Corporate Tax Advisory for City Law Firms and Accountancy Practices

The City of London — the Square Mile and its immediate surrounds including Canary Wharf — is home to the world's greatest concentration of corporate law firms, international accountancy practices, and financial advisory houses. Every significant M&A transaction, IPO, or corporate restructuring that touches the UK involves City-based advisers, and the tax dimension of these transactions is invariably complex. For City solicitor firms, tax structuring is not a secondary consideration in corporate transactions — it is a core determinant of deal economics. The difference between a share sale and an asset sale, the availability of substantial shareholdings exemption (SSE) under section 192A of the Taxation of Chargeable Gains Act 1992, the treatment of deferred and contingent consideration, and the application of the anti-avoidance rules in the transactions in securities legislation (Part 15 of the Corporation Tax Act 2010) can each have a material impact on the net proceeds realised by vendors and the acquisition cost base available to purchasers. Accountancy practices in the City — both the Big Four and the specialist advisory firms — similarly require deep technical expertise when advising clients on corporate tax matters. Transfer pricing compliance under the OECD guidelines as implemented through Part 4 of the Taxation (International and Other Provisions) Act 2010, the diverted profits tax introduced by Finance Act 2015, and the evolving Pillar Two global minimum tax rules present ongoing compliance and advisory challenges.

The tax structuring of mergers and acquisitions is one of the most technically demanding areas of UK tax practice. A well-structured transaction can deliver significant value to vendors and purchasers alike; a poorly structured one can result in unexpected tax charges, lost reliefs, and protracted disputes with HMRC. Consider a typical management buy-out (MBO) of a UK trading company. The transaction will involve the creation of a new holding company (Newco), the acquisition of the target company's shares by Newco (funded by a combination of institutional equity, management equity, and bank debt), and the establishment of management incentive arrangements — typically through a combination of ordinary shares, growth shares, and options. Each element of this structure engages complex tax provisions. The share-for-share exchange between the existing shareholders and Newco must qualify for relief under section 135 of the Taxation of Chargeable Gains Act 1992 — and the conditions for that relief are more stringent than many practitioners appreciate, particularly following HMRC's revised guidance on the "bona fide commercial" requirement. The debt funding introduces questions about the deductibility of interest under the corporate interest restriction rules in Part 10 of the Taxation (International and Other Provisions) Act 2010 and the transfer pricing implications of intra-group lending. The management incentive arrangements are perhaps the most technically fraught area. The boundary between employment income (taxable at up to 45% plus National Insurance) and capital gains (taxable at lower rates) is the subject of extensive anti-avoidance legislation — including the employment-related securities provisions in Part 7 of the Income Tax (Earnings and Pensions) Act 2003 — and aggressive HMRC scrutiny. Getting the valuation of growth shares wrong at the outset can result in punitive employment income tax charges years later.

Transfer pricing has moved from a specialist compliance area to a front-page commercial concern for multinational groups and their advisers. HMRC's investment in transfer pricing expertise, its participation in multilateral risk assessments through the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC), and the introduction of country-by-country reporting have all increased the likelihood that transfer pricing positions will be challenged. For City law firms advising multinational clients, transfer pricing issues arise in the context of corporate restructurings (where functions, assets, and risks are moved between group entities), the establishment of regional headquarters or shared service centres, and the pricing of intra-group financial transactions such as loans, guarantees, and cash pooling arrangements. Accountancy practices preparing transfer pricing documentation under the UK's self-assessment regime need to ensure that their clients' policies are defensible, that the economic analysis supporting arm's-length pricing is robust, and that the documentation meets the requirements set out in the OECD Transfer Pricing Guidelines as adopted by UK legislation. Where disputes arise — and they are arising with increasing frequency — specialist tax counsel can provide the independent analysis and advocacy skills needed to resolve the matter, whether through HMRC's Alternative Dispute Resolution (ADR) process, the Mutual Agreement Procedure (MAP) under the relevant double taxation treaty, or litigation before the Tax Tribunal. Daniel Feingold advises City solicitor firms and accountancy practices on transfer pricing disputes and has experience of both the technical pricing issues and the procedural aspects of resolving multi-jurisdictional controversies.

