We continue to be very busy on both investment transactions targeting real estate assets across Europe and fund raising for managers targeting such investments. The very popular ‘beds and sheds’ sectors (residential assets or industrial/logistics assets) continue to be popular and we are seeing a huge increase in other alternatives, such as life sciences and data centres. On the fund raising side, we continue to raise large value add blind pool vehicles although core plus vehicles and debt funds are now extremely popular. Given the real estate sector trends towards larger funds and investors wanting specific asset allocation, we are also working on a huge number of sector specific joint ventures.
In terms of technical content, helping clients navigate ever evolving substance requirements and the gamut of rules in the UK and elsewhere restricting tax relief for interest are two key themes. Both of these categories of rule can significantly impact operational requirements and returns from investments.
If you could make one change to tax, what would it be?
Difficulties caused by conflicting or uncertain characterisations of entities as opaque or transparent have increased exponentially as a result of anti-hybrid rules, both in the UK and elsewhere. These might be very much reduced if the UK and other jurisdictions could adopt clearer and internationally consistent rules on foreign entity characterisation.
My Amsterdam colleagues tell me that the Netherlands has some interesting proposals here; in particular, the idea that in relation to an entity that is resident in one jurisdiction, the tax rules of another jurisdiction would default to following the entity’s tax characterisation in its jurisdiction of residence. Obviously this is an instance of ‘be careful what you wish for’, but that caution might be largely addressed by an elective grandfathering rule for existing structures.
What advice would you give to someone starting out in tax?
In addition to having an interest in and aptitude for tax, pick a commercial area (or two) that genuinely interests you. Clients can tell when you’re genuinely interested in what they’re doing and will be more likely to seek your advice. Further, your advice will generally be better if you are applying a tax analysis to a deeper understanding of what people are trying to achieve commercially.
What should we be looking out for later this year?
The continuing development of specific tax rules for asset holding companies is going to be particularly interesting following the recent publication of draft legislation. At the risk of the sort of sweeping generalisation that is normally anathema to me as a tax practitioner, the UK corporation tax rules derive from a model that was established primarily to tax the profits of largely domestic trading businesses. In general, they are not well suited to holding and managing assets financed by third party capital, often provided from outside the UK. That unsuitability creates a major drag on the UK’s ability to make the most of the business opportunities that the wider asset management sector, in all its forms, generates. Whilst we probably won’t achieve a set of tax rules that is as internationally competitive as, say, Luxembourg, if some of the particular difficulties caused by our rules can be removed or mitigated so that they detract less from the existing attractions of the UK, that can only be a good thing for the UK.
It is also good to see that the government is looking seriously at reforming our archaic stamp duty rules. Many aspects of these rules should be relegated from the statute book to tax trivia quizzes alongside taxes on windows or beards. That they remain is not a good advertisement internationally for the UK as being a modern jurisdiction that is open for business.
You might not know this about me...
My passion is skiing and if things had panned out differently I might well have ended up as a ski instructor (my qualification has long since lapsed). I am happiest on a powder day in the Austrian alps with my family.
We continue to be very busy on both investment transactions targeting real estate assets across Europe and fund raising for managers targeting such investments. The very popular ‘beds and sheds’ sectors (residential assets or industrial/logistics assets) continue to be popular and we are seeing a huge increase in other alternatives, such as life sciences and data centres. On the fund raising side, we continue to raise large value add blind pool vehicles although core plus vehicles and debt funds are now extremely popular. Given the real estate sector trends towards larger funds and investors wanting specific asset allocation, we are also working on a huge number of sector specific joint ventures.
In terms of technical content, helping clients navigate ever evolving substance requirements and the gamut of rules in the UK and elsewhere restricting tax relief for interest are two key themes. Both of these categories of rule can significantly impact operational requirements and returns from investments.
If you could make one change to tax, what would it be?
Difficulties caused by conflicting or uncertain characterisations of entities as opaque or transparent have increased exponentially as a result of anti-hybrid rules, both in the UK and elsewhere. These might be very much reduced if the UK and other jurisdictions could adopt clearer and internationally consistent rules on foreign entity characterisation.
My Amsterdam colleagues tell me that the Netherlands has some interesting proposals here; in particular, the idea that in relation to an entity that is resident in one jurisdiction, the tax rules of another jurisdiction would default to following the entity’s tax characterisation in its jurisdiction of residence. Obviously this is an instance of ‘be careful what you wish for’, but that caution might be largely addressed by an elective grandfathering rule for existing structures.
What advice would you give to someone starting out in tax?
In addition to having an interest in and aptitude for tax, pick a commercial area (or two) that genuinely interests you. Clients can tell when you’re genuinely interested in what they’re doing and will be more likely to seek your advice. Further, your advice will generally be better if you are applying a tax analysis to a deeper understanding of what people are trying to achieve commercially.
What should we be looking out for later this year?
The continuing development of specific tax rules for asset holding companies is going to be particularly interesting following the recent publication of draft legislation. At the risk of the sort of sweeping generalisation that is normally anathema to me as a tax practitioner, the UK corporation tax rules derive from a model that was established primarily to tax the profits of largely domestic trading businesses. In general, they are not well suited to holding and managing assets financed by third party capital, often provided from outside the UK. That unsuitability creates a major drag on the UK’s ability to make the most of the business opportunities that the wider asset management sector, in all its forms, generates. Whilst we probably won’t achieve a set of tax rules that is as internationally competitive as, say, Luxembourg, if some of the particular difficulties caused by our rules can be removed or mitigated so that they detract less from the existing attractions of the UK, that can only be a good thing for the UK.
It is also good to see that the government is looking seriously at reforming our archaic stamp duty rules. Many aspects of these rules should be relegated from the statute book to tax trivia quizzes alongside taxes on windows or beards. That they remain is not a good advertisement internationally for the UK as being a modern jurisdiction that is open for business.
You might not know this about me...
My passion is skiing and if things had panned out differently I might well have ended up as a ski instructor (my qualification has long since lapsed). I am happiest on a powder day in the Austrian alps with my family.
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