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GAAR guidance: examples of non-abusive transactions—checklist

GAAR guidance: examples of non-abusive transactions—checklist The GAAR guidance aims to help interpret and apply the general anti-abuse rule (GAAR). This is why the GAAR guidance includes in Part D various examples to illustrate the types of arrangements HMRC considers should escape the GAAR and those which it considers should be caught by the GAAR. The current version of the GAAR guidance, as well as previous versions of the guidance, are available online (see: GAAR guidance). Part D of the GAAR guidance (which is dated 11 September 2020) contains the majority of the illustrative examples, but some are found in other parts of the guidance too. For ease of reference, the table in this Checklist: • pulls together • in one place • a list of the arrangements: ◦ referred to in any part of the GAAR guidance ◦ in respect of which HMRC has indicated it would not pursue counteraction under the GAAR (although note that much of the legislation underlying the examples has changed since the examples were...

Tax and distressed debt—points to consider

Tax and distressed debt—points to consider 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, and • enforcement of debts For a more detailed look at the 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 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 debt be...

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Table comparing types of share capital

Table comparing types of share capital There are various types of share capital and the main differences are summarised below: Authorised share capital Issued share capital Allotted share capital Generally obsolete from 1 October 2009, as companies no longer need authorised share capital Holders of issued share capital can exercise membership rights Holders of allotted share capital have the unconditional right to be included on the register of members (section 558 of the Companies Act 2006 (CA 2006)) but cannot yet exercise the membership rights However, may still apply to companies (i) incorporated under older legislation or (ii) where shareholders want to limit directors' powers to issue and allot shares, in which case, it means the maximum amount of shares that directors can allot Reflects the point in time when an individual shareholders' name is entered on the company's register of members Reflects the point in time before an individual shareholders' name is entered on the company's register of members Authorised capital = issued shares + unissued...

Accounts and reports—glossary of terms

Accounts and reports—glossary of terms STOP PRESS: A significant restructuring of the UK listing regime came into effect on 29 July 2024 which included the removal of the premium and standard listing segments and the creation of a single listing category for equity shares in commercial companies. The commercial companies category is heavily disclosure-based and sits alongside other listing categories such as the shell companies, secondary listing and closed ended investment fund categories. A new UK Listing Rules sourcebook came into force to implement the changes and the previous Listing Rules sourcebook was revoked. For further information, see Practice Note: Reform of the UK listing regime—fundamentals. This Practice Note reflects the listing regime as it was prior to 29 July 2024. A Abbreviated accounts If the accounts of a small company (that is not a micro-entity) relate to financial years beginning before 1 January 2016 (see the Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 (SI 2015/980)), it may file abbreviated accounts at Companies House,...

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AML, CTF and counter-proliferation financing training materials—post-training ‘red flag’ identification exercise answers

AML, CTF and counter-proliferation financing training materials—post-training ‘red flag’ identification exercise answers Scenario A: Politically exposed person You have been approached by a new client with instructions to assist in the purchase of a football club. The client is a high net worth individual who made his fortune in the mining industry in an emerging market. He then moved into politics before choosing to pursue some business interests. In accordance with the firm’s policy, enhanced due diligence (EDD) has been carried out and his politically exposed person (PEP) status was highlighted. The issue of source of funds was raised and the client responded to say that the acquisition was to be funded out of the proceeds of sale of one of his former mining businesses. During the course of the matter you have found the client to be a difficult character who constantly tries to change his instructions with no logical explanation. It has also been brought to your attention by a junior lawyer that in...

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What is a capital contribution reserve?

What is a capital contribution reserve? A capital contribution reserve typically arises when an irrevocable gift has been made to a company by a shareholder (ie new shares are not issued in consideration). Such a payment often arises in the context of overseas companies, where a parent company makes a long term loan to a subsidiary at a below market rate of interest. The difference between the face value of the loan, and its discounted value using a market rate of interest, is required to be credited to a capital contribution reserve. The Privy Council (PC) case of Keller v Williams [2000] 2 BCLC 390 explored the context in which capital contributions might arise and how the funds might be used. The dispute centred on whether the funds paid were to be treated as capital contributions (as shown in the company's records) or as shareholders' loans. The PC, upholding the decision of the lower courts, held ‘…If the shareholders of a company...

A non-UK trust (A) holds shares in company B, which itself owns a UK residential property. A has also made a loan to B, which is still outstanding. For the purposes of Schedule A1 of the Inheritance Tax Act 1984 could the fact that A holds shares and debt in B result in a double charge to inheritance tax?

A non-UK trust (A) holds shares in company B, which itself owns a UK residential property. A has also made a loan to B, which is still outstanding. For the purposes of Schedule A1 of the Inheritance Tax Act 1984 could the fact that A holds shares and debt in B result in a double charge to inheritance tax? In answering this Q&A we have assumed the following: • that the trust and the company in question are both resident outside the UK for UK tax purposes • that the trust’s shareholding in the company constitutes an interest in a close company within the meaning of paragraph 2(1) of Part 1 of Schedule A1 of the Inheritance Tax Act 1984 (IHTA 1984) • that the residential property in question constitutes a UK residential property interest within the meaning of IHTA 1984, Sch A1, Pt 1, para 8 • that the trust has made a loan to the company, which is still outstanding Valuation of A’s shareholding...

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Autumn Budget 2024—What did we learn from the government’s UK Corporate Tax Roadmap?

Tax analysis: Naomi Lawton, Knowledge Counsel at A&O Shearman examines the government’s Corporate Tax Roadmap as announced at the Autumn Budget 2024 including its practical implications.

FTT decides LLP was in business and tax transparent when members transferred loan notes to it (GCH Corporation Ltd and others v HMRC)

Tax analysis: In GCH Corporation Ltd, the FTT allowed the taxpayers’ appeals against capital taxes assessments relating to a transfer of loan notes to a limited liability partnership by its members.