Burford Capital LtdBUR

Burford Capital Ltd Income Taxes Disclosure

10-KFiled Feb 26, 20267 min read
Income taxes
The Company has received an exemption from corporate income tax in Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989, as amended, for the year ending December 31, 2025. This tax exemption must be reapplied for with the Guernsey taxing authorities on an annual basis.
The Company’s operating subsidiaries in Australia, Ireland, Singapore, the United Kingdom and the United States are subject to taxation in such jurisdictions as determined in accordance with relevant tax legislation. In certain cases, an operating subsidiary of the Company may elect a transaction structure that could be subject to income tax in a country related to the transaction creating the capital provision asset.
The Group's effective tax rate was 14%, 9% and 3% for the years ended December 31, 2025, 2024 and 2023, respectively. The variability in the Group’s effective tax rate from period to period reflects the differing portions of the Group’s overall income and losses reported to each relevant taxing jurisdiction, and the differing tax rates in effect for such taxing jurisdictions at which such income and losses are taxed. Another significant factor in the determination of the effective tax rate is the change in the Group’s valuation allowance against its deferred tax asset, largely arising from currently nondeductible interest expense.
The table below sets forth the domestic and foreign income/(loss) before income taxes for the periods indicated.
Years ended December 31,
($ in thousands)202520242023
Guernsey$(9,606)$26,717$11,695
Foreign93,638226,871726,588
Income/(loss) before income taxes84,032253,588738,283
The table below sets forth the components of the tax charge reconciling the domestic statutory tax rate to the provision for/(benefit from) income taxes for the periods indicated.
Years ended December 31,
202520242023
($ in thousands)AmountPercentageAmountPercentageAmountPercentage
Guernsey statutory tax rate$— — %$— — %$— — %
Foreign tax effects
Singapore
Statutory tax rate difference between Guernsey and Singapore(920)(1)%(590)— %(570)— %
Changes in valuation allowances9591 %589— %802— %
Other(39)— %1— %(232)— %
United Kingdom
Statutory tax rate difference between Guernsey and United Kingdom1,5662 %(2,251)(1)%3,487— %
Changes in valuation allowances2,7293 %388— %(863)— %
Changes in deferred tax(3,518)(4)%(1,090)— %43— %
Other9— %52— %(2,200)— %
United States
Statutory tax rate difference between Guernsey and United States(12,699)(15)%(3,969)(2)%1,582— %
Changes in valuation allowances13,74116 %10,4884 %404— %
Nondeductible partnership income/(loss)
(1,960)(2)%(1,008)— %— — %
IRC §162(m) limitation12,47915 %7,8033 %20,9993 %
Intercompany transactions— — %3,1051 %(3,105)— %
US Federal Withholding Tax1,9952 %2,4121 %1,928— %
US state and local taxes(937)(1)%3,1281 %2,897— %
Other, net(1,737)(2)%4,8762 %(5,074)(1)%
Other jurisdictions
Foreign other176— %71— %(14)— %
Effective tax rate11,84414 %24,0059 %20,0843 %
The table below sets forth a detailed analysis of the foreign tax differential for the periods indicated.
Years ended December 31,
($ in thousands)202520242023
US subsidiaries at statutory tax rate$(12,698)$(4,726)$1,884
Singapore subsidiaries at statutory tax rate(920)(590)(570)
Irish subsidiaries at statutory tax rate30(2)6
UK subsidiaries at statutory tax rate1,566(2,251)3,487
Other— 4 (7)
Total(12,022)(7,565)4,800
The table below sets forth the current and deferred components of the provision for/(benefit from) income taxes for the periods indicated.
Years ended December 31,
($ in thousands)202520242023
Current:
Domestic (Guernsey)$— $— $— 
Foreign - US federal and state(2,323)35,75912,417
Foreign - other and withholding8625,1231,804
Total current provision for/(benefit from) income taxes(1,461)40,88214,221
Deferred:
Domestic (Guernsey)— — — 
Foreign - US federal and state11,211(15,033)8,982
Foreign - other2,094 (1,844)(3,119)
Total deferred provision for/(benefit from) income taxes13,305(16,877)5,863
Total:
Domestic (Guernsey)— — — 
Foreign - US federal and state8,88820,72621,399
Foreign - other and withholding2,956 3,279 (1,315)
Total provision for/(benefit from) income taxes11,84424,00520,084
The table below sets forth the income taxes paid, net of refunds received for the periods indicated.
Years ended December 31,
($ in thousands)202520242023
Guernsey$— $— $— 
Foreign
US federal21,97716,35812,344
US state - Illinois (618)1,472— 
US state - Other4281,3041,026
Other foreign jurisdictions186 142(49)
Income taxes paid (net of refunds received)21,97319,27513,321
The table below sets forth the tax effect of temporary tax-related differences and carryforwards that comprise significant portions of gross deferred tax assets and liabilities as of the dates indicated.
December 31,
($ in thousands)20252024
Deferred tax assets:
