Which recent tax case has caught your eye?
UBS AG and DB Group Services. The case concerned the taxation of restricted securities which had been issued to bank employees instead of awarding them cash bonuses. The reasoning of the Supreme Court was that the legislation in question had to be construed as being limited to restrictions on securities with a business or commercial purpose. It marks a return to the dark ages and leads to the absurd result that restricted securities awarded for tax avoidance purposes are taxable upon issue on their restricted value (as opposed to later, on their full unrestricted value, as Parliament intended). Nicola Shaw QC, Gray’s Inn Tax Chambers
The CJEU decision in Brisal and KBC vs Fazenda Pública is of interest whether or not the UK remains subject to the EU fundamental freedoms post-Brexit. It says that a member state cannot impose withholding tax on interest on a gross basis where a resident lender would pay tax (even at a higher rate) on a net basis after deducting financing costs. Aside from the potential for affected taxpayers to seek tax refunds, there is the issue of how the landscape of withholding tax on intra-EU lending will shape up in the future. For those member states that impose withholding tax and do not provide an exemption under the relevant tax treaty with the UK, will UK lenders be at a disadvantage to EU lenders post-Brexit? Elizabeth Bradley, head of corporate tax at Berwin Leighton Painser
It’s not a tax case but I can see it having a very significant impact on tax practice. Last year the Supreme Court decision in Pham v Sec of State for the Home Department [2015] UKSC 19 recalibrated the law dramatically on the grounds by which administrative decisions, including those therefore of HMRC, could be challenged. It would seem that the ‘virtually unattainable test’ of irrationality from Wednesbury has been reinterpreted to emphasise the assessment of reasonableness. Significantly, the judgments of the Supreme Court describe that assessment as producing an outcome not far from the proportionality requirement of EU law. Where HMRC is called upon to exercise a discretion or make a judgement or any form of decision, it appears that gone are the days where that decision could only be challenged if it was shown to be irrational. Now consideration might be given to whether the decision went no further than was necessary to attain its objective. Take for example those decisions to assess to tax transfers made into pension funds which were at the time not known to be non-compliant. A proportionality test might require HMRC to tax only those transfers which were made for a tax avoidance motive and disregard those where the transfer was made for good financial reasons. Simon Whitehead, founding partner, Joseph Hage Aaronson
What proposed changes to tax law have caught your eye?
The income-based carried interest rules in the latest Finance Bill are a good example of the modern approach to tax legislation. On the plus side, the revisions to the previous draft legislation took account of comments from asset managers, industry bodies and advisers. However, the rules are extremely complex and highly prescriptive – and as a result, they are likely to generate anomalous results in practice.
The consultation on simplification and expansion of the substantial shareholding exemption is welcome. The intricacy of our SSE does not compare favourably with participation exemptions in other jurisdictions and has been one area of difficulty for some overseas businesses looking to establish operations in the UK. Stuart Sinclair, partner, Akin Gump
What will the UK tax system look like post-Brexit?
UK businesses which have expanded abroad will collapse. International businesses will withdraw from the UK. The only way to stop the haemorrhaging of investment and jobs will be to make the UK into a tax haven, and remove all the special charges on the ownership of property in the UK by companies. This will be a curious climax to the last government’s campaign against tax avoidance. VAT will continue as a national tax, but without the framework of the Directives or the guidance of the CJEU, so it will diverge ever more from EU principles. David Southern QC, Temple Tax Chambers
If you could make one change to a tax law or practice, what would it be?
A better non-statutory ruling system please! It’s an old chestnut, but as the tax authorities impose more and more burdens on taxpayers to pay the right amount of tax, and be transparent, notwithstanding the complexity of the tax system, this surely has to be accompanied by an efficient and well-staffed ruling system. Due to staff shortages, the length of time it takes to get rulings is a deterrent to making any application at all and often the tax authority will try to wriggle out of giving a ruling by arguing it is covered by published guidance. Richard Woolich, head of UK tax, DLA Piper
I’d like HMRC case workers to follow more closely the spirit (and sometimes the letter) of the administrative rules. I appreciate that they may have difficulties in getting some taxpayers to co-operate. But they should raise enquiries properly within the statutory deadlines, rather than relying on discovery powers (and the lenient views that the courts take) when they are late. And they should issue notices of enquiry labelled as such and issued to the correct taxpayer, rather than relying on the courts to treat other correspondence as amounting to the required formalities. I am not suggesting that HMRC always gets its own way or that there is an institutional intention to push the rules, but it grates on me when I come across problems of this nature. Gordon Keenay, head of stamp taxes, FTI Consulting
What's happening on the administration of taxes in Scotland?
