This Practice Note will consider the following: • direct tax issues for UK resident corporate bondholders • direct tax issues for UK resident individual bondholders, and • the UK stamp tax and VAT consequences of being a bondholder (whether individual or corporate) Bondholders may also be interested in the potential consequences for them of Foreign Account Tax Compliance Act (FATCA) and the EU Financial Transactions Tax (FTT). These are considered in Practice Note: Tax issues for bond issuers—FATCA and FTT. Direct tax issues for corporate bondholders For UK resident companies acquiring a bond, the main tax issues to consider are: • the loan relationship rules—the bond is almost always a loan relationship and will be taxed accordingly • chargeable gains—the bond is almost always a qualifying corporate bond and exempt from corporation tax on chargeable gains, and • withholding tax—the bondholder will hope that it is able to rely on an exemption from withholding tax Each of these issues is explored further in the remainder of this section. Loan relationships As for the bond issuer, the

FORTHCOMING CHANGE: At Tax Update 2026, HMRC published a consultation on 'Modernising the distributions framework'. The consultation includes a range of proposals aimed at reducing opportunities for income tax payers to extract value from companies in the form of capital rather than income, including: • preventing the implementation of new holding company structures which facilitate the extraction of value as capital. Currently, the insertion of a new holding company above an existing group holding company results in the shareholders holding ‘good tax capital’ in the new holding company equal to the market value of the old holding company’s shares. A reduction in capital of the new holding company therefore represents a repayment of capital rather an income distribution. The consultation proposes that share buybacks and other returns of capital ‘reflect a “frozen” amount of capital on the shares in any future holding company at the amount subscribed on the original investment, matching the CGT deferment of the original base cost’ • relaxing the tax conditions to effect a direct or indirect statutory

In an asset sale, the buyer selects and purchases from the seller only those assets and liabilities it wishes to acquire. Sometimes, an asset sale is the sale of an entire business (ie all the assets that form part of, and are used in, that business) or part of a business and sometimes it is just a sale of an asset or a collection of assets. Although the consideration for an asset sale may well be a straightforward cash payment on completion, in many cases part of the consideration is: • payable after the disposal of the asset (deferred), and perhaps even • conditional on whether or not a future event happens (contingent) An example of this is where a business is acquired for: • a cash payment on completion, and • an earn-out, which, for instance, might include a payment dependent on the level of profits of the business over a defined period (often two or three years) after completion and will usually be: ◦ a sum equal

The way consideration payable for the acquisition of shares is structured is not always straightforward. In many cases payment can be delayed, deferred or made conditional pending the satisfaction of some contingency. In most cases, this will be because the buyer will want to either: • be sure that the company is actually worth what the buyer believes it is worth at the time the deal is completed In such cases, it is common to find a price adjustment mechanism incorporated into the sale agreement which will normally be based on a set of accounts compiled by reference to the date of completion. Additional consideration will only be paid (or a repayment made) once those accounts have been finalised and agreed which may be some months after completion. For a discussion of the different ways a deal might be priced (and how various types of accounts are used to inform pricing), see Practice Note: Completion accounts, accounts date and locked box and tax. • delay paying part of the price for the shares

The way consideration payable for the acquisition of shares is structured is not always straightforward. In many cases payment can be delayed, deferred or made conditional pending the satisfaction of some contingency. Selling shareholders will seek to maximise the total consideration they will receive for their shares but will also try to mitigate any tax liability on the disposal by: • maximising the use of available reliefs to reduce or eliminate any charge, and/or • deferring the time that any such tax charge becomes payable Where the consideration is deferred, however, the selling shareholder can incur a tax liability on an amount of consideration which it has not actually received (referred to as a ‘dry’ tax charge). No discount is generally allowed in the computation of chargeable gains for any consideration which is ascertainable at the time of the share disposal even if it is: • delayed • subject to any contingency, or • at risk of not being received for some reason Where any deferred consideration is unascertainable

