FORTHCOMING CHANGE relating to UK transfer pricing legislation: Finance Bill 2026 (as introduced) contains provisions which make multiple changes to the UK’s transfer pricing legislation. With effect for accounting periods beginning on or after 1 January 2026, when enacted these measures will, amongst other things, remove UK-to-UK transfer pricing (subject to exclusions in order to prevent opportunities for tax arbitrage), amend the participation condition, clarify that the OECD Model Tax Convention and OECD Transfer Pricing Guidelines are interpretative aids, and make several changes to the provisions governing financial transactions to better align the UK rules with the OECD Transfer Pricing Guidelines. Alongside these changes, the government also announced at Budget 2025 that it would be proceeding with a requirement for in-scope multinationals to report information annually on cross-border related party transactions for accounting periods beginning on after 1 January 2027—the technical regulations for this new ‘International Controlled Transactions Schedule’ (ICTS) are expected to be published in spring 2026. For more on the changes being made, see News Analyses: Finance Bill 2026—reform of UK law in

Certain economic climates can mean distressed debt portfolios changing hands. In such climates, banks typically seek to reduce their balance sheet exposure to struggling businesses or individuals, while private equity and other funds see opportunities to make a profit from the purchase and subsequent realisation/ repayment of the debt in distressed portfolios. This Practice Note outlines the tax issues which should be considered where a portfolio of distressed debt is being acquired. Throughout the rest of this Practice Note, distressed debt is referred to as non-performing loans (NPLs). NPLs could include, for example, residential mortgage loans or corporate debt. Other Practice Notes in this series cover the key tax issues arising in relation to: • debt restructurings (ie waivers, debt/equity swaps or renegotiations) • enforcement of debts In addition, Tax and distressed debt—checklist of points to consider summarises the key tax issues to consider when dealing with distressed debt generally. For a closer look at the technical provisions in the loan relationships regime that deal

This checklist sets out the key tax issues to consider when dealing with distressed corporate debt, dealing in turn with: • acquisitions of non-performing loans • debt restructurings (ie waivers, debt/equity swaps and renegotiations), and • enforcement of debts For a more detailed look at the various tax issues outlined in this checklist, see Practice Notes: • Tax and distressed debt—acquisitions of non-performing loans • Tax and distressed debt—debt restructurings, and • Tax and distressed debt—enforcement actions available to creditors Acquisitions of non-performing loans This section outlines the tax issues to consider when a purchaser acquires existing UK debt at a discount to its face value: • Where is, or where should, the purchaser be based? ◦ will there be any withholding tax on interest payments made by the borrower to the purchaser? ◦ if the purchaser is resident outside the UK, could relief be claimed under a double tax treaty? ◦ to what extent will the purchaser be taxable on receipts from the borrowers? • How will the

This Practice Note outlines the key tax issues that should be considered when a company struggling to repay external debt seeks to restructure its external debt obligations. Other Practice Notes in this series cover the tax issues arising in relation to: • acquisitions of non-performing loans, and • the enforcement of debts In addition, a checklist: Tax and distressed debt—checklist of points to consider summarises the key tax issues to consider when dealing with distressed debt generally. For a closer look at the technical provisions in the loan relationships regime that deal with debt releases, see Practice Notes: • Loan relationships—impairment and debt releases • Loan relationships—impairment and debt releases: connected companies The role of tax in debt restructurings Companies struggling to repay external debt will often look to reduce their exposure through: • seeking a formal debt waiver (a ‘debt release’) • swapping debt for equity, or • renegotiating the terms of the debt owed The role of a tax practitioner will be to consider whether

This Practice Note outlines the key tax issues that are relevant where creditors seek to enforce their security over the assets of a company or corporate group in distress. Other Practice Notes in this series cover key tax issues relating to: • acquisitions of distressed debt, and • debt restructurings (ie waivers, debt/equity swaps or renegotiations) In addition, Tax and distressed debt—checklist of points to consider summarises the key tax issues to consider when dealing with distressed debt generally. This Practice Note discusses the types of enforcement actions available to creditors of distressed companies and their implications. For a closer look at the technical provisions in the loan relationships regime that deal with debt releases, see Practice Notes: • Loan relationships—impairment and debt releases • Loan relationships—impairment and debt releases: connected companies Types of enforcement As discussed in Practice Note: Tax and distressed debt—debt restructurings, lenders will often participate in a restructuring of a distressed group’s debt with the aim of enabling the underlying business

FORTHCOMING CHANGE relating to the treatment of forex under UK transfer pricing rules: Finance Bill 2026 contains provisions making several changes to the UK’s transfer pricing rules from 1 January 2026. These include, among other things, amendments to bring foreign exchange gains and losses arising under loan relationships and derivative contracts within the scope of the UK’s main transfer pricing rules, without disturbing the tax rules for forex hedging. Up until now, these amounts have been adjusted under specific provisions within the loan relationships and derivative contracts regimes dealing with transactions not made on arm’s length terms. In addition, amendments extend the reach of the existing loan relationships anti-avoidance provision in CTA 2009, s 452 to cater for a new ability for companies to elect to be treated as guarantors of a non-arm’s length borrowing for transfer pricing purposes. For more details, see News Analysis: Budget 2025—Tax analysis—International and Tax—publication of Finance Bill 2026. Many of the entries in a company’s corporation tax return will be tax-adjusted figures taken from its accounts drawn up

