules, with a few specific IP rules: these apply to IP held by individuals and non‑corporate entities, and to IP created or obtained by a company before 1 April 2002 (or acquired before 1 July 2020 from a related party that owned the asset before 1 April 2002). This framework does not specifically track the...

The way consideration payable for buying shares is arranged is rarely simple or linear, and can vary considerably. In many situations payment is postponed, deferred, or made conditional on a particular contingency being satisfied. Selling shareholders will look to maximise the overall price for their shares while also seeking to limit, so far as possible, any tax on disposal by: making full and efficient use of available reliefs to cut or remove any charge, and/or delaying the point in time at which any such tax becomes due However, where the consideration is deferred, the seller can become liable to tax immediately on an amount not yet received (a ‘dry’ tax charge). In calculating chargeable gains, no discount is usually allowed in respect of any consideration that is ascertainable at the date of disposal, even where it is: deferred subject to a...

This Practice Note reviews the UK tax considerations relevant to the establishment, operation and cessation of contractual joint ventures, and explores how the participants might differentiate such an arrangement from a partnership. For the purposes of this Practice Note, it is assumed that the joint venture parties are UK tax resident corporate entities and that the joint venture’s business is conducted in the UK (for information on ventures with a non- UK element, see Practice Note: Tax implications of international joint ventures)... What is a contractual joint venture? A joint venture is a commercial arrangement undertaken by two or more independent parties. There are no specific statutory rules, including tax provisions, that apply solely to joint ventures, and the term itself has no precise legal definition. A joint venture can be structured in various ways. It may operate through a separate joint venture vehicle, most...

Successive UK governments have aimed to cement the UK as one of the world’s most appealing settings for innovation and enterprise. To that end, a wide-ranging suite of tax incentives has been rolled out to encourage innovative companies, supporting both investors and trading entities, and assisting businesses at every phase of a business’s life cycle. These incentives include: R& D tax reliefs patent box business asset disposal relief (previously entrepreneurs’ relief) capital allowances for purchases of: knowhow patents, and plant and machinery venture capital trusts the enterprise investment scheme, and the seed enterprise investment scheme This Practice Note outlines the UK position on key tax...

ARCHIVED: This Practice Note has been archived and is not maintained. Residence, ordinary residence and domicile Residence, together with domicile and ordinary residence, determined the extent of an individual’s UK tax liability before 6 April 2013, notably where non- UK income and gains arose. This Practice Note deals solely with the position prior to 6 April 2013. The UK’s first formal test of individual tax residence, the statutory residence test ( SRT), came into effect on 6 April 2013. For an outline of the post 5 April 2013 regime, see the Residence after 5 April 2013 Practice Note. The SRT applies for income tax, capital gains tax and inheritance tax purposes, but not for national insurance purposes. All law, case law and guidance predating 6 April 2013 were superseded for the 2013/14 tax year and thereafter. From the same date, the concept of ordinary residence was...

This Practice Note deals with the application of the residence rules to people leaving the UK after 5 April 2013. The UK introduced its first codified individual tax residence test—the statutory residence test ( SRT)—with effect from 6 April 2013. For detailed guidance on the SRT, refer to the Residence after 5 April 2013 Practice Note. Prior to that date, an individual’s UK tax residence was assessed by reference to a patchwork of narrow statutory provisions, case law, established practice and HMRC guidance. Status for any period before 6 April 2013 must therefore still be established under those earlier rules. Application of the SRT looks in part at whether a person was UK resident in the preceding three tax years, meaning residence outcomes for 2010/11, 2011/12 and/or 2012/13 matter when assessing residence from 6 April 2013. Although the pre‑2013/14 years remain governed by the old law, an...

ARCHIVED : This Practice Note has been archived and is not maintained. Guidance on the UK residence rules up to 6 April 2013 is set out in the Residence before 6 April 2013 [ Archived] Practice Note. This Note explains how the residence rules applied to individuals arriving in the UK before 6 April 2013. For those departing the UK before that date, see Residence before 6 April 2013—application of rules to individuals leaving the UK [ Archived] Practice Note. For rules on UK residence from 6 April 2013 onwards, refer to the Introductory guide to residence and domicile for UK tax purposes before 6 April 2025 [ ARCHIVED] Practice Note. In addition to the above, the following may assist: Ordinary residence before 6 April 2013 [ Archived], Tax implications of ordinary residence before 6 April 2013 [ Archived], and Domicile for UK tax...

ARCHIVED : This Practice Note is archived and no longer maintained or updated as such. For a fuller overview of the residence rules that applied before 6 April 2013, see Practice Note: Residence before 6 April 2013 [ Archived]. From 6 April 2013, residence is determined by the statutory residence test (see Practice Note: Residence after 5 April 2013 for guidance). This Practice Note first clarifies what counts as a 'visitor' and outlines HMRC guidance on the tax treatment of visitors prior to 6 April 2013. It then covers: people who come to the UK for under 183 days in a tax year on a single occasion other short-term visitors who are in the UK for more than 183 days in one tax year habitual visitors (individuals who arrive here often and routinely) those who spend extended periods in the UK, but not exceeding three...

Core business tax resources These principal tax resources offer practical commentary, legislation, rules and guidance for tax lawyers in private practice or in‑house. Note: access to the titles below requires the appropriate subscription(s)... Yellow Tax Handbook Provides the consolidated, annotated text of all legislation and official materials on income tax, capital gains tax, corporation tax, National Insurance contributions ( NICs), tax credits, petroleum revenue tax and inheritance tax, with references to Simon’s Taxes and HMRC Manuals, where relevant. For lawyers and tax practitioners seeking the underlying legislation on direct taxes and wishing to research guidance on a particular section of direct tax law... Orange Tax Handbook Provides the consolidated, annotated text of all legislation and official material covering VAT, stamp and transfer taxes, insurance premium tax, soft...

Sukuk (singular form: ‘sakk’) Sukuk are Shari’a-compliant financing instruments, commonly described as Islamic certificates or bonds. For further detail, see Practice Notes: The structure and elements of a Sukuk transaction and Sukuk—investment bond arrangements and their UK direct tax treatment— What are sukuk? Where the statutory requirements are satisfied, sukuk can access the UK tax regime that applies to alternative finance investment bond ( AFIB) arrangements. For guidance on those provisions, see Practice Note: Sukuk—investment bond arrangements and their UK direct tax treatment. A distinct variant is sukuk al ijara. In such structures, the bond-issuer (the legislative term for the sukuk issuer) typically holds land on trust for the certificate holders (the sukuk investors). The issuer secures a land interest through a sale and leaseback—the ijara element. For more detail, see Practice Notes: The structure and elements of a Sukuk...