The aim is to smooth out tax payment and help taxpayers avoid unexpected or large tax bills. Late payments are in some cases linked to the current timing and structure of payment arrangements (with delays of up to 22 months from when they receive income to when the relevant tax is paid), which can be difficult for some taxpayers to budget and pay on time. This means there is a greater risk of individuals falling into tax debt.

Under the current system, approximately 1.1 million payments on account were missed in January 2025 with the taxpayer falling into tax debt in 75% of cases. Tax debt can be costly for individuals, as it can lead to penalties and interest. If a final self assessment tax bill is paid late, there is a penalty of 5% of the tax unpaid at 30 days, six months and twelve months, plus interest on the amount owed. By paying more frequently in smaller, easy to manage payments, the risk of additional costs associated with debt for individuals should decrease.

By comparison with current self assessment arrangements in the UK, many other countries including the US, Canada, France, Germany and Australia collect tax much sooner.

Currently, the amount of tax that can be collected through PAYE in any pay period is capped at 50% of PAYE income. This cap is intended to help protect individuals’ net income. The government is testing through the consultation whether there are specific groups for whom a different threshold might be appropriate. For example, some taxpayers may prefer to have this threshold raised to enable them to have their projected ITSA liabilities collected automatically through PAYE.

HMRC estimate that there are 9.1 million individuals who file a self assessment tax return and do not meet the criteria to have some of their ITSA liabilities collected through PAYE. Of these, around 2.5 million taxpayers make POAs. The remainder make a single payment in January following the relevant tax year, or have no ITSA tax liability to pay. Some taxpayers in ITSA may be due a repayment.

Taxpayers with ITSA liabilities over £1,000, who have not paid 80% of their liability at source, such as through PAYE, are required to make two equal POAs due by the end of January and July. POAs are calculated using known ITSA liability, typically based on the taxpayer’s ITSA tax return from the previous year. Any remaining balance is settled through a balancing payment which is due by 31 January following the end of the tax year, at the same time as filing.

The government wishes to increase the frequency of POAs from April 2029, with POAs paid in the same year as the taxable activity through direct ITSA POA. This could be achieved through, for example, monthly or quarterly payments, aligning timing more closely with ITSA payments through PAYE.

The government recognises that ITSA income can be irregular. It is therefore seeking options to balance the potential for more regular payments with avoiding taxpayers having to make payments that do not reflect their income patterns. Direct ITSA POAs could be forecasted, based on past self assessment returns, with taxpayers able to update their forecasts efficiently. Taxpayers would report their actual liability and reconcile their payments with a balancing payment or repayment from HMRC when they complete their self assessment return, as they do now.

The consultation sets out the government’s key areas of focus for changing the timing of ITSA payments, including:

• the proposed design of reforms for ITSA taxpayers with PAYE income who will be required to pay their forecasted ITSA liability in-year from April 2029
• the potential for more timely payment for other ITSA taxpayers, such as those with ITSA income only
• specifics on design, how and when to collect payments, and safeguards needed to protect taxpayers
• support and guidance required for taxpayers and their representatives to help them transition to new payment timing

From April 2029, the government will require ITSA taxpayers with sufficient PAYE income to make ITSA payments through PAYE each payday, divided into equal payments through the year. The forecasted liability payments will be based on the taxpayer’s last filed ITSA return, as this will be a crystallised or complete picture of liability. Taxpayers will be able to update their forecast using more recent information to ensure it remains an accurate reflection of their expected tax bill.

The consultation runs for six weeks from 23 June to 4 August 2026 and a summary of responses will be published in Autumn 2026.

If you would like more detail on the consultation, please contact Keith Rushen on 0207 486 2378.

The post Tax Update 2026: Consultation on Timely Payments and ITSA appeared first on Robinson Rushen.

In the Budget 2025, the government announced its decision to implement the ICTS, and Finance Act 2026 gave the Commissioners of HMRC the power to introduce regulations requiring in-scope multinationals to file an ICTS. The government intends that the ICTS reporting requirement will take effect for accounting periods beginning on or after 1 January 2027.

The ICTS will facilitate automated, data-led risk assessment by HMRC, permitting more accurate identification of transfer pricing risk. It will increase efficiency by promoting tax compliance at the earliest opportunity and reducing the length of transfer pricing enquiries. Taxpayers will benefit from shorter, better targeted enquiries from HMRC that are focused on cases where adjustments to transfer pricing are required.