Much of the most important tax in terms of raising finance for the Scottish government is income tax. This year, 2016/17, there is a single Scottish rate of income tax at 10 pence inserted across all rate bands. It is payable by Scottish taxpayers, who are identified by an ‘S’ PAYE code, based on where they live, and it is the responsibility of HMRC to identify those who are Scottish. Not everyone has been correctly identified yet but hopefully this will be rectified before the measures in the Scotland Act 2016 are implemented; i.e. when all income tax rates and bands are devolved from April 2017.
Revenue Scotland is responsible for the fully devolved taxes of LBTT and Scottish landfill tax (from April 2015); air passenger duty from April 2018; and, in due course, aggregates levy. As a new tax authority, Revenue Scotland continues to make its way along the learning curve. There may also be challenges to come around some of the new legislation, such as the GAAR – the general anti-avoidance rule – which is designed to be wider than the UK general anti-abuse rule measure in FA 2013. Charlotte Barbour, director of taxation, ICAS
What caught your eye in the Finance Bill?
Sometimes it’s the detail that catches my eye: in this Bill, it’s the clause 68 proposal to repeal the replacement rule for small tools which appeared to put small tools into the capital allowance regime. I was a bit alarmed by the practical implications of that and asked one of our technical officers to seek clarification from HMRC on the measure. That prompted an interesting discussion from which it emerged that HMRC consider that the deduction of expenditure on low cost items with an expected useful life of less than two years has not been dependent on the statutory replacement provisions! It follows rather from generally accepted accounting principles. So, the repeal of the statutory provisions should not mean that traders have to claim capital allowances on low-cost low-durability items. The repeal of the replacement provisions is going to require quite a major overhaul of HMRC guidance and I think that it will be important for tax advisers to consider the significance of any changes. Michael Steed, immediate former president of the ATT.
What changes would you like to see in the next five years?
I hope that the pendulum will swing back so that tax issues return to being discussed and determined on the basis of the rule of law, which has sadly been eroded in recent years. If the criminal law were subject to the rules which apply to tax, such as the accused having the burden of proof to show he is innocent, or the state being able to deprive people of their liberty without even the need for a trial – or even without the need to establish any wrongdoing, there would be a public outcry. But depriving people (other people) of their property by using the magic word ‘tax’ seems somehow to be quite acceptable. Peter Vaines, Field Court Tax Chambers.
Looking back on your involvement in the HMRC governance process, is there any room for improvement?
I feel very lucky that I was a member of the Tax Disputes Resolution Board at a time when tax was front-page news. The quality of the papers put before the TDRB was exceptional and, in my view (but I would say this, wouldn’t I?), the discussion of technical issues was of the highest standard, as was the careful deliberation as to how to resolve the case. It is a shame that only a handful of people within HMRC see this. The PAC, NGOs and the media prefer a different narrative, of course, and there must surely be a way for HMRC (aided, I would suggest, by others) to be more on the front foot. I don’t think that bewailing the fact that the media don’t get it is enough. Andrew Scott, legal director at Pinsent Masons
Views on BEPS
The government had already made it clear that it wanted the UK to lead the pack on implementing BEPS, but it was something of a surprise that the Finance Bill includes provisions to incorporate the revised transfer pricing guidelines in the BEPS Actions 8–10 report into UK law. The ink is barely dry on the report, and it would be fair to say that it does not yet represent a settled consensus. The US in particular is understood to be very ambivalent about some aspects of the report. There is a very significant risk that the way in which tax authorities apply the arm’s length principle will diverge even further than it does at present. James Ross, partner, McDermott Will & Emery
Even though only a limited number of the BEPS action plans have crystalized into definitive guidance, BEPS is already altering behaviour. Multinationals are restructuring so that profits follow substance. New tax structures are being implemented in a more sober environment. More tax will be collected by tax authorities around the world. Given its goal of eliminating double non-taxation, the OECD can consider that a success. Their mission now should be to help ensure the fair distribution of that tax and prevent countries from taxing the same income. The OECD needs to take the lead on bringing together the often competing views of the EU, UN, NGOs and other stakeholders trying to influence global tax policy. Michael Lebovitz, partner, White & Case
I still maintain that it is the US tax system that has given rise to the type of planning and structures that BEPS has in its sights. The ‘check the box’ election, coupled with an unsatisfactory CFC regime, has allowed US multinationals to game the system for many years and to implement abusive structures with complicit treaty partners. Unfortunately, there is no desire or political will in the US to amend its legislation, so the rest of the world is forced to accept BEPS. Miles Dean, founder, Milestone Tax
What trends have you noticed in the marketplace?
