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One minute with... Chris Bates

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You lead the European VAT group at Norton Rose Fulbright. What are your predictions for the UK VAT system?
Whatever form Brexit finally takes, VAT is with us for the long haul, although there is likely to be a slow process of incremental divergence. Two areas have been singled out for more rapid review and change. One is property. Although the restriction of zero rating was originally driven by the need to comply with EU law, I doubt we will see much of a liberalisation. It is more likely that there will be a tightening up of the system and broader anti-avoidance measures. Perhaps we will see the GAAR extended to VAT if HMRC feels the EU concept of abuse of law is too narrowly defined.
The other area is financial services. Most financial services provided outside the EU carry the right to input tax recovery. Extending that to supplies to the remaining EU member would be expensive for the public finances but there isn’t an obvious simple fix. The extent of the issue will, of course, be bound up with the regulatory issues; and the interaction of different layers of law makes disentanglement from Europe such a complex problem.
You have extensive experience advising on the taxation aspect of asset and project finance. Can you share a trend in the marketplace?
Old style UK tax based asset finance has all but disappeared from what it used to be. However, the new challenges posed by developments in cross-border taxation coming out of the BEPS project can be very stretching, especially where non-traditional sources of finance are involved.
What do you know now that you wish you’d known at the start of your career?
If you are caught up in a dispute with HMRC, the best solution is not to dig a trench, crawl in and lob a desultory missive every six months in the general direction of HMRC. Disputes are best resolved quickly but need pro-active management, using all the tools available from litigation to mediation. Delaying tactics don’t solve the problem; they just mean the bills rack up, as the file is revisited time and time again.
Are there any new rules that are causing a particular problem?
The style of modern legislation means that advisers become very dependent on guidance. If you take the new anti-hybrid legislation, the rules are rather detailed and prescriptive and the overall sense of direction of the legislation is quickly lost. Of course, guidance is helpful but it can be long – for the hybrid rules, there are 390 pages. Producing this is a strain not just on HMRC resources but on the resources of all the consultative bodies involved. I sometimes worry it is not sustainable.
Guidance dependency is dangerous for taxpayers. Typically it is given by use of examples, but the examples provided are usually fairly straightforward and commercial life is usually much messier. It is dangerous to extrapolate what HMRC’s view might be of a more complex case from a simple case. When the legislation comes to be interpreted by the courts, little weight is given to HMRC’s guidance and so it is not a terribly reliable guide as to how the legislation may ultimately be interpreted. And if HMRC changes its mind, the taxpayer has very limited remedies: judicial review rarely succeeds in this area.
And finally, you might not know this about me but…
I’m probably happiest on a horse, at the ballet or tucking in to my wife’s cassoulet. 
Issue: 1376
Categories: One minute with