There is – with good reason – a lot of chatter about the new UK asset holding company regime. Private equity and credit firms are very excited about it, and rightly so. It’s a bit of a Holy Grail moment (well, almost...) for alternative asset managers, as the regime is expected to allow fund managers to house financial assets and shares in a UK fund vehicle that will not be subject to all the usual vagaries of, and contortions demanded by, the UK tax system – hitherto, leaving the UK about as popular as a rattlesnake in a lucky dip, in terms of being a credible asset holding jurisdiction for the global funds industry. The new, super-charged AHC regime (a souped-up version of the City’s UK securitisation company regime, but decked out in all the finery fit for the Mayfair managers) presents a UK fund vehicle that will, all going well, be taxed only on a small financing return (absent the torture of the distribution rules and the SSE, inter alia) and where investors can, to some extent, take out underlying capital returns as capital gains, receive interest gross without the unnecessary listing on the 19th Exchange of the Ruritanian Special Market and not be walloped with stamp duty on share buybacks. It’s what the UK funds industry needs and it will be a welcome antidote to the more common European structures being battered by BEPS and the Danish cases.
Kevin Cummings, McDermott, Will &Emery
Interesting questions are also starting to emerge regarding the interpretation of retained EU law post-Brexit. It will be some time before we have guidance on these issues from the courts.
Nicholas Gardner, Ashurst
I might introduce a £100 penalty for every lie told about HMRC in the press or social media – it would certainly be a revenue raiser! Seriously though, I passionately believe that the department needs to be accountable and scrutinised. After all, we touch the lives of millions, we have a lot of powers that we need to use responsibly, and I know we don’t always get things right – but when commentators and politicians trot out baseless, tired old tropes about sweetheart deals etc., it harms public trust in tax administration.
Jim Harra, HMRC
Difficulties caused by conflicting or uncertain characterisations of entities as opaque or transparent have increased exponentially as a result of anti-hybrid rules, both in the UK and elsewhere. These might be very much reduced if the UK and other jurisdictions could adopt clearer and internationally consistent rules on foreign entity characterisation. My Amsterdam colleagues tell me that the Netherlands has some interesting proposals here; in particular, the idea that in relation to an entity that is resident in one jurisdiction, the tax rules of another jurisdiction would default to following the entity’s tax characterisation in its jurisdiction of residence. Obviously, this is an instance of ‘be careful what you wish for’, but that caution might be largely addressed by an elective grandfathering rule for existing structures.
Ben Eaton, Greenberg Traurig
There are lots of complicated things I could mention, but one thing that could be achieved relatively easily and have quite a significant impact would be to reform stamp duty and the process for paying it. From a procedural perspective, I think we’re partway there already now that HMRC has moved away from physical stamping of documents as a result of the success of the temporary covid-19 related measures introduced in March 2020. However, this could be improved further with use of a proper online system, with suitable options in the submission form for disclosing the complexities of particular transactions and for relevant documents to be uploaded directly into the submission. It would also be helpful to re-state and clarify the legislation regarding the territorial scope of stamp duty, which is a notoriously grey area and can lead to unnecessary uncertainty regarding the treatment of overseas transactions.
Kitty Swanson, Mayer Brown
Can I choose two? I would abolish stamp duty on primary principal residences. It acts as a block on mobility, social and geographic. My second would be a well-designed, hypothecated, carbon tax. The revenue could fund green initiatives, as well as finance or grants for things like net zero home renovations.
Victor Cramer, Stewarts Law
It can represent a big change, so you will need to develop some of your skills. You learn so much in practice, but there is always a team of experts on every topic, and always another partner to sign things off. When I first moved in-house, it initially felt lonely, with much to decide alone. I was asked to give advice on all things tax related (even though I had only really been a direct tax specialist at that point). But the great advantage of working in-house is that you can manage your own time, and this allows you to research a matter thoroughly. You soon gain a sense of when to seek external support and when to feel comfortable giving your advice independently. You also find so much support from wider finance colleagues and the board. Making decisions and delivering for your in-house stakeholders is very rewarding and fulfilling, and this makes it all worthwhile. I believe that, regardless of whether working in-house becomes a permanent move, it is an important experience for any tax professional as it provides an invaluable insight into the real challenges that businesses face. I might be biased but leading an in-house tax team is a great route by which to gain experience in leading many wider finance and risk areas. I would always advise others to grab these opportunities.
Eleanor Christie, Nando’s
Litigating online has been a steep learning curve but we’ve got there. I hope it remains as an option in the future. It’s particularly effective for shorter appeals, or cases which turn on a tricky point of statutory interpretation. But there is no doubt that it has its challenges. It takes real concentration to read a (virtual) room while making a meaningful connection with the tribunal or the witness. A screen feels very one dimensional. I have also been in the middle of making what I thought was a nice point and then seeing the judges in their boxes pixelating or jumping about the screen and so we all have to start again.