There are a number of trends around inversions, focus on risk (particularly around international tax structures) and BEPS. On the day to day transaction side, warranty and indemnity insurance of SPAs and tax deeds has rather quickly become a feature of many M&A deals. There are a number of issues associated with these policies particularly around risk allocation, coverage and disclosure which need to be worked through, but I see it is fundamentally altering the dynamic of risk protection under the traditional tax warranty/indemnity standard built-up over many years. Insurers are also stepping in to cover identified tax risk where previously robust tax opinions were sufficient for clients: such insurance is not cheap and so the usefulness of such policies needs to be considered on a case by case basis. David F Saleh, partner, Clifford Chance
Any surprises in the March Budget?
The measures relating to non-doms that were tucked away in the Budget announcements were a surprise. The potential rebasing at April 2017 is more generous than expected but should be more practical, and may discourage individuals from leaving the UK. It will be good to see the further detail in respect of the announcement made in relation to mixed funds. The rules are already overly complex and adding a further layer of rules on top may only increase that complexity. Let’s hope that the new rules will be fair and simple to apply. Wendy Walton, head of private clients,BDO
What’s your view on the ‘Panama papers’ and the resulting media coverage over the (former) prime minister’s tax affairs?
My views on the prime minister’s offshore investments are now rather well known following my interview by John Humphreys on Radio 4’s Today programme on 8 April. On the same day, I was interviewed on television on BBC Breakfast, and a clip of that interview, which was shared on Facebook, has had nearly 4m views. In short, I was defending the PM’s right to make a perfectly legal investment upon which he paid all appropriate tax. The BBC interviewer was lost for words after I suggested that the headline should have read: ‘Man makes modest investment and pays all his tax’. James Quarmby, head of the private wealth team, Stephenson Harwood
How does your experience at the Ugandan Tax Tribunal compare with appearing before UK courts and tribunals?
It was a privilege to appear in front of the Ugandan Tax Tribunal against the Ugandan Revenue Authority who were fair and courteous at all times. Their system reflected the procedural position in the UK earlier this century and one highlight was successfully persuading the tribunal to allow us to adduce affidavits, rather than hearing all the evidence in chief in person (which would have taken several weeks). It also highlighted to me that although legal systems can contain significant differences (we covered international and constitutional issues of importance to the future and infrastructure of the country as well as capital gains tax) we are more defined by our similarities, both as tribunals and advocates. Amanda Hardy QC, Old Square Tax Chambers
What’s on your tax wishlist?
Better guidance to correct the mess created by the diverted profits tax (DPT). On reflection, whilst introducing the DPT was a politically successful pre-2015 election move, it is becoming clear that it does not capture those it was meant to. It is unfortunate that the UK broke cover before agreeing a more coordinated response with other EU and OECD members. Leslie Allen, partner, Mishcon de Reya.
