At the moment, mainly investment fund launches for private equity, venture capital and hedge fund managers – private equity and venture capital funds in particular are quite active. I am also reviewing several co-investments by global funds of funds, and I am working with our private equity transaction partners on two acquisitions and a restructuring. We specialise in asset management clients, so the vast majority of my work is in that space.
If you could make one change to a tax law or practice, what would it be?
If I had a magic wand, I would magic up a more commercially minded and predictable HMRC. I have full sympathy with some of the abuse encountered by HMRC and the need to legislate against such taxpayer behaviour, but the vast majority of clients have no wish to engage in any abusive practices. When dealing with HMRC, also on the policy side, it can feel that the overarching concern is to counter abuse. This means that the creation of a more commercially enabling and predictable environment comes, at times, second (and therefore lags). It is, admittedly, not always an easy balancing act but compared to other jurisdictions we compete with, we are at the more extreme end of the anti-avoidance focus.
One way in which this issue continues to manifest itself is the combination of unpredictable measures and excessively long anti-avoidance legislation, often supplemented with even longer guidance – which then raises as many questions as it answers. To name one example, the salaried partner legislation and guidance were at the centre of disagreements between HMRC and industry in 2018. While the guidance is being reworked, we have now had nearly four years of uncertain legislation in some of the key areas. This is not helpful for anyone.
Are there any new rules that are causing a particular problem?
It’s not a new rule, but sometimes existing measures can also create new difficulties. For example, the impact of BEPS on global investment fund structures is still evolving, as participating jurisdictions amend their local laws to implement individual BEPS action points. In particular, some jurisdictions are now starting to increase the substance requirements for local vehicles to be treaty eligible; this is clearly within the aim of BEPS, but it can cause unwelcome cost and complexity to taxpayers.
For instance, on a recent transaction the client decided, midway through the deal, to change the holding company and treaty jurisdiction for an investment; this was because the Dutch tax advisers reported a change in the local substance requirement for treaty purposes which would have necessitated the hiring of two local employees, renting an office and considerable annual wage spend. One could argue that such change is what BEPS is aimed at, but from a cost and practical perspective the clients understandably preferred to find a less onerous jurisdiction – especially since they had no need for the two local employees or office space. I expect this type of issue to arise more frequently as the implementation of BEPS continues.
What should we be looking out for in 2019?
From a tax perspective, keeping Jeremy Corbyn out of power.
Finally, you might not know this about me but…
One of my personal goals is to get my act together and form a jazz trio, given my passion for jazz piano which I have been playing for 25 years. When that finally happens, I’ll make sure Tax Journal is the first to know.
At the moment, mainly investment fund launches for private equity, venture capital and hedge fund managers – private equity and venture capital funds in particular are quite active. I am also reviewing several co-investments by global funds of funds, and I am working with our private equity transaction partners on two acquisitions and a restructuring. We specialise in asset management clients, so the vast majority of my work is in that space.
If you could make one change to a tax law or practice, what would it be?
If I had a magic wand, I would magic up a more commercially minded and predictable HMRC. I have full sympathy with some of the abuse encountered by HMRC and the need to legislate against such taxpayer behaviour, but the vast majority of clients have no wish to engage in any abusive practices. When dealing with HMRC, also on the policy side, it can feel that the overarching concern is to counter abuse. This means that the creation of a more commercially enabling and predictable environment comes, at times, second (and therefore lags). It is, admittedly, not always an easy balancing act but compared to other jurisdictions we compete with, we are at the more extreme end of the anti-avoidance focus.
One way in which this issue continues to manifest itself is the combination of unpredictable measures and excessively long anti-avoidance legislation, often supplemented with even longer guidance – which then raises as many questions as it answers. To name one example, the salaried partner legislation and guidance were at the centre of disagreements between HMRC and industry in 2018. While the guidance is being reworked, we have now had nearly four years of uncertain legislation in some of the key areas. This is not helpful for anyone.
Are there any new rules that are causing a particular problem?
It’s not a new rule, but sometimes existing measures can also create new difficulties. For example, the impact of BEPS on global investment fund structures is still evolving, as participating jurisdictions amend their local laws to implement individual BEPS action points. In particular, some jurisdictions are now starting to increase the substance requirements for local vehicles to be treaty eligible; this is clearly within the aim of BEPS, but it can cause unwelcome cost and complexity to taxpayers.
For instance, on a recent transaction the client decided, midway through the deal, to change the holding company and treaty jurisdiction for an investment; this was because the Dutch tax advisers reported a change in the local substance requirement for treaty purposes which would have necessitated the hiring of two local employees, renting an office and considerable annual wage spend. One could argue that such change is what BEPS is aimed at, but from a cost and practical perspective the clients understandably preferred to find a less onerous jurisdiction – especially since they had no need for the two local employees or office space. I expect this type of issue to arise more frequently as the implementation of BEPS continues.
What should we be looking out for in 2019?
From a tax perspective, keeping Jeremy Corbyn out of power.
Finally, you might not know this about me but…
One of my personal goals is to get my act together and form a jazz trio, given my passion for jazz piano which I have been playing for 25 years. When that finally happens, I’ll make sure Tax Journal is the first to know.
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