Compensation and benefit accruals$18,319$20,699
Net operating loss carryforwards12,21412,045
Non-deductible and excess interest57,46137,655
Unrealized loss1,730 2,358 
Acquisition costs307359
Capital lease137157
Other928928
Total deferred tax assets(1)
91,09674,201
Deferred tax liabilities:
Depreciation and amortization(822)(1,041)
Goodwill(17,793)(15,333)
Unrealized gain(64,085)(55,558)
Total deferred tax liabilities(1)
(82,700)(71,932)
Net deferred tax position8,396 2,269 
Valuation allowance(52,780)(34,826)
Net deferred tax liabilities(44,384)(32,557)
1. Total deferred tax assets and liabilities in this table are shown on a gross basis. Deferred tax assets and liabilities as shown in the consolidated statements of financial condition are offset within each tax jurisdiction, to the extent that they relate to the same taxable entity.
The table below sets forth the net operating loss carryforwards as of the dates indicated. US net operating loss carryforwards reported in the Group’s consolidated financial statements reflect the US federal statutory tax rate and an estimated blended state tax rate. The actual effective state tax rate in a particular year may differ from the estimated blended state tax rate.
Years ended December 31,
($ in thousands)202520242023
US federal(1)
$— $— $— 
US state(2)
34,63935,2049,427
Foreign(1)
28,80124,1193,692
1. US federal and foreign net operating losses have indefinite carryforward periods.
2. US state operating losses is comprised of amounts which will expire on various dates ranging from 2038 through 2042.
The table below sets forth the valuation allowances as of the dates indicated.
December 31,
($ in thousands)20252024
US
$35,163 $18,805
UK
13,95413,308
Singapore
3,4542,521
Other
210 192
Total52,78034,826
The Group’s valuation allowance against its deferred tax assets primarily relates to interest expense, foreign net operating loss carryforwards and other deferred tax assets. The Group, in determining its valuation allowance for its deferred tax assets, has performed an assessment of positive and negative evidence, including the nature, frequency and severity of cumulative financial reporting losses in recent years, and the
future reversal of existing temporary differences, predictability of future taxable income exclusive of reversing temporary differences of the character necessary to realize the tax assets, relevant carryforward periods, taxable income in carryback periods if carryback is permitted under applicable tax laws and prudent and feasible tax planning strategies that would be implemented, if necessary, to protect against the loss of certain deferred tax assets that would otherwise expire (e.g., net operating losses). Although realization is not assured, based on the Group’s assessment, the Group has concluded that it is more likely than not that the remaining gross deferred tax assets will be realized and, as such, no additional valuation allowance has been provided.
The calculation of the Group’s global tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations and case law in a multitude of taxing jurisdictions across the Group’s global operations. ASC 740—Income Taxes states that a tax benefit from an uncertain tax position shall be recognized when it is more likely than not that the position will be sustained upon examination, including
resolutions of any related appeals or litigation processes, based on the technical merits. In accordance with the guidelines established by ASC 740—Income Taxes, the Group believes it does not have any uncertain tax positions for the year ended December 31, 2025 or for any prior tax year that currently remains open under an applicable statute of limitations in the corresponding taxing jurisdiction. The Group continues to monitor its global tax positions and, if necessary, update its position under ASC 740—Income Taxes regarding any uncertain tax positions based on any relevant case law, tax law and regulatory developments in an applicable taxing jurisdiction. As of the date of this 2025 Form 10-K, the Group is subject to audit in New York for the tax years ended December 31, 2024, 2023 and 2022. Certain affiliates of the Group file a US federal income tax return, along with various state and local income tax returns, which are subject to examination by the relevant taxing authorities for the years ended December 31, 2021 and onwards.
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law. The OBBBA includes a broad range of tax reform provisions and has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Group’s income tax provision for the year ended December 31, 2025 reflects the impact of tax legislation enacted during the year.

Historical Timeline

Fiscal YearFiled
2025Feb 26, 2026Showing above
2024Mar 3, 2025

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

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