I would impose a mandatory Q&A test, prepared by the CIOT, on all MPs about to vote on a piece of tax legislation to make sure they could explain what they were voting on. The results would be published. Those not willing to take the test, or failing it, would be barred from voting. The same would apply to members of the Public Accounts Committee about to pronounce on a tax issue, particularly given the protection offered to them by Parliamentary privilege, which needs to be earned. I would also introduce a taxpayer GAAR, where the result contended for by HMRC was clearly not in the contemplation of Parliament, having regard to explanatory notes, other materials and common sense. Laurent Sykes QC, Gray's Inn Tax Chambers.
How, if at all, is HMRC applying the general anti-abuse rule (GAAR) in practice?
We have seen inspectors raise the question of how the GAAR might apply within their negotiations, rather than its use as an actual weapon – it’s all been a bit too quiet on the GAAR front, in my view. Maybe the GAAR will be a big development for 2016.
I find HMRC’s tactical threat of the GAAR interesting, because it is often forgotten that the GAAR could result in the unwinding of planning for tax purposes. The GAAR could be advantageous on some occasions; for example, if HMRC is contending PAYE is due but the GAAR might result in s 455 being due instead, this could have advantages for the taxpayer. Anton Lane, managing partner, Edge Tax
If you could make one change to UK tax law or practice, what would it be?
The non-deductibility of a nanny’s salary is one of the most blatant examples of double taxation in the UK system. Whilst I understand concerns that people might start paying salaries to their relatives, where a nanny is an unconnected person their salary should be an allowable deduction for his or her employer. For the fully taxed salary to be paid out of fully taxed income is grossly unfair. Charlotte Sallabank, partner, Jones Day
How do you see the in-house tax function evolving over the next five to ten years?
Increasingly, the tax function should position itself as a business partner. The days are over when it was enough for the tax department to concentrate on little more than CFC avoidance financing structures from its Ivory Tower. We need to be communicating with senior executives and the board on risk management. This will mean that tax skills alone will not be enough; they will have to be aligned with communication skills, business awareness and strategic thinking. In addition, changes in information technology and data retrieval will mean that tax departments will need to invest in new technologies and processes, while spending more time on process improvements and change management. Another interesting development will be the move of increasing amounts of tax work to shared service centres, both offshore and near shore. Jim Marshall, senior vice president for tax, Pearson plc
Which recent tax case has caught your eye?
UBS AG and DB Group Services. The case concerned the taxation of restricted securities which had been issued to bank employees instead of awarding them cash bonuses. The reasoning of the Supreme Court was that the legislation in question had to be construed as being limited to restrictions on securities with a business or commercial purpose. It marks a return to the dark ages and leads to the absurd result that restricted securities awarded for tax avoidance purposes are taxable upon issue on their restricted value (as opposed to later, on their full unrestricted value, as Parliament intended). Nicola Shaw QC, Gray’s Inn Tax Chambers
The CJEU decision in Brisal and KBC vs Fazenda Pública is of interest whether or not the UK remains subject to the EU fundamental freedoms post-Brexit. It says that a member state cannot impose withholding tax on interest on a gross basis where a resident lender would pay tax (even at a higher rate) on a net basis after deducting financing costs. Aside from the potential for affected taxpayers to seek tax refunds, there is the issue of how the landscape of withholding tax on intra-EU lending will shape up in the future. For those member states that impose withholding tax and do not provide an exemption under the relevant tax treaty with the UK, will UK lenders be at a disadvantage to EU lenders post-Brexit? Elizabeth Bradley, head of corporate tax at Berwin Leighton Painser
It’s not a tax case but I can see it having a very significant impact on tax practice. Last year the Supreme Court decision in Pham v Sec of State for the Home Department [2015] UKSC 19 recalibrated the law dramatically on the grounds by which administrative decisions, including those therefore of HMRC, could be challenged. It would seem that the ‘virtually unattainable test’ of irrationality from Wednesbury has been reinterpreted to emphasise the assessment of reasonableness. Significantly, the judgments of the Supreme Court describe that assessment as producing an outcome not far from the proportionality requirement of EU law. Where HMRC is called upon to exercise a discretion or make a judgement or any form of decision, it appears that gone are the days where that decision could only be challenged if it was shown to be irrational. Now consideration might be given to whether the decision went no further than was necessary to attain its objective. Take for example those decisions to assess to tax transfers made into pension funds which were at the time not known to be non-compliant. A proportionality test might require HMRC to tax only those transfers which were made for a tax avoidance motive and disregard those where the transfer was made for good financial reasons. Simon Whitehead, founding partner, Joseph Hage Aaronson
What proposed changes to tax law have caught your eye?