The measure is intended to improve fairness ensuring multinational enterprises pay tax on profits generated from economic activity in the UK. It is also intended to increase efficiency so that HMRC’s compliance activity can be more effectively targeted, benefiting compliant taxpayers.

The government is seeking views on draft regulations, a draft HMRC notice and a draft template illustrating the information that would need to be filed annually.

HMRC advises that the use of Excel to depict the ICTS template is entirely illustrative, for convenience, and not indicative of IT design, as HMRC will work collaboratively with software providers, other intermediaries and end users on the IT design of the ICTS. HMRC intends for the final design to minimise burdens and reflects user needs, consistent with their strategic approach to third-party software.

The consultation will run from 16 June 2026 to 31 July 2026 and responses received will feed into the drafting of the statutory instrument which the government expects to lay later in 2026. Consultation responses will also inform the notice which HMRC intends to publish by the end of 2026.

If you would like more information on the above, please contact Keith Rushen on 0207 486 2378.

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The tax rules applying to transactions between companies and their shareholders, including those establishing the nature, timing, and quantum of distributions, have remained largely unchanged since the introduction of corporation tax in 1965.

The rules are extremely broad and are intended to capture any extractions of value from a company to a shareholder in respect of their shareholding, or in respect of debt instruments with equity-like characteristics. The rules are subject to particular exemptions such as when the extraction is in return for new consideration or repayment of capital.

While the rules generally operate well, the commercial and legal environment in which they apply has undergone significant change. There are some scenarios where they can produce distortions and result in substantively similar payments receiving different tax treatment. In particular, the charge to income tax on dividends from non-UK resident companies developed separately as a charge on income from foreign possessions and is not aligned with the wider charge to income tax on dividends and other distributions from UK resident companies.

Extractions which do not fall within the charge to income tax often result in capital distributions treatment and are subject to CGT instead. This can affect both the amount that is taxable and the tax rate at which it is charged. The result is that economically similar payments to a shareholder can be taxed inconsistently.

The government is now considering how the rules could be modernised to ensure they operate as intended and do not give rise to distortions, without undermining commercial practice. This is intended to produce a cohesive system that taxes equivalent payments in more consistent way.

The proposals are not intended to impact legitimate commercial restructurings, and the government is keen to understand the wider impacts of these proposals on corporate groups, their owners and how they choose to operate.

Many definitional provisions under consideration will apply equally to taxpayers within the charge to corporation tax as to ones within the charge to income tax. The focus of the consultation is on individual shareholders. The proposals are not intended to affect corporate shareholders directly. The general exemption from tax under Part 9A CTA 2009 should ensure this, but the government welcomes responses highlighting unintended consequences.

The consultation covers the following seven areas:

• Capital reductions
• Demerger relief rules
• Income tax treatment of distributions from non-UK resident companies and aligning this with the treatment of dividends and other distributions from UK resident companies
• Interaction of the distributions regime with the treatment of debt and loans and proposes introducing a priority rule as to when extractions should be charged under the loans to participators regime
• Loans from non UK resident companies that otherwise would meet the close company criteria and considers introducing rules to address long term extractions
• Purchase of own share rules
• Transactions in securities provisions

The consultation runs for 12 weeks from 23 June to 14 September 2026. The government will analyse the consultation process and publish a summary of responses after the consultation closes. It may seek to engage in further consultation on specific reforms.

If you would like more detail on any of the above, please contact Keith Rushen on 0207 486 2378.

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It has been HMRC’s general practice to tax a UK resident member of an LLC on the profits of the LLC only if and when those profits are distributed by the LLC to its members. In particular, it has treated a Delaware LLC as having ‘ordinary share capital’ for the purposes of s.832 TA88.  Any tax paid in the US on the profits of the LLC is available for relief against UK tax only as underlying tax and only to a UK company which controls, directly or indirectly, at least 10% of the voting power in the LLC.  However, double taxation can arise for UK resident individual members of an LLC if treated as transparent in the US but opaque in the UK.

HMRC’s practice remains at variance to the 2015 Supreme Court decision in the Anson case [UKSC44] which found that the US LLC should be treated as transparent for UK tax purposes and that profits were taxable on the UK members as they arose rather than when they were distributed, and the taxpayers appeal was allowed.