FORTHCOMING CHANGE relating to the modernisation of stamp taxes on shares framework: Stamp duty and SDRT will, in 2027, be replaced with a single, self-assessed tax on transfers of securities, the securities transfer tax (STT) (formerly referred to as the securities transfer charge or STC), that will be paid (and reported) through electronic transfer systems such as CREST or, where appropriate, a new online portal. Draft legislation for the STT was published on 13 July 2026, along with explanatory notes, a policy paper and the outcome of the higher rate 1.5% stamp tax consultation. Subject to exemptions, the STT draft legislation includes a main charge of 0.5% for agreements to transfer chargeable securities to another person for consideration in money or money’s worth and, for transfers to a clearance service (CS) or depositary receipt issuer (DRI), a higher-rate charge of 1.5%. The main charge arises when an agreement is made or, in the case of a conditional agreement, when the conditions are satisfied, although, where the agreement is not electronic, the STT

A limited company may buy back its own shares, if certain conditions set out in the Companies Act 2006 (CA 2006) are met. This is known as a share buyback or a purchase of own shares. In addition to the provisions of the CA 2006, there are other rules and guidelines that are relevant to a listed company or an AIM company. The restrictions in the CA 2006 relating to share buybacks do not apply to unlimited companies. For further information on this type of company, see Practice Note: Unlimited companies. For an introduction to share buybacks, see Practice Note: How to carry out a share buyback. For a consideration of the law applicable to a share buyback and information on why a company might wish to carry out one, see Practice Note: Share buybacks—the legal framework. Off-market or on-market? Two types of share buyback are possible: • an off-market purchase of shares, or • a market (or on-market) purchase of shares For an explanation of the differences between

Companies sometimes provide directors or employees with low interest (or interest-free) loans as part of the reward package or on specific occasions to help the individual meet significant expenditure. As with any other kind of employment reward, if the loan is provided by a third party, rather than the employer, the disguised remuneration provisions in Part 7A of Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) should be considered first, as those rules take priority over most of the other rules for taxing employment income (including the benefits code). For more details, see: Disguised remuneration and EBTs—overview and, in relation to the loan charge under the disguised remuneration rules, see Practice Note: Disguised remuneration—history of the loan charge. If there is no third party (eg because the loan is advanced by the employer itself), or one of the exemptions from the disguised remuneration rules applies, then the rules in the benefits code on employment-related loans described below may apply to the relevant loan. Broadly, where an employee or director

Ireland—Property analysis: This article was written by Simon Hannigan and Fintan Clancy of Arthur Cox LLP.

FORTHCOMING CHANGE: At Tax Update 2026, HMRC published a consultation on 'Modernising the distributions framework'. The consultation includes a range of proposals aimed at reducing opportunities for income tax payers to extract value from companies in the form of capital rather than income, including: • preventing the implementation of new holding company structures which facilitate the extraction of value as capital. Currently, the insertion of a new holding company above an existing group holding company results in the shareholders holding ‘good tax capital’ in the new holding company equal to the market value of the old holding company’s shares. A reduction in capital of the new holding company therefore represents a repayment of capital rather an income distribution. The consultation proposes that share buybacks and other returns of capital ‘reflect a “frozen” amount of capital on the shares in any future holding company at the amount subscribed on the original investment, matching the CGT deferment of the original base cost’ • relaxing the tax conditions to effect a direct or indirect statutory demerger

FORTHCOMING CHANGE relating to abolition of the non-dom regime and introduction of a residence-based regime: At Spring Budget 2024, the government announced that it is abolishing the remittance basis of taxation and replacing it with a residence-based regime from 6 April 2025. Individuals who opt into the regime will (subject to conditions) not pay UK tax on foreign income and gains for the first four years of UK tax residence. See News Analysis: Spring Budget 2024—Private Client analysis—Abolition of ‘non-dom’ regime. This Practice Note considers some of the tax issues that arise when structuring a private equity acquisition that has both UK and offshore elements. There are many reasons to use offshore entities through which to structure acquisitions, even when such acquisitions are of onshore (UK) targets. Often the structure is adopted to accommodate investors; for example, UK resident non-domiciled investors in a UK-based fund may wish to take advantage of the remittance basis in relation to their distributions from the fund. More generally, some

Law360: Ireland's finance minister said 7 August 2024 that a priority of the country's next budget will be addressing the tax burdens of families, workers and businesses, adding that the cost of living remains a serious issue.