The income-based carried interest rules in the latest Finance Bill are a good example of the modern approach to tax legislation. On the plus side, the revisions to the previous draft legislation took account of comments from asset managers, industry bodies and advisers. However, the rules are extremely complex and highly prescriptive – and as a result, they are likely to generate anomalous results in practice.
The consultation on simplification and expansion of the substantial shareholding exemption is welcome. The intricacy of our SSE does not compare favourably with participation exemptions in other jurisdictions and has been one area of difficulty for some overseas businesses looking to establish operations in the UK. Stuart Sinclair, partner, Akin Gump
What will the UK tax system look like post-Brexit?
UK businesses which have expanded abroad will collapse. International businesses will withdraw from the UK. The only way to stop the haemorrhaging of investment and jobs will be to make the UK into a tax haven, and remove all the special charges on the ownership of property in the UK by companies. This will be a curious climax to the last government’s campaign against tax avoidance. VAT will continue as a national tax, but without the framework of the Directives or the guidance of the CJEU, so it will diverge ever more from EU principles. David Southern QC, Temple Tax Chambers
If you could make one change to a tax law or practice, what would it be?
A better non-statutory ruling system please! It’s an old chestnut, but as the tax authorities impose more and more burdens on taxpayers to pay the right amount of tax, and be transparent, notwithstanding the complexity of the tax system, this surely has to be accompanied by an efficient and well-staffed ruling system. Due to staff shortages, the length of time it takes to get rulings is a deterrent to making any application at all and often the tax authority will try to wriggle out of giving a ruling by arguing it is covered by published guidance. Richard Woolich, head of UK tax, DLA Piper
I’d like HMRC case workers to follow more closely the spirit (and sometimes the letter) of the administrative rules. I appreciate that they may have difficulties in getting some taxpayers to co-operate. But they should raise enquiries properly within the statutory deadlines, rather than relying on discovery powers (and the lenient views that the courts take) when they are late. And they should issue notices of enquiry labelled as such and issued to the correct taxpayer, rather than relying on the courts to treat other correspondence as amounting to the required formalities. I am not suggesting that HMRC always gets its own way or that there is an institutional intention to push the rules, but it grates on me when I come across problems of this nature. Gordon Keenay, head of stamp taxes, FTI Consulting
What's happening on the administration of taxes in Scotland?
Much of the most important tax in terms of raising finance for the Scottish government is income tax. This year, 2016/17, there is a single Scottish rate of income tax at 10 pence inserted across all rate bands. It is payable by Scottish taxpayers, who are identified by an ‘S’ PAYE code, based on where they live, and it is the responsibility of HMRC to identify those who are Scottish. Not everyone has been correctly identified yet but hopefully this will be rectified before the measures in the Scotland Act 2016 are implemented; i.e. when all income tax rates and bands are devolved from April 2017.
Revenue Scotland is responsible for the fully devolved taxes of LBTT and Scottish landfill tax (from April 2015); air passenger duty from April 2018; and, in due course, aggregates levy. As a new tax authority, Revenue Scotland continues to make its way along the learning curve. There may also be challenges to come around some of the new legislation, such as the GAAR – the general anti-avoidance rule – which is designed to be wider than the UK general anti-abuse rule measure in FA 2013. Charlotte Barbour, director of taxation, ICAS
What caught your eye in the Finance Bill?
Sometimes it’s the detail that catches my eye: in this Bill, it’s the clause 68 proposal to repeal the replacement rule for small tools which appeared to put small tools into the capital allowance regime. I was a bit alarmed by the practical implications of that and asked one of our technical officers to seek clarification from HMRC on the measure. That prompted an interesting discussion from which it emerged that HMRC consider that the deduction of expenditure on low cost items with an expected useful life of less than two years has not been dependent on the statutory replacement provisions! It follows rather from generally accepted accounting principles. So, the repeal of the statutory provisions should not mean that traders have to claim capital allowances on low-cost low-durability items. The repeal of the replacement provisions is going to require quite a major overhaul of HMRC guidance and I think that it will be important for tax advisers to consider the significance of any changes. Michael Steed, immediate former president of the ATT.