Elizabeth Wilson QC, Pump Court Tax Chambers
I am part of a generation of female partners who have been able to look up and see brilliant senior women to whom we can aspire. Now I’m in a position to impact the culture around me, I make sure I spend time passing on the mentorship and support that I was so lucky to benefit from. If anyone reading this is feeling defeated by the juggle of work and life, please reach out. We all have responsibility for making our industry inclusive and diverse.
Katie Leah, Goodwin
Blackrock Holdco 5 LLC [2020] UKFTT 443 (TC), where HMRC sought to refuse deductions on the intragroup loans under the transfer pricing and unallowable purpose rules ...This case reinforces certain practical matters when looking at the financing arrangements for transactions: namely, ensuring that there is both proper consideration of the transactions by directors and supporting contemporaneous documentation. The case also shows the importance of obtaining at the outset expert input into transfer pricing the terms of any intragroup financing arrangement. Jiten Tank, Paul Hastings
Haworth [2021] UKSC 25, where the Supreme Court upheld the decision of the Court of Appeal to quash a follower notice issued by HMRC. The practical implications are that HMRC cannot issue a valid notice unless it is able to form the opinion that there is no scope for a reasonable person to disagree that the earlier ruling used to justify the notice denies the taxpayer the advantage. As the Supreme Court stated: ‘Only then can they be said to have formed the opinion that the relevant ruling “would” deny the advantage. An opinion merely that is likely to do so is not sufficient.’ Clearly, this raises the distinct possibility that a range of follower notices are invalid in circumstances where HMRC has been applying the wrong approach to the legislation. Watch out for future challenges in this area in respect of notices which have been issued and/or the taxpayer has paid the notice and/or is facing enforcement action.
Julian Hickey, Addington Chambers
The recent Supreme Court decision in the long running FII saga ([2020] UKSC 47) has re-written the book on time limits for restitution claims based on mistake of law. This is going to have a big impact on a wide range of GLO litigation. Working out when a company could first have ‘discovered’ that it had a ‘worthwhile’ claim (whatever that means) to challenge primary UK tax legislation, by reading the runes in the CJEU caselaw, is going to be a real challenge, and I suspect that there are several more rounds of appeal to go through before the implications of the Supreme Court’s latest majority judgment are fully resolved.
Sam Grodzinski QC, Blackstone Chambers
My first boss, Sir Amyas Morse, gave me a great piece of advice. He told me never to be afraid to admit that I had got something wrong. It won’t be easy, but rather like going to the dentist with toothache, the sooner you get it over with, the better, and afterwards you will be glad you did it.
Maryanna Sharrock, Stephenson Harwood
If there is an area of tax in which you wish to specialise, then invest in it holistically and early on. Read around the subject; make the effort to learn from colleagues, clients and peers at other firms; and build relationships with all of these people. Taking this approach early on helps with understanding the business fundamentals and commercial rationale for why tax input is necessary, and it also helps to demystify things, including the jargon! It should help reveal the bigger picture and enable a more practical application of tax knowledge. Deepesh Upadhyay, Eversheds Sutherland
One of my interests is bog snorkeling. I have competed at the World Bog Snorkeling Championships in mid-Wales but unfortunately, I have not yet been crowned champion. Making your way through a 60 metre peat bog is not at all easy, although the experience is surprisingly refreshing.
Elena Rowlands, Travers Smith
My family, like a lot of others, is neurodiverse (and brilliant, obviously, but then I am biased!). Neurodiversity covers a range of differences in the ways in which people’s brains work, including autism, ADHD, dyslexia and dyspraxia. It isn’t talked about enough but awareness is growing and businesses increasingly appreciate the talent and value that people who think differently can bring. Many neurodiverse people have skills that are very useful for tax (e.g. creative thinking and/or deep technical focus), so as a profession we should be well placed to help build inclusive workplaces.
Hilary Barclay, Burges Salmon
I once won a knock-down karate contest whilst unconscious. My opponent – who was both much better and bigger than me – hit me in the neck with a roundhouse kick with such force that it lifted me off the ground. He was disqualified for a foul and for using excess force. I came around as they were presenting me with the trophy. But it showed me that you can still win provided you follow the rules – a valuable lesson for any tax specialist!
Tony Monger, Mazars
Tax Journal thanks everyone who took part in this feature this year. We look forward to publishing more views from senior tax professionals and rising stars in 2022. If you fit the bill and would like to take part (or know someone who does), please email the editor at paul.stainforth@lexisnexis.co.uk.