HMRC maintained that the decision was specific to the facts found in that case. Where US LLCs have been treated as companies within a group structure, HMRC would continue to treat US LLCs as companies.  Where a US LLC has been treated as carrying on a trade or business, i.e. transparent for tax purposes, HMRC would continue to treat the US LLC as carrying on a trade or business.

Given the different views on the opacity of LLCs, individual members of an LLC who are tax resident in the UK can face a high effective tax rate, potentially as high as 75%. They will be chargeable directly on profits, income and gains as these arise in the US, and taxable again in the UK on any distributions of the LLC’s pre-tax profits. These tax charges arise because the provisions of the UK/USA DTA on double taxation relief.

The government now appear to recognise the issue of high effective tax rates for UK resident individual members of reverse hybrids and wishes to find a solution which is “effective and robust in providing a fair outcome with long-term certainty”.

The government says it is mindful of the need to avoid unnecessary disruption to the established tax position for corporate members of hybrids. The consultation does not represent an intention to change the position for corporates.

The consultation asks a range of questions on solutions proposed, whether there are problems with the proposed solutions, what are the implications for different types of investors, with details of technical implementation such as timeframes and practical scope.

The consultation asks for views on proposals for changes to legislation by 31 July 2026.

If you would like more detail on this consultation, please contact Keith Rushen on +44 (0)20 7486 2378.

The post HMRC Consults on Tax Treatment of US LLCs and Other Reverse Hybrids appeared first on Robinson Rushen.

The capital gains share reorganisation rules in s.127 – 139 TCGA92 generally apply where a company’s share capital is reorganised and are extended to where shares are issued to a person in exchange for shares in another company or its share capital is reconstructed. These are usually ‘paper for paper’ transactions where no cash has been paid. In such transactions the reorganisation rules provide that there is no immediate charge to CGT or corporation tax on the shareholders. Instead, any gain is rolled over into the new shares.

The FA 2026 changes amend the existing avoidance rules by removing the bona fide commercial reasons condition and ensure that they apply to those persons who have entered into arrangements where the main purpose, or one of the main purposes, of the arrangement is to secure a tax advantage that they would not ordinarily have been entitled to.

HMRC has previously confirmed that deferral of a charge to tax is not, of itself, tax avoidance, as the purpose of s.135 is to provide deferral and the anti-avoidance rule has to be viewed in that light. HMRC will have regard to the established case law on anti-avoidance rules such as the case when considering whether counteraction is warranted.

The previous wording of the anti-avoidance rule meant that it did not apply where a share exchange was effected for bona fide commercial reasons and did not form part of a scheme or arrangements of which the main purpose, or one of the main purposes, was avoidance of liability to CGT or CT.

The revised rule now applies where there are arrangements that relate to an exchange of securities, and the main purpose, or one of the main purposes, of the arrangements is to reduce or avoid a capital gains liability.  Only the shareholders obtaining a tax advantage will be affected and holders of 5% or less of any class of securities in the original company are no longer outside the scope of the rule.

The reason for the change is that in the Delinian [formerly Euromoney] case, the Court of Appeal confirmed that the previous wording focussed on the purposes of the exchange itself, finding that the exchange was not part of a scheme or arrangement to avoid tax and that even where tax avoidance arrangements are present, they may not be sufficient to amount to a main purpose.  HMRC suggest the revised wording puts the focus of the purpose test on the particular arrangements that are put in place to avoid tax.  It also follows the approach of most modern TAARs which also dispense with a bona fide commercial reasons condition.

The changes to the rule are intended to deter and, where necessary, counteract, situations where additional arrangements such as the use of loan notes in certain situations have been included in a commercial transaction in order to reduce or avoid a liability to tax on chargeable gains.

HMRC does not consider that the rule would apply where a business is restructured so that a share sale will qualify for a relief or exemption should a sale take place after the relevant qualifying conditions for that relief have been met throughout the relevant period following the restructuring.  This would include for example separating investment and trading activities with a view to any future sale of shares in a trading company qualifying for the substantial shareholding exemption or separating commercial properties before transfer to a REIT.

This contrasts with situations where a proposed commercial transaction would not meet the conditions for such a relief at the time of the transaction, where a type of security is included in the exchange or scheme of reconstruction with the purpose of reducing or avoiding a liability to tax on capital gains.