What changes would you like to see in the next five years?
I hope that the pendulum will swing back so that tax issues return to being discussed and determined on the basis of the rule of law, which has sadly been eroded in recent years. If the criminal law were subject to the rules which apply to tax, such as the accused having the burden of proof to show he is innocent, or the state being able to deprive people of their liberty without even the need for a trial – or even without the need to establish any wrongdoing, there would be a public outcry. But depriving people (other people) of their property by using the magic word ‘tax’ seems somehow to be quite acceptable. Peter Vaines, Field Court Tax Chambers.
Looking back on your involvement in the HMRC governance process, is there any room for improvement?
I feel very lucky that I was a member of the Tax Disputes Resolution Board at a time when tax was front-page news. The quality of the papers put before the TDRB was exceptional and, in my view (but I would say this, wouldn’t I?), the discussion of technical issues was of the highest standard, as was the careful deliberation as to how to resolve the case. It is a shame that only a handful of people within HMRC see this. The PAC, NGOs and the media prefer a different narrative, of course, and there must surely be a way for HMRC (aided, I would suggest, by others) to be more on the front foot. I don’t think that bewailing the fact that the media don’t get it is enough. Andrew Scott, legal director at Pinsent Masons
Views on BEPS
The government had already made it clear that it wanted the UK to lead the pack on implementing BEPS, but it was something of a surprise that the Finance Bill includes provisions to incorporate the revised transfer pricing guidelines in the BEPS Actions 8–10 report into UK law. The ink is barely dry on the report, and it would be fair to say that it does not yet represent a settled consensus. The US in particular is understood to be very ambivalent about some aspects of the report. There is a very significant risk that the way in which tax authorities apply the arm’s length principle will diverge even further than it does at present. James Ross, partner, McDermott Will & Emery
Even though only a limited number of the BEPS action plans have crystalized into definitive guidance, BEPS is already altering behaviour. Multinationals are restructuring so that profits follow substance. New tax structures are being implemented in a more sober environment. More tax will be collected by tax authorities around the world. Given its goal of eliminating double non-taxation, the OECD can consider that a success. Their mission now should be to help ensure the fair distribution of that tax and prevent countries from taxing the same income. The OECD needs to take the lead on bringing together the often competing views of the EU, UN, NGOs and other stakeholders trying to influence global tax policy. Michael Lebovitz, partner, White & Case
I still maintain that it is the US tax system that has given rise to the type of planning and structures that BEPS has in its sights. The ‘check the box’ election, coupled with an unsatisfactory CFC regime, has allowed US multinationals to game the system for many years and to implement abusive structures with complicit treaty partners. Unfortunately, there is no desire or political will in the US to amend its legislation, so the rest of the world is forced to accept BEPS. Miles Dean, founder, Milestone Tax
What trends have you noticed in the marketplace?
There are a number of trends around inversions, focus on risk (particularly around international tax structures) and BEPS. On the day to day transaction side, warranty and indemnity insurance of SPAs and tax deeds has rather quickly become a feature of many M&A deals. There are a number of issues associated with these policies particularly around risk allocation, coverage and disclosure which need to be worked through, but I see it is fundamentally altering the dynamic of risk protection under the traditional tax warranty/indemnity standard built-up over many years. Insurers are also stepping in to cover identified tax risk where previously robust tax opinions were sufficient for clients: such insurance is not cheap and so the usefulness of such policies needs to be considered on a case by case basis. David F Saleh, partner, Clifford Chance
Any surprises in the March Budget?
The measures relating to non-doms that were tucked away in the Budget announcements were a surprise. The potential rebasing at April 2017 is more generous than expected but should be more practical, and may discourage individuals from leaving the UK. It will be good to see the further detail in respect of the announcement made in relation to mixed funds. The rules are already overly complex and adding a further layer of rules on top may only increase that complexity. Let’s hope that the new rules will be fair and simple to apply. Wendy Walton, head of private clients,BDO
What’s your view on the ‘Panama papers’ and the resulting media coverage over the (former) prime minister’s tax affairs?
