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One minute with... Elizabeth Small

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What’s keeping you busy at work?

Pre-Covid 19, I would have said SDLT in respect of residential property, but during lockdown I am being kept busy by VAT on commercial real estate transactions. We are seeing a large number of sale and leasebacks, surrenders and re-grants and other property transactions where there is arguably an element of a barter transaction. Care has to be taken in identifying the issues and agreeing with the other side what the agreed common approach is, then making sure the documentation and the eventual VAT invoicing reflect what we’ve agreed. 

Also, I spend a gratuitous amount of my life worrying about the implications of floor boxes for the construction industry scheme (CIS), and the disapplication of the option to tax rules often come into play for relatively small sums of money.

What do you know now that you wish you’d known at the start of your career?

A quick response is not always valued, even if you are correct.

If you could make one change to a tax law or practice, what would it be? 

At a parochial English level, I’d abolish the 15% flat rate SDLT regime as being no longer fit for purpose: following the 3% higher rates for additional dwellings (HRAD) taking the top rate on many property purchases up to 15%.

The EU’s directive on mandatory disclosures for intermediaries (DAC 6) will place a large compliance burden on companies and intermediaries. Reporting requirements extend to historical arrangements from 25 June 2018 to 30 June 2020) (with a new reporting deadline which is 28 February 2021), and for transactions from 1 July 2020 to 31 December 2020 reports must be within 30 days beginning on 1 January 2021. For transactions after 1 January 2021, reports must be made within 30 days. 

I’d like to see DAC 6 implementation eased further – by removing the need to collect information on historic transactions, and by limiting the reporting needed during the first year, perhaps by concentrating on one or two targeted hallmarks – so that taxpayers and tax authorities can better understand the information required and provided. 

Are there any new rules that are causing a particular problem? 

The proposed VAT domestic reverse charge (DRC) is, in my view, little understood by the construction industry and will create unnecessary complications. Charging VAT to oneself in respect of another person’s supplies is (to most people) an alien and counter intuitive concept, and it will be too esoteric for some to get to grips with properly. The DRC also adopts many of the same principles and language as the CIS, so it may become a common mistake to assume that if (for example) the CIS rules apply so does the DRC. So, I was delighted to hear that implementation has been postponed until 1 March 2021.

Has a recent tax case caught your eye?

It’s not a new one, but a decision I often refer to is the first SDLT tax case: Vardy Properties v HMRC [2012] UKFTT 564 (TC). A third party (A) contracted to sell the property to a company (B), which was owned by another company (C). B resolved to reduce its share capital to create distributable reserves with the intention of immediately upon B’s acquisition distributing the property to C. The old sub-sale exemption should then have applied, meaning no SDLT was paid. The taxpayer lost in part because of a company law technicality: B had not followed the proper procedures in declaring the dividend. The case shows the importance of proper implementation, attention to detail, compliance and recognising the contribution that non-tax lawyers and advisers bring to a transaction.

And finally, you might not know this about me but... 

Lockdown has made me realise that I used my commuting time for reading novels, as I’ve read a lot less during lockdown. But I have taken up a new hobby, Qigong, and I feel taller. 
Issue: 1493
Categories: One minute with