Given the changes to the anti avoidance provisions, where there is uncertainty whether additional steps included in a share exchange or reorganisation are arrangements with a main purpose of avoiding or reducing CGT, it may be appropriate to seek advance clearance from HMRC.

If you would like more details on the above, please contact Keith Rushen on 0207 486 2378.

The post HMRC Issues Guidance on Changes to Share Exchange and Reorganisation Rules appeared first on Robinson Rushen.

Advance assurance is a voluntary service that allows the claimant company to send to HMRC details of its R&D activities. This is done before claiming R&D tax relief in its corporation tax return.

HMRC offers two types of advance assurance, being a new targeted advance assurance service – the advance assurance pilot, and an existing full claim advance assurance service

Before an application for advance assurance is made, the applicant must choose the right type of assurance service and meet the relevant criteria to use it. A company cannot apply under both services for the same period or project.

The targeted advance assurance service has been introduced as a pilot. The pilot will run until May 2027 and gives eligible small or medium sized enterprises clarity on specific complex or high-risk areas of an R&D tax relief claim, before a claim is made.

Applicants will be able to seek assurance on one of four issues during the pilot, which have been chosen from stakeholder feedback as the most complex or high-risk aspects of an R&D, being

• whether the project meets the definition of R&D for tax purposes
• whether overseas expenditure qualifies for relief
• which party can claim relief for contracted-out expenditure
• whether the company qualifies for exemption from the PAYE or National Insurance contribution cap

Up to two applications for targeted advance assurance may be made. Each application can only cover one project and one assurance area of R&D relief. Assurance on another project or area will require a separate application.

HMRC will continue to provide a full claim advance assurance service to SMEs claiming R&D relief for the first time. This service covers the entire claim, and the advance assurance granted will cover the first three accounting periods only.

If you would like more detail on the above, please contact Keith Rushen on 0207 486 2378.

The post Research & Development and Advance Assurance Update appeared first on Robinson Rushen.

For most companies, it will be mandatory for profits and losses attributable to a foreign PE to be exempt from UK tax for accounting periods beginning on or after 1 January 2027. For UK-resident companies that conduct activities in relation to oil and gas extraction and exploration through foreign PEs this measure will apply from 1 September 2026.

Current regime

A company resident in the UK operating abroad may do so through a subsidiary company in the other state or, alternatively, through a PE in that state.

Under UK law, a company is subject to UK corporation tax on the profits of its foreign PEs, but it may make an election to exempt the profits of its foreign PEs. The effect of this election is that future profits of the company’s foreign PEs are not subject to UK CT and future losses may not be used to offset the UK profits of the company for CT purposes.

Such elections are irrevocable and require the company to determine whether losses were made in the years prior to the election, in which case an equivalent amount of profits must be brought into charge in the years following the election. Profits will also be brought into charge after the election is made if the anti-diversion rules are triggered.

Case for change

Under the current approach, where an election has not been made, the foreign losses of a UK company are available to be used to relieve UK profits of the main company or the wider group.

According to HMRC, this impact is not being appropriately balanced by equivalent foreign profits being brought into the charge of UK CT. In some cases this is because the UK profits are largely or fully sheltered by the availability of double taxation relief and in other cases a multinational group may subsidiarise a foreign PE at the point that it becomes profitable, which removes those profits from the charge to UK CT without the transfer of the PE business generally giving rise to a taxable gain.

The result is that the UK Exchequer is in some cases compensating multinational groups for costs/losses incurred overseas through reduced CT on UK profits, without corresponding tax being collected on their foreign profits.

This effect is particularly significant for groups which generate very large foreign losses or are able to claim very large amounts of capital allowances in relation to their foreign PEs, for example in the oil and gas sector. Where circumstances allow, these structures can substantially reduce the UK CT liability of multinational groups, even where unusual market conditions result in unusual or elevated UK profits.

The current UK regime includes some protections that apply when a foreign PE exemption election is made, but these have limitations in practice.

Proposed revisions

The government will make the foreign PE exemption mandatory. These changes will be published in draft legislation over the summer and are intended to have effect for accounting periods beginning on or after 1 January 2027.

For UK resident companies with foreign PEs that carry on activities in connection with the exploration or exploitation of oil and gas, this measure will commence from 1 September 2026. This will prevent losses arising in foreign PEs after that date from being offset or relieved against UK profits. This will be achieved by deeming the accounting periods of such companies to end on 31 August 2026, with the new regime applying from the following day.

