from article:

His unit had been told that they were seeking a ‘high value target,’ a Taliban commander, and that they must prove they had killed the right man

The Gurkhas had intended to remove the Taliban leader’s body from the battlefield for identification purposes.

But they came under heavy fire as their tried to do so. Military sources said that in the heat of battle, the Gurkha took out his curved kukri knife and beheaded the dead insurgent.

He is understood to have removed the man’s head from the area, leaving the rest of his body on the battlefield.
Second, looking at these first facts from a Laws of War standpoint, the more appropriate COA (removal of the entire body from the field) was foreclosed by enemy fires. The Gurk, utilizing judgment in terms of the military necessity to ID the HVT, took an alterrnative COA to achieve that goal and complete his mission.

Thirdly, looking to another set of facts from the article:

The incident, which is being investigated by senior commanders, is hugely embarrassing to the British Army, which is trying to build bridges with local Afghan communities who have spent decades under #Taliban rule.
....
If the Gurkha being investigated by the Army is found guilty of beheading the dead enemy soldier, he will have contravened the Geneva Conventions which dictate the rules of war. Soldiers are banned from demeaning their enemies.

The Gurkha now faces disciplinary action and a possible court martial. If found guilty, he could be jailed.

He is now confined to barracks at the Shorncliffe garrison, near Folkestone, Kent.
The overall UK policy looks more akin to Strategic Legalism (the use of law or legal arguments to further larger policy objectives, irrespective of facts or laws to the contrary) than anything else.

The bottom line, therefore, has nothing much to do with law (especially military law); but is overwhelmingly a question of "proper policy". What is "proper" - I lean to MAJ Thomas:

Now, when the rules and customs of war are departed from by one side, one must expect the same sort of behaviour from the other. Accordingly, officers of the Carbineers should be, and up until now have been, given the widest possible discretion in their treatment of the enemy. Now, I don't ask for proclamations condoning distasteful methods of war, but I do say that we must take for granted that it does happen. Let's not give our officers hazy, vague instructions about what they may or may not do. Let's not reprimand them, on the one hand for hampering the column with prisoners, and at another time and another place, hold them up as murderers for obeying orders. [...] The fact of the matter is that war changes men's natures. The barbarities of war are seldom committed by abnormal men. The tragedy of war is that these horrors are committed by normal men in abnormal situations, situations in which the ebb and flow of everyday life have departed and have been replaced by a constant round of fear, and anger, blood, and death. Soldiers at war are not to be judged by civilian rules, as the prosecution is attempting to do, even though they commit acts which, calmly viewed afterwards, could only be seen as unchristian and brutal. And if, in every war, particularly guerilla war, all the men who committed reprisals were to be charged and tried as murderers, court martials like this one would be in permanent session. Would they not? I say that we cannot hope to judge such matters unless we ourselves have been submitted to the same pressures, the same provocations as these men, whose actions are on trial.
That being said, the more likely result is "Shoot straight, you ba$tards".

Regards

Mike

Note Bene: This and my prior post are personal opinion pieces and not statements about what the "law" is.