There is – with good reason – a lot of chatter about the new UK asset holding company regime. Private equity and credit firms are very excited about it, and rightly so. It’s a bit of a Holy Grail moment (well, almost...) for alternative asset managers, as the regime is expected to allow fund managers to house financial assets and shares in a UK fund vehicle that will not be subject to all the usual vagaries of, and contortions demanded by, the UK tax system – hitherto, leaving the UK about as popular as a rattlesnake in a lucky dip, in terms of being a credible asset holding jurisdiction for the global funds industry. The new, super-charged AHC regime (a souped-up version of the City’s UK securitisation company regime, but decked out in all the finery fit for the Mayfair managers) presents a UK fund vehicle that will, all going well, be taxed only on a small financing return (absent the torture of the distribution rules and the SSE, inter alia) and where investors can, to some extent, take out underlying capital returns as capital gains, receive interest gross without the unnecessary listing on the 19th Exchange of the Ruritanian Special Market and not be walloped with stamp duty on share buybacks. It’s what the UK funds industry needs and it will be a welcome antidote to the more common European structures being battered by BEPS and the Danish cases.
Kevin Cummings, McDermott, Will &Emery
Interesting questions are also starting to emerge regarding the interpretation of retained EU law post-Brexit. It will be some time before we have guidance on these issues from the courts.
Nicholas Gardner, Ashurst
I might introduce a £100 penalty for every lie told about HMRC in the press or social media – it would certainly be a revenue raiser! Seriously though, I passionately believe that the department needs to be accountable and scrutinised. After all, we touch the lives of millions, we have a lot of powers that we need to use responsibly, and I know we don’t always get things right – but when commentators and politicians trot out baseless, tired old tropes about sweetheart deals etc., it harms public trust in tax administration.
Jim Harra, HMRC
Difficulties caused by conflicting or uncertain characterisations of entities as opaque or transparent have increased exponentially as a result of anti-hybrid rules, both in the UK and elsewhere. These might be very much reduced if the UK and other jurisdictions could adopt clearer and internationally consistent rules on foreign entity characterisation. My Amsterdam colleagues tell me that the Netherlands has some interesting proposals here; in particular, the idea that in relation to an entity that is resident in one jurisdiction, the tax rules of another jurisdiction would default to following the entity’s tax characterisation in its jurisdiction of residence. Obviously, this is an instance of ‘be careful what you wish for’, but that caution might be largely addressed by an elective grandfathering rule for existing structures.
Ben Eaton, Greenberg Traurig
There are lots of complicated things I could mention, but one thing that could be achieved relatively easily and have quite a significant impact would be to reform stamp duty and the process for paying it. From a procedural perspective, I think we’re partway there already now that HMRC has moved away from physical stamping of documents as a result of the success of the temporary covid-19 related measures introduced in March 2020. However, this could be improved further with use of a proper online system, with suitable options in the submission form for disclosing the complexities of particular transactions and for relevant documents to be uploaded directly into the submission. It would also be helpful to re-state and clarify the legislation regarding the territorial scope of stamp duty, which is a notoriously grey area and can lead to unnecessary uncertainty regarding the treatment of overseas transactions.
Kitty Swanson, Mayer Brown
Can I choose two? I would abolish stamp duty on primary principal residences. It acts as a block on mobility, social and geographic. My second would be a well-designed, hypothecated, carbon tax. The revenue could fund green initiatives, as well as finance or grants for things like net zero home renovations.
Victor Cramer, Stewarts Law
It can represent a big change, so you will need to develop some of your skills. You learn so much in practice, but there is always a team of experts on every topic, and always another partner to sign things off. When I first moved in-house, it initially felt lonely, with much to decide alone. I was asked to give advice on all things tax related (even though I had only really been a direct tax specialist at that point). But the great advantage of working in-house is that you can manage your own time, and this allows you to research a matter thoroughly. You soon gain a sense of when to seek external support and when to feel comfortable giving your advice independently. You also find so much support from wider finance colleagues and the board. Making decisions and delivering for your in-house stakeholders is very rewarding and fulfilling, and this makes it all worthwhile. I believe that, regardless of whether working in-house becomes a permanent move, it is an important experience for any tax professional as it provides an invaluable insight into the real challenges that businesses face. I might be biased but leading an in-house tax team is a great route by which to gain experience in leading many wider finance and risk areas. I would always advise others to grab these opportunities.
Eleanor Christie, Nando’s
Litigating online has been a steep learning curve but we’ve got there. I hope it remains as an option in the future. It’s particularly effective for shorter appeals, or cases which turn on a tricky point of statutory interpretation. But there is no doubt that it has its challenges. It takes real concentration to read a (virtual) room while making a meaningful connection with the tribunal or the witness. A screen feels very one dimensional. I have also been in the middle of making what I thought was a nice point and then seeing the judges in their boxes pixelating or jumping about the screen and so we all have to start again.