Transitional rules will be amended such that losses and other attributes arising in years before exemption takes effect will not be available to relieve UK profits of the company or the wider group arising after the effective date.

The existing legislation taxing profits of an exempted foreign PE where there is a ‘total opening negative amount’ will be repealed.

The proposed changes will be accompanied by an anti-avoidance rule intended to prevent arrangements which would seek to artificially accelerate the utilisation of such losses or otherwise minimise their impact.

If you would like more information on the above changes, please contact Keith Rushen on 0207 486 2378.

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From April 2028, the HVCTS will increase the tax paid by owners of high value residential property, raising revenue from those with the top 1% most valuable properties in England to support funding for local government services and to reduce the largest inequalities in the Council Tax system.

The consultation is seeking views on the detailed design of the HVCTS, proposed scope, a deferral mechanism to support those who cannot pay, the billing process, the proposed appeals process, administration and enforcement mechanisms, and the equalities impacts of the proposed approach.

The HMRC’s Valuation Office will be conducting a targeted valuation exercise to identify properties in scope. Properties will be placed into one of four bands based on their value with a corresponding charge. Charges will be uprated in line with the CPI annually. Revaluations will be conducted every five years with the next revaluation to take place in 2033. Decisions on whether to uprate bands will be taken alongside revaluations and will therefore be for a future government.

Properties built after implementation of the HVCTS (April 2028) but before the next scheduled revaluation will be valued and banded either on completion or from the day they are occupied, as is the case with Council Tax. Properties which have been significantly improved or changed after the implementation date, for example by adding a large extension, will be revalued and banded at the sooner of either the next revaluation or sale of the property.

Proposed HVCTS charging structure

In the vast majority of properties, it is expected that HVCTS will be paid by the same taxpayer as Council Tax. However, where Council Tax is paid by occupiers, for the most part HVCTS will be paid by the owners of the properties.

The HVCTS is forecast to raise around £430 million of revenue per year from 2028/29 which will support funding for local government services. Local authorities are to be fully compensated for the additional costs of administering HVCTS.

If you would like more information on the consultation, please contact Keith Rushen on 0207 486 2378.

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In HMRC v Burlington Loan Management DAC (2026) EWCA Civ 461, the appeal concerned the tax treatment of interest received by the Respondent (“BLM”) in respect of a debt claim in the administration in England of Lehman Brothers International (Europe) (“LBIE”).

BLM was resident in the Republic of Ireland. It purchased the rights to the debt claim in February 2018, by way of a back-to-back assignment via a broker from SAAD Investments Company Ltd (“SICL”), a company resident in the Cayman Islands.

The issue was whether BLM’s entitlement to receive about £90m of post- administration interest in respect of the SICL claim was exempt from UK WHT by virtue of Article 12 of the UK-Ireland DTT.

Article 12 provided that interest derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State, the term “interest” as used in the Article meant income from debt-claims of every kind, and the provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt-claim in respect of which the interest is paid to take advantage of this Article by means of that creation or assignment.

Both the FTT and the UT had held that the payment of interest to BLM from the LBIE administration was taxable only in Ireland by reason of Article 12(1). HMRC appealed on the basis that the FTT and UT should have found that Article 12(1) was disapplied by Article 12(5) because the main purpose or one of the main purposes of BLM was to take advantage of Article 12 by means of the assignment of the SICL claim.

The FTT held that SICL also did not have, as one of its main purposes, taking advantage of Article 12(1) by means of the assignment, as at the time that the liquidators reached the agreement in principle to sell the SICL claim, they had not inquired about the identity of the end purchaser. They had no way of knowing that the purchaser could offer the price that it had because it was able to benefit from Article 12(1) rather than benefitting from some other exemption from UK WHT, or because it had significant tax losses against which to offset the interest received.

The FTT also rejected the suggestion that it made any difference that, by the time that the SICL liquidators entered into the formal assignment of the SICL claim, they knew that BLM was relying on Article 12(1) for its exemption from UK WHT.

The FTT noted that HMRC was effectively arguing that a seller would be “taking advantage” of Article 12(1) as long as it knew that its purchaser was taking into account its exemption from UK WHT in framing its offer.