My views on the prime minister’s offshore investments are now rather well known following my interview by John Humphreys on Radio 4’s Today programme on 8 April. On the same day, I was interviewed on television on BBC Breakfast, and a clip of that interview, which was shared on Facebook, has had nearly 4m views. In short, I was defending the PM’s right to make a perfectly legal investment upon which he paid all appropriate tax. The BBC interviewer was lost for words after I suggested that the headline should have read: ‘Man makes modest investment and pays all his tax’. James Quarmby, head of the private wealth team, Stephenson Harwood
How does your experience at the Ugandan Tax Tribunal compare with appearing before UK courts and tribunals?
It was a privilege to appear in front of the Ugandan Tax Tribunal against the Ugandan Revenue Authority who were fair and courteous at all times. Their system reflected the procedural position in the UK earlier this century and one highlight was successfully persuading the tribunal to allow us to adduce affidavits, rather than hearing all the evidence in chief in person (which would have taken several weeks). It also highlighted to me that although legal systems can contain significant differences (we covered international and constitutional issues of importance to the future and infrastructure of the country as well as capital gains tax) we are more defined by our similarities, both as tribunals and advocates. Amanda Hardy QC, Old Square Tax Chambers
What’s on your tax wishlist?
Better guidance to correct the mess created by the diverted profits tax (DPT). On reflection, whilst introducing the DPT was a politically successful pre-2015 election move, it is becoming clear that it does not capture those it was meant to. It is unfortunate that the UK broke cover before agreeing a more coordinated response with other EU and OECD members. Leslie Allen, partner, Mishcon de Reya.
I would impose a mandatory Q&A test, prepared by the CIOT, on all MPs about to vote on a piece of tax legislation to make sure they could explain what they were voting on. The results would be published. Those not willing to take the test, or failing it, would be barred from voting. The same would apply to members of the Public Accounts Committee about to pronounce on a tax issue, particularly given the protection offered to them by Parliamentary privilege, which needs to be earned. I would also introduce a taxpayer GAAR, where the result contended for by HMRC was clearly not in the contemplation of Parliament, having regard to explanatory notes, other materials and common sense. Laurent Sykes QC, Gray's Inn Tax Chambers.
How, if at all, is HMRC applying the general anti-abuse rule (GAAR) in practice?
We have seen inspectors raise the question of how the GAAR might apply within their negotiations, rather than its use as an actual weapon – it’s all been a bit too quiet on the GAAR front, in my view. Maybe the GAAR will be a big development for 2016.
I find HMRC’s tactical threat of the GAAR interesting, because it is often forgotten that the GAAR could result in the unwinding of planning for tax purposes. The GAAR could be advantageous on some occasions; for example, if HMRC is contending PAYE is due but the GAAR might result in s 455 being due instead, this could have advantages for the taxpayer. Anton Lane, managing partner, Edge Tax
If you could make one change to UK tax law or practice, what would it be?
The non-deductibility of a nanny’s salary is one of the most blatant examples of double taxation in the UK system. Whilst I understand concerns that people might start paying salaries to their relatives, where a nanny is an unconnected person their salary should be an allowable deduction for his or her employer. For the fully taxed salary to be paid out of fully taxed income is grossly unfair. Charlotte Sallabank, partner, Jones Day
How do you see the in-house tax function evolving over the next five to ten years?
Increasingly, the tax function should position itself as a business partner. The days are over when it was enough for the tax department to concentrate on little more than CFC avoidance financing structures from its Ivory Tower. We need to be communicating with senior executives and the board on risk management. This will mean that tax skills alone will not be enough; they will have to be aligned with communication skills, business awareness and strategic thinking. In addition, changes in information technology and data retrieval will mean that tax departments will need to invest in new technologies and processes, while spending more time on process improvements and change management. Another interesting development will be the move of increasing amounts of tax work to shared service centres, both offshore and near shore. Jim Marshall, senior vice president for tax, Pearson plc