Elizabeth Wilson QC, Pump Court Tax Chambers
I am part of a generation of female partners who have been able to look up and see brilliant senior women to whom we can aspire. Now I’m in a position to impact the culture around me, I make sure I spend time passing on the mentorship and support that I was so lucky to benefit from. If anyone reading this is feeling defeated by the juggle of work and life, please reach out. We all have responsibility for making our industry inclusive and diverse.
Katie Leah, Goodwin
Blackrock Holdco 5 LLC [2020] UKFTT 443 (TC), where HMRC sought to refuse deductions on the intragroup loans under the transfer pricing and unallowable purpose rules ...This case reinforces certain practical matters when looking at the financing arrangements for transactions: namely, ensuring that there is both proper consideration of the transactions by directors and supporting contemporaneous documentation. The case also shows the importance of obtaining at the outset expert input into transfer pricing the terms of any intragroup financing arrangement. Jiten Tank, Paul Hastings
Haworth [2021] UKSC 25, where the Supreme Court upheld the decision of the Court of Appeal to quash a follower notice issued by HMRC. The practical implications are that HMRC cannot issue a valid notice unless it is able to form the opinion that there is no scope for a reasonable person to disagree that the earlier ruling used to justify the notice denies the taxpayer the advantage. As the Supreme Court stated: ‘Only then can they be said to have formed the opinion that the relevant ruling “would” deny the advantage. An opinion merely that is likely to do so is not sufficient.’ Clearly, this raises the distinct possibility that a range of follower notices are invalid in circumstances where HMRC has been applying the wrong approach to the legislation. Watch out for future challenges in this area in respect of notices which have been issued and/or the taxpayer has paid the notice and/or is facing enforcement action.
Julian Hickey, Addington Chambers
The recent Supreme Court decision in the long running FII saga ([2020] UKSC 47) has re-written the book on time limits for restitution claims based on mistake of law. This is going to have a big impact on a wide range of GLO litigation. Working out when a company could first have ‘discovered’ that it had a ‘worthwhile’ claim (whatever that means) to challenge primary UK tax legislation, by reading the runes in the CJEU caselaw, is going to be a real challenge, and I suspect that there are several more rounds of appeal to go through before the implications of the Supreme Court’s latest majority judgment are fully resolved.
Sam Grodzinski QC, Blackstone Chambers
My first boss, Sir Amyas Morse, gave me a great piece of advice. He told me never to be afraid to admit that I had got something wrong. It won’t be easy, but rather like going to the dentist with toothache, the sooner you get it over with, the better, and afterwards you will be glad you did it.
Maryanna Sharrock, Stephenson Harwood
If there is an area of tax in which you wish to specialise, then invest in it holistically and early on. Read around the subject; make the effort to learn from colleagues, clients and peers at other firms; and build relationships with all of these people. Taking this approach early on helps with understanding the business fundamentals and commercial rationale for why tax input is necessary, and it also helps to demystify things, including the jargon! It should help reveal the bigger picture and enable a more practical application of tax knowledge. Deepesh Upadhyay, Eversheds Sutherland
One of my interests is bog snorkeling. I have competed at the World Bog Snorkeling Championships in mid-Wales but unfortunately, I have not yet been crowned champion. Making your way through a 60 metre peat bog is not at all easy, although the experience is surprisingly refreshing.
Elena Rowlands, Travers Smith
My family, like a lot of others, is neurodiverse (and brilliant, obviously, but then I am biased!). Neurodiversity covers a range of differences in the ways in which people’s brains work, including autism, ADHD, dyslexia and dyspraxia. It isn’t talked about enough but awareness is growing and businesses increasingly appreciate the talent and value that people who think differently can bring. Many neurodiverse people have skills that are very useful for tax (e.g. creative thinking and/or deep technical focus), so as a profession we should be well placed to help build inclusive workplaces.
Hilary Barclay, Burges Salmon
I once won a knock-down karate contest whilst unconscious. My opponent – who was both much better and bigger than me – hit me in the neck with a roundhouse kick with such force that it lifted me off the ground. He was disqualified for a foul and for using excess force. I came around as they were presenting me with the trophy. But it showed me that you can still win provided you follow the rules – a valuable lesson for any tax specialist!
Tony Monger, Mazars
Tax Journal thanks everyone who took part in this feature this year. We look forward to publishing more views from senior tax professionals and rising stars in 2022. If you fit the bill and would like to take part (or know someone who does), please email the editor at paul.stainforth@lexisnexis.co.uk.
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