FTT had also commented that it would have an enormous impact on the secondary debt market if purchasers were to be unable to obtain the benefit of an applicable treaty simply because there were people in the market with different tax attributes which were reflected in the market price of the debt claim which was the subject of the transaction, and the seller happened to know the reason why its purchaser had the necessary tax attributes to be able to pay the market price of the debt claim.

The FTT rejected the submission by HMRC that this situation was akin to the case of a “conduit company” or “treaty shopping”. The FTT referred to the report from the OECD Committee on Fiscal Affairs entitled “Double Taxation Conventions and the Use of Conduit Companies” (the “Conduit Report”).  Article 12(5) and its equivalent in other treaties are aimed specifically at transactions involving conduits or treaty-shopping.

The FTT concluded that in order for a person to be said to have a main purpose of taking advantage of a treaty relief itself in relation to a debt claim, the central issue is whether the concept in Article 12(5) of having a main purpose to “take advantage of” Article 12(1) simply means to have a main purpose of “obtaining the benefit of” that article, or whether it means something else.

This point was recently considered in relation to a provision in the double tax treaty between the UK and Japan in Vietjet Aviation JSC v FW Aviation (Holdings) Ltd (2025) EWCA Civ 783. Vietjet was involved a commercial dispute relating to aircraft financing agreements that were in default. One of the issues was whether the claimant assignee of the aircraft loans was a permitted assignee within the meaning of the financing documents. These documents required any assignee to be an entity which benefited from a double tax treaty with Japan so that no withholding tax would be levied on payments of interest.

The argument made by the defendant, Vietjet, was that the claimant had been deliberately incorporated in England in order to benefit from Article 11.1 of the UK – Japan DTT and thus came within the class of permitted assignees. This meant that it was taking advantage of Article 11 within the disapplication provisions of Article 11.7.  Popplewell LJ rejected that argument and gave two reasons for doing so.

The first was that “taking advantage” in Article 11.7 did not mean simply taking the benefit of Article 11. It meant doing so contrary to the object and purpose of the treaty, i.e. as an anti-abuse provision and the object and purpose of the treaty, and also from the OECD Commentary on the Model Convention.  The object and purpose of the treaty was to attribute the right to tax persons in the state of residence or state of source in accordance with its detailed provisions, and to avoid double taxation and non-taxation.

It is noted that VietJet is a significant decision that was not available either to the FTT or the UT in this case.

In the CA, Snowden LJ agreed with Popplewell LJ’s conclusion that to “take advantage” of a provision such as Article 12(1), within the meaning of an anti-abuse provision such as Article 12(5), cannot simply be synonymous with to “obtain the benefit” of that provision, with the result that the treaty would be self-defeating.

All three Judges dismissed HMRC’s appeal in a significant decision on the correct interpretation of Article 12(5).

If you would like more information on this decision, please contact Keith Rushen on 0207 486 2378.

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Currently stablecoins are generally treated like other cryptoassets for tax purposes. Where they potentially play a more significant role in both wholesale and retail payments in the future, the government is considering whether this treatment is remains appropriate or whether it should be considering making changes.

Given stablecoins are treated in the same way as other cryptoassets, there are no specific tax rules for their treatment, nor is the term ‘stablecoin’ specifically defined in existing tax legislation. The treatment that applies will depend on the circumstances in which they are used, and can also depend on the particular features of the stablecoin in question, but they would not generally be considered as money.

Whilst they are designed to maintain a stable value, economic gains and losses can still arise on stablecoins, for example as a result of foreign exchange movements on non-sterling denominated stablecoins. However, gains and losses can also arise in situations where a stablecoin’s value deviates, whether temporarily or permanently, from its par value.

For individuals, CGT treatment applies on the disposal of an asset that is not exempt, and where no other tax rules take priority.  Stablecoins will typically be chargeable assets in the same way as other types of cryptoassets, regardless of whether they reference sterling, a foreign currency, other assets, or are stabilised through a pricing algorithm. Depending on the redemption rights they provide and who holds the token, some stablecoins can legally amount to a debt between issuer and holder in respect of the referenced fiat currency.

CGT rules provide an exemption for simple debts but this is unlikely to apply to stablecoins in the vast majority of cases as, even where there is a debt, the exemption only applies where the debt is disposed of by the original creditor, which for a stablecoin is unlikely to be an individual.

