United Kingdom: Tax

The European Commission has adopted a tax simplification package that abolishes withholding taxes on cross-border payments and modernises key direct tax directives. For private capital managers, the most significant development may be the formal withdrawal of the controversial Unshell Directive, though substance requirements remain on the regulatory agenda in a different form.

The UK Government has launched a consultation proposing to treat US limited liability companies (LLCs) as transparent for UK tax purposes when held by individuals, addressing long-standing double taxation issues that have deterred internationally mobile individuals from living and investing in the UK.

The UK government has launched a consultation on reforming the taxation of US LLC members, proposing to treat these entities as transparent for UK tax purposes to eliminate effective double taxation that can reach over 70%.

HMRC has released detailed guidance on applying inheritance tax to pensions from 2027, while the Pension Schemes Act 2026 introduces sweeping changes including a new DC Value for Money framework and consolidation requirements for small pension pots. The Pensions Regulator has also published expectations for AI governance in workplace pension arrangements, alongside updated dashboards guidance as the industry prepares for the likely 2027/28 go-live date.

Welcome to our monthly update on current legal issues for trustees of DB and hybrid pension schemes, designed to help you stay up to date with key developments...

UK trust taxation presents complex challenges for international advisers, particularly with recent changes to inheritance tax rules and the introduction of the Foreign Income and Gains regime.

HM Revenue & Customs is consulting on the way that returns of value to shareholders – specifically, distributions (such as dividends) and capital repayments – are taxed.

The UK government is consulting on significant reforms to income tax payment timing that would require self-assessment taxpayers to pay tax in-year from April 2029, rather than after the tax year ends.

Supreme Court upholds Court of Appeal decision that structured LLP profit-sharing arrangements are subject to miscellaneous income tax charge, providing guidance on section 850 ITTOIA and section 687 ITTOIA with wider implications for partnership taxation.

The European Commission has adopted a tax simplification package that abolishes withholding taxes on cross-border payments and modernises key direct tax directives. For private capital managers, the most significant development may be the formal withdrawal of the controversial Unshell Directive, though substance requirements remain on the regulatory agenda in a different form.

The OECD has proposed significant revisions to its transfer pricing guidance on intra-group services, expanding practical examples and emphasizing the need for robust documentation to evidence service provision and benefits. While core principles remain unchanged, the updates create potential tensions with HMRC's more prescriptive approach to high-value services, particularly around pricing methodologies and the treatment of shareholder activities.

The UK government plans to make the foreign permanent establishment exemption mandatory from January 2027, fundamentally changing how UK companies are taxed on overseas operations. This policy shift, accelerated for oil and gas companies to September 2026, will prevent businesses from using foreign branch losses to offset UK profits while exempting future foreign profits from UK tax. What implications will this have for international business structures, loss relief strategies, and the broader competitivene