This Practice Note explains how the key management personnel of a company that is seeking growth capital will be taxed in connection with any shares they acquire as a condition of a funding round. Investors in the growth capital industry commonly provide finance through a series of funding rounds, and they will usually require key individuals involved in the business to also participate in these by subscribing for shares in the relevant company. Growth capital—seed, venture and development capital Unquoted companies commonly require investment at every stage of development, from their inception right through to when the business is fully established and profitable. Companies will often seek investment from the private equity and venture capital industry, which is where external investors provide finance in return for an equity stake in potentially high-growth companies. Where companies are in the early stages of development or are looking to expand further, the investment can take the form of: • seed capital, which is capital provided to completely new businesses—finance is usually provided by friends and family of the entrepreneur setting

FORTHCOMING CHANGE relating to call for evidence on tax support for entrepreneurs: At Budget 2025, the government published a call for evidence (which closed on 28 February 2026) on the impact of existing tax incentive schemes and options to provide further support for entrepreneurs. The call for evidence seeks to understand the effectiveness of the current EIS and VCT schemes, to explore potential new ways to support scaling companies that have reached the VCT and EIS limits, and to gather evidence about how tax policies might seek to encourage different types of investors. This Practice Note summarises the key UK tax reliefs that may be available to individuals providing seed or venture capital to unconnected start-up and early-stage companies. Such investors will usually provide finance through a series of funding rounds and will usually require key individuals involved in the business to also participate in the funding rounds by subscribing for shares in the company. For an analysis of the tax issues arising in connection with shares subscribed for in this way,

FORTHCOMING CHANGE relating to call for evidence on tax support for entrepreneurs: At Budget 2025, the government published a call for evidence (which closed on 28 February 2026) on the impact of existing tax incentive schemes and options to provide further support for entrepreneurs. The call for evidence seeks to understand the effectiveness of the current EIS and VCT schemes, to explore potential new ways to support scaling companies that have reached the VCT and EIS limits, and to gather evidence about how tax policies might seek to encourage different types of investors. This Practice Note looks at the key UK tax reliefs potentially available to individuals running a company that is seeking growth capital, ie seed, venture or development capital. Founders, owners, directors and key management personnel of a company seeking growth capital will usually hold shares in the company. These may be held prior to the investment of growth capital, or acquiring shares may be a condition of the capital investment that is imposed by the new investors—these

FORTHCOMING CHANGE relating to the reform of offshore anti-avoidance legislation: Between 30 October 2024 and 19 February 2025, the UK government ran a call for evidence to understand and identify areas where the personal tax offshore anti-avoidance rules could be improved or updated. The call for evidence asked high-level questions about several areas of legislation, one of which was the transfer of assets abroad code. In the outcome document published on 21 July 2025, the government stated that it would consider further how best to engage with relevant experts in shaping and taking forward further consultation in this area (as a whole). The government then provided an update at Autumn Budget 2025 stating that it had committed to an ambitious reform agenda following the call for evidence and planned to substantially simplify the legislation in this area. That announcement also stated that HMRC would adopt a co-creation approach working with a small group of external experts from representative bodies, complemented by broader stakeholder engagement, to help shape the reforms. Any changes to legislation that formed part

FORTHCOMING CHANGE relating to the reform of offshore anti-avoidance legislation: Between 30 October 2024 and 19 February 2025, the UK government ran a call for evidence to understand and identify areas where the personal tax offshore anti-avoidance rules could be improved or updated. The call for evidence asked high-level questions about several areas of legislation, one of which was the rules on attribution of gains to participators in non-UK companies, and another was the transfer of assets abroad code. In the outcome document published on 21 July 2025, the government stated that it would consider further how best to engage with relevant experts in shaping and taking forward further consultation in this area (as a whole). The government then provided an update at Autumn Budget 2025 stating that it had committed to an ambitious reform agenda following the call for evidence and planned to substantially simplify the legislation in this area. That announcement also stated that HMRC would adopt a co-creation approach working with a small group of external

FORTHCOMING CHANGE relating to UK permanent establishments: Following earlier consultation in 2023, on 28 April 2025 the government launched a technical consultation on draft legislation reforming the UK’s permanent establishment (PE) legislation to: (i) align the domestic provisions dealing with the attribution of profits to PEs with the latest OECD documents and interpretation of the ‘separate enterprise principle’, (ii) update the domestic definition of a dependent agent PE in line with the 2017 version of the OECD Model Tax Convention, (iii) amend the scope of the investment manager exemption, (iv) align the domestic treatment of gains attributable to PEs with the 2017 version of the OECD Model Tax Convention, and (v) make consequential amendments to ensure that PE principles are consistently replicated across UK tax legislation. The draft legislation does not affect the content or operation of any of the UK’s double tax treaties. A policy paper was also published alongside the consultation. The policy paper states that the earliest operative date for these measures ‘will be from