This means that under the current rules, the use of stablecoins as a means of payment will typically constitute a disposal for CGT purposes. As a result, the acquisition and disposal cost must be recorded in order to calculate capital gains or losses.

For sterling-denominated stablecoins, any gain or loss is likely to be negligible because a sterling-denominated stablecoin should not fluctuate relative to sterling. However, such transactions must still be tracked, as once aggregate proceeds from all disposals exceed £50,000, they may need to be reported to HMRC irrespective of whether gains or losses arise.

Foreign currency denominated stablecoins will fluctuate in value relative to sterling due to exchange movements, and therefore disposals will give rise to gains and losses.

To date, stablecoins have primarily been used in the cryptoasset ecosystem to facilitate the purchase and sale of other cryptoassets, and as part of decentralised finance arrangements. For individuals who are actively engaged in a high volume of cryptoassets transactions, it is common to rely on tax calculator software to assist with tax computations. In such cases, the tax calculator software should also be able to calculate the gains and losses arising on the stablecoins.

However, a broader adoption of stablecoins could involve retail payments for everyday purchases, as opposed to using them in the cryptoasset ecosystem. Where there is broader adoption, individuals are unlikely to be familiar with using tax calculator software, and it is likely to be impractical. The requirement to track these transactions for tax compliance would be an administrative burden that does not exist for other, more traditional means of retail payment (such as cash or card payments) and could therefore act as a disincentive to their use.

Income tax could apply in situations involving stablecoins, for example:

• where they are received as remuneration as part of an individual’s employment, and charged to income tax in the usual way
• where returns are generated from staking or lending, but are not profits of a trade, but miscellaneous income
• where payments are received by individuals for the provision of goods or services, and subject to income tax as trading income
• where an individual carries on a trade of buying and selling cryptoassets including stablecoins

Income received in the form of stablecoins would be taxable in the same or similar way as if they were paid in cash. Therefore, their current treatment under income tax provisions may not cause disproportionate administrative burdens for individuals.

Corporate tax treatment of stablecoins will depend on the particular features of the stablecoins in question and how they are used by the company. Tax regimes applying to loan relationships, intangible fixed assets, trading, chargeable gains, could potentially be relevant.

For example, a company has a loan relationship when it has a money debt that arises from a transaction for the lending of money, or a money debt where an instrument has been issued representing security for it or creditor rights in respect of it. Where a stablecoin provides rights of redemption for the holder, a money debt will likely arise and, as a result, these may fall within the loan relationship rules, with profits or losses taxed or relieved as income based on the accounts.

For foreign currency-denominated stablecoins, special exchange gains and losses rules could apply, such as the Disregard Regulations.

Stablecoins will not typically meet the requirements to be taxed under the Intangible Fixed Assets regime and stablecoins are unlikely to be acquired or created for use on a continuing basis in the company’s business, i.e. as a ‘fixed asset’.

Where a stablecoin is used for the purposes of a trade carried on by the company, for example as part of a trade in buying and selling cryptoassets, any profits or losses arising on it will usually be taxed as part of the company’s trading profits. This could either be by virtue of being a trading loan relationship or directly as part of the trading profits calculation.  If no other rules apply, then gains and losses arising from stablecoin transactions will be calculated under the chargeable gains rules for companies. This will require separate calculations to determine the taxable gains and losses on disposals of stablecoins.

Additional complexity can arise where a company lends a stablecoin. If the stablecoin itself is a loan relationship, the lending of that stablecoin will create a money debt. However, the lending is unlikely to be an actual loan relationship, because stablecoins are not generally considered to be money and therefore there is no transaction for the lending of money. Instead, amounts such as exchange gains and losses and impairment losses would be brought into account under the non-lending relationship rules in Part 6 CTA 2009. Returns on lending, however, would generally not be treated as interest, because they are not returns on the lending of money, and would instead be expected to be miscellaneous income under Part 10 CTA 2009.

HMRC’s Call for Evidence seeks views on how stablecoins are treated for both individuals and companies. The government would like to hear from investors, professionals and firms that use stablecoins, including technology and financial service firms, trade associations and representative bodies, academic institutions and think tanks, and legal, accountancy and tax advisory firms.

The consultation runs from 26 March to 7 May 2026.

If you would like more information on the above, please contact Keith Rushen on 0207 486 2378.

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