I joined Hardwick & Morris in the autumn of 2018, and the past six months or so has been taken up with transferring clients and getting used to new admin procedures. That ‘honeymoon period’ is over, so it’s now a variety of things. At present, I am working with a number of clients to reduce their exposure to IHT, advising on setting up offshore trusts for two non-domiciled individual sisters, plus the usual mixture of tax and other questions thrown up by a varied private client portfolio. In addition, we act for some of the biggest names in the music industry, so there is always something interesting coming across my desk.
If you could make one change to a tax law, what would it be?
Tax legislation has become too big and there are many complications. I therefore feel it is time for a major overhaul and simplification. As a first step, I would like to see inheritance tax replaced by capital gains tax. IHT is perceived to be a major burden, even if the reality is that most estates do not have to pay IHT. A shift to CGT would, perhaps, change that view as the family home would be protected by principal private residence relief, whilst investments perceived to be held by those with wealth would remain chargeable. I accept it is not perfect and there will be many issues, such as a loss of business property relief, but I do feel it is time to look at the bigger picture rather than just tinker around the edges – which all chancellors have been guilty of for the past 20 years or so.
Has a recent tax case caught your eye?
The judgment in the case of Hull City AFC (Tigers) Ltd [2019] UKFTT 227, involving payments to an offshore company under an image rights agreement with Geovanni, provides the first guidance on whether such payments constitute earnings in almost 20 years. The decision includes some interesting comments on factors to be taken into account when considering the application of the disguised remuneration rules to image rights payments. These should be reviewed by anyone acting for a client in this area and will also give an indication of what may be considered in cases of other payments that may be caught under the disguised remuneration rules.
The decision is, perhaps, not totally surprising and does reflect the approach taken in the Rangers case ([2017] UKSC 45) that payments are earnings so there is no need to consider the actual contracts. This approach has been taken in other countries; for example, the case of the Brisbane Bears in Australia, where the court reached a similar conclusion.
I would expect fresh scrutiny of image rights and similar agreements from HMRC, so it would be advisable to review related issues with clients in the coming months in light of this decision.
What should we look out for this year?
It is impossible to avoid Brexit, which I suspect will take up most of the government’s time. That will either lead to a lack of changes in tax or, alternatively, there may be some changes made in haste without proper consideration.
One area that merits monitoring is the taxation of trusts. A consultation document was issued in November 2018 on ‘the principles underpinning the taxation of trusts and the extent to which the status quo aligns with them’. This is a far-reaching consultation covering both UK and offshore trusts.
It is hoped that the trust protections against anti-avoidance provisions for deemed domiciled individuals will not change. The consultation document does, however, raise the question of territorial scope and the reasons for choosing a non-resident trust over a UK resident trust. Will we therefore see a need to justify settling assets into an offshore trust before becoming deemed domiciled which extends beyond taking advantage of the trust protections?
The consultation has now ended and we are awaiting the outcome.
You might not know this about me…
At my first firm, I arranged an office trip to Shepherd Neame in Faversham. So, despite what a few of my ex-bosses believed, I can organise the proverbial in a brewery!
I joined Hardwick & Morris in the autumn of 2018, and the past six months or so has been taken up with transferring clients and getting used to new admin procedures. That ‘honeymoon period’ is over, so it’s now a variety of things. At present, I am working with a number of clients to reduce their exposure to IHT, advising on setting up offshore trusts for two non-domiciled individual sisters, plus the usual mixture of tax and other questions thrown up by a varied private client portfolio. In addition, we act for some of the biggest names in the music industry, so there is always something interesting coming across my desk.
If you could make one change to a tax law, what would it be?
Tax legislation has become too big and there are many complications. I therefore feel it is time for a major overhaul and simplification. As a first step, I would like to see inheritance tax replaced by capital gains tax. IHT is perceived to be a major burden, even if the reality is that most estates do not have to pay IHT. A shift to CGT would, perhaps, change that view as the family home would be protected by principal private residence relief, whilst investments perceived to be held by those with wealth would remain chargeable. I accept it is not perfect and there will be many issues, such as a loss of business property relief, but I do feel it is time to look at the bigger picture rather than just tinker around the edges – which all chancellors have been guilty of for the past 20 years or so.
Has a recent tax case caught your eye?
The judgment in the case of Hull City AFC (Tigers) Ltd [2019] UKFTT 227, involving payments to an offshore company under an image rights agreement with Geovanni, provides the first guidance on whether such payments constitute earnings in almost 20 years. The decision includes some interesting comments on factors to be taken into account when considering the application of the disguised remuneration rules to image rights payments. These should be reviewed by anyone acting for a client in this area and will also give an indication of what may be considered in cases of other payments that may be caught under the disguised remuneration rules.
The decision is, perhaps, not totally surprising and does reflect the approach taken in the Rangers case ([2017] UKSC 45) that payments are earnings so there is no need to consider the actual contracts. This approach has been taken in other countries; for example, the case of the Brisbane Bears in Australia, where the court reached a similar conclusion.
I would expect fresh scrutiny of image rights and similar agreements from HMRC, so it would be advisable to review related issues with clients in the coming months in light of this decision.
What should we look out for this year?
It is impossible to avoid Brexit, which I suspect will take up most of the government’s time. That will either lead to a lack of changes in tax or, alternatively, there may be some changes made in haste without proper consideration.
One area that merits monitoring is the taxation of trusts. A consultation document was issued in November 2018 on ‘the principles underpinning the taxation of trusts and the extent to which the status quo aligns with them’. This is a far-reaching consultation covering both UK and offshore trusts.
It is hoped that the trust protections against anti-avoidance provisions for deemed domiciled individuals will not change. The consultation document does, however, raise the question of territorial scope and the reasons for choosing a non-resident trust over a UK resident trust. Will we therefore see a need to justify settling assets into an offshore trust before becoming deemed domiciled which extends beyond taking advantage of the trust protections?
The consultation has now ended and we are awaiting the outcome.
You might not know this about me…
At my first firm, I arranged an office trip to Shepherd Neame in Faversham. So, despite what a few of my ex-bosses believed, I can organise the proverbial in a brewery!
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