My practice at Winckworth Sherwood has a strong focus on real estate transactions. The tax structuring of mixed-use property development projects is a mainstay. Until fairly recently, a significant element related to landmark central London projects, but the focus has shifted in line with housing needs. A notable development has been the emergence of the private investment backed ‘build to rent’ sector, which has arisen as a consequence of the ongoing shortage of UK housing, the need for faster place-making and more housing choice for changing demographics. We are also seeing the fast emergence of an entirely new investment asset class – privately funded building and operation of affordable housing, shared ownership and shared equity schemes. This is closely followed by an emerging sector of public private joint ventures between public bodies and private sector investors, designed to deliver more housing while securing sustainable income returns to cash strapped public bodies. It is a rapidly evolving sector, which presents many challenges, not the least relating to tax.
If you could make one change to UK tax law, what would it be?
I am supportive of recent moves to bring non-UK residents into the UK tax net in relation to all UK real estate matters. From my understanding, UK real estate has been the single most important asset class in terms of inward UK investment values for a while, and the archaic exemptions afforded to non-UK persons made little economic sense. Indeed, the rules created an unequal playing field.
As many of my peers have previously said in this column, the UK’s tax code grows increasingly lengthy and complex each year, and it imposes a real regulatory burden in many instances, not least in having to learn entirely new regimes. For me, the complex SDLT regime is ripe for a thorough review, as the regime has evolved into a mish-mash of conflicting principles on a seemingly ad hoc basis. The SDLT partnership rules spring to mind: the draconian rules on corporate partnerships are in conflict with how many valid business ventures need to be structured for cogent business reasons. This is cropping up quite frequently with our work on public private joint ventures. Instead of a sledgehammer approach, I would prefer to see a purposive approach adopted in these rules.
Has a recent case has caught your eye?
The Court of Appeal’s decision in Wakefield College v HMRC [2018] EWCA Civ 952 is very welcome as it seems to have disrupted the court’s previous decision in Longridge. In the latter case, a strict interpretation of the term, ‘economic activity’, for VAT law purposes was adopted. It seemed that any form of income generation was an ‘economic activity’. This caused major headaches for charities which seek to rely upon zero-rated treatment on the construction of new buildings. In our austerity world where community facilities and charitable nurseries are vital to local needs whilst relying upon supplementary income, Longridge became a problem.
Wakefield adopts a more sophisticated test: it states that whether there is a supply for consideration and whether that supply amounted to an economic activity are two separate tests. As ever, careful fact base analysis is required but this is welcome, though we understand the matter may yet be revisited.
Who do you admire most in tax?
Many of my peers, but our client Simon White, the head of tax at Barratt Homes, stands out because of his phenomenal technical knowledge and his instinctive commercial grasp of the facts. Simon has become a very valued sounding board, which is so important in our area.
Finally, you might not know this about me but…
I started my career as a trainee economist but only lasted a year. And I am very committed to the cause of preserving tigers in the wild.
My practice at Winckworth Sherwood has a strong focus on real estate transactions. The tax structuring of mixed-use property development projects is a mainstay. Until fairly recently, a significant element related to landmark central London projects, but the focus has shifted in line with housing needs. A notable development has been the emergence of the private investment backed ‘build to rent’ sector, which has arisen as a consequence of the ongoing shortage of UK housing, the need for faster place-making and more housing choice for changing demographics. We are also seeing the fast emergence of an entirely new investment asset class – privately funded building and operation of affordable housing, shared ownership and shared equity schemes. This is closely followed by an emerging sector of public private joint ventures between public bodies and private sector investors, designed to deliver more housing while securing sustainable income returns to cash strapped public bodies. It is a rapidly evolving sector, which presents many challenges, not the least relating to tax.
If you could make one change to UK tax law, what would it be?
I am supportive of recent moves to bring non-UK residents into the UK tax net in relation to all UK real estate matters. From my understanding, UK real estate has been the single most important asset class in terms of inward UK investment values for a while, and the archaic exemptions afforded to non-UK persons made little economic sense. Indeed, the rules created an unequal playing field.
As many of my peers have previously said in this column, the UK’s tax code grows increasingly lengthy and complex each year, and it imposes a real regulatory burden in many instances, not least in having to learn entirely new regimes. For me, the complex SDLT regime is ripe for a thorough review, as the regime has evolved into a mish-mash of conflicting principles on a seemingly ad hoc basis. The SDLT partnership rules spring to mind: the draconian rules on corporate partnerships are in conflict with how many valid business ventures need to be structured for cogent business reasons. This is cropping up quite frequently with our work on public private joint ventures. Instead of a sledgehammer approach, I would prefer to see a purposive approach adopted in these rules.
Has a recent case has caught your eye?
The Court of Appeal’s decision in Wakefield College v HMRC [2018] EWCA Civ 952 is very welcome as it seems to have disrupted the court’s previous decision in Longridge. In the latter case, a strict interpretation of the term, ‘economic activity’, for VAT law purposes was adopted. It seemed that any form of income generation was an ‘economic activity’. This caused major headaches for charities which seek to rely upon zero-rated treatment on the construction of new buildings. In our austerity world where community facilities and charitable nurseries are vital to local needs whilst relying upon supplementary income, Longridge became a problem.
Wakefield adopts a more sophisticated test: it states that whether there is a supply for consideration and whether that supply amounted to an economic activity are two separate tests. As ever, careful fact base analysis is required but this is welcome, though we understand the matter may yet be revisited.
Who do you admire most in tax?
Many of my peers, but our client Simon White, the head of tax at Barratt Homes, stands out because of his phenomenal technical knowledge and his instinctive commercial grasp of the facts. Simon has become a very valued sounding board, which is so important in our area.
Finally, you might not know this about me but…
I started my career as a trainee economist but only lasted a year. And I am very committed to the cause of preserving tigers in the wild.
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