Employee incentive arrangements are a critical component of corporate transactions and ongoing talent management for City-based businesses. The tax treatment of these arrangements — which can include Enterprise Management Incentive (EMI) options, Company Share Option Plan (CSOP) options, Share Incentive Plans (SIPs), growth shares, carried interest, and co-investment arrangements — is governed by a complex web of statutory provisions and HMRC practice. For solicitor firms drafting incentive documentation and accountancy practices advising on the tax consequences, the stakes are high. An EMI option that fails to meet the qualifying conditions — for example, because the company exceeds the gross assets limit or the employee exceeds the individual limit — is treated as an unapproved option, with the result that the entire gain on exercise is subject to income tax and National Insurance rather than benefiting from the favourable CGT treatment available to qualifying EMI options. Employee Ownership Trusts (EOTs) have emerged as an increasingly popular succession planning tool, particularly for owner-managed businesses in the professional services sector. The CGT exemption available to vendors who sell a controlling interest to an EOT (introduced by Finance Act 2014) is a powerful incentive, but the conditions for qualifying — including the requirement that the trust must hold a controlling interest for at least twelve months, the all-employee benefit requirement, and the constraints on connected party transactions — require careful navigation. HMRC has indicated that it is scrutinising EOT transactions more closely, particularly where the purchase price appears to exceed market value or where the vendor retains significant influence over the company post-sale. Private wealth managers and trust companies also encounter employee incentive issues when their clients hold significant equity positions in private companies. The interaction between the employment-related securities rules and the capital gains tax provisions — particularly in the context of entrepreneurs' relief (now business asset disposal relief) and investors' relief — requires specialist analysis.

Corporate restructurings — including demergers, hive-downs, and group reorganisations — are a staple of City corporate practice, and the tax treatment of these transactions is governed by provisions that are both technical and, in places, uncertain in their application. The statutory demerger provisions in sections 1073–1099 of the Corporation Tax Act 2010 provide a mechanism for splitting a corporate group into separate independent groups without triggering corporation tax, income tax, or stamp duty charges — but only if the exacting conditions set out in those sections are satisfied. In practice, many restructurings do not fit neatly within the statutory demerger framework and require alternative approaches. Liquidation demergers, for example, rely on a combination of capital gains tax reliefs (including the SSE and the reorganisation provisions), capital distributions treatment, and stamp duty exemptions. The interaction of these provisions is complex, and HMRC's published guidance does not address every permutation. City law firms routinely seek specialist tax counsel opinions on proposed restructuring transactions, particularly where significant value is at stake or where the transaction involves novel features. Accountancy practices advising owner-managed businesses on pre-sale restructurings — for example, separating investment property from a trading business ahead of a disposal — similarly benefit from independent tax counsel input to confirm the analysis and identify potential risks. Daniel Feingold has extensive experience advising on corporate restructurings, including statutory and liquidation demergers, hive-downs of trade and assets, and the use of capital reduction demergers. He has also advised on the application of the GAAR to restructuring transactions and can provide opinions on the robustness of proposed arrangements.

City law firms and accountancy practices are increasingly grappling with the implications of the OECD's two-pillar solution to the tax challenges arising from digitalisation. Pillar Two — the global minimum tax — has been implemented in the UK through Finance Act 2024 and imposes a minimum effective tax rate of 15% on multinational groups with consolidated revenues exceeding EUR 750 million. The compliance burden is substantial. Groups within scope must calculate their effective tax rate in each jurisdiction in which they operate, applying the complex top-up tax rules where the effective rate falls below 15%. The interaction between Pillar Two and existing UK tax provisions — including the substantial shareholdings exemption, the patent box regime, and the corporate interest restriction — is the subject of ongoing technical analysis and HMRC guidance. For City-based multinational groups and their advisers, Pillar Two raises strategic questions about corporate structure, the location of holding companies and intellectual property, and the value of tax incentives offered by low-tax jurisdictions. Private wealth managers and trust companies advising on corporate holdings within family structures also need to consider whether Pillar Two applies to their clients' arrangements. While Pillar Two primarily affects the largest multinationals, its influence on international tax norms is already shaping the planning environment for smaller groups. City practices that stay ahead of these developments — and can access specialist counsel to advise on their implications — will be better positioned to serve their clients in an increasingly complex international tax landscape.

Daniel Feingold advises City of London law firms, accountancy practices, private wealth managers, and trust companies on the full range of corporate tax matters. His practice at Burnell Chambers — located in Middle Temple, adjacent to the City — enables him to provide responsive, commercially informed advice on M&A tax structuring, management buy-outs, employee share incentives, transfer pricing, corporate restructurings, and HMRC disputes. With over thirty years of experience — including senior roles at BDO Stoy Hayward, Dechert LLP, and Grant Thornton before founding his own tax law firm and subsequently joining the Bar — Daniel brings a breadth of perspective that combines technical depth with practical commercial understanding. He understands the time pressures of corporate transactions, the need for clear and actionable advice, and the importance of maintaining strong working relationships with instructing professionals. To discuss how Daniel can assist with a corporate tax matter, contact the clerks at Burnell Chambers on 020 3576 1203 or at clerks@burnellchambers.co.uk. Conferences can be held at 1A Middle Temple Lane, London EC4Y 9AA, or by video call.