One minute with Emily Szasz, Partner at Freshfields.
What’s keeping you busy at work?
I’m working on a broad range of cross-border transactions: private capital buyouts, take privates, founder sales, strategic M&A, joint ventures, capital markets and carve outs. I’m also helping clients with contentious matters, many flowing from historic M&A deals. There’s nothing like analysing a previous deal through a contentious lens to spot the bear traps on the next one.
What do you know now that you wish you’d known at the start of your career?
Firstly, see every piece of work as a learning opportunity. The curve is steep and the climb slow as you accumulate what feel like unconnected pieces of knowledge, but at some point it clicks and you can fit new information into a broader framework. Secondly, relish the fact that it is impossible to know all tax: there will always be something new to learn. Thirdly, no one can advise on the tax consequences of a transaction in a vacuum, so take time to learn the commercial context of whatever you are working on.
If you could make one change to tax, what would it be?
Stamp duty reform would normally be top of my list, but I won’t go for that given we’re expecting legislation for the new single tax on securities soon (fingers crossed!).
Instead, I’d streamline the chargeable gains treatment of deferred consideration. Currently, this turns on whether the consideration is ascertainable or unascertainable (a distinction laid out in Marren v Ingles [1980] 3 All ER 95). We see this give rise to several issues in practice, particularly on share disposals.
Firstly, unascertainable consideration (e.g. an earnout) can cause tax leakage, even where the seller is disposing of SSE exempt shares. The earnout is not treated as proceeds for the underlying shares but as consideration for a separate asset – the right to receive the earnout – itself disposed of when the earnout is received. That disposal is not eligible for the SSE.
Secondly, outside an SSE context, a seller typically pays upfront tax on any deferred cash consideration, the amount charged depending on whether it is ascertainable or unascertainable. Relief or a refund is generally available if the deferred consideration is not later received, but upfront dry tax charges are never attractive to sellers.
The policy rationale for these distinctions is not clear. I’d fix it so that tax on deferred cash consideration is incurred only when received, and so that SSE is available on the whole of any deferred consideration (whether ascertainable or unascertainable), if received in connection with the sale of an exempt shareholding.
What’s topical in your world?
We’re looking very carefully at HMRC’s consultation on modernising the taxation of distributions and repayments of capital from companies, published on Tax Update day. These rules have remained largely unchanged for 60 years, and HMRC say they are considering how to modernise them so they do not produce distortive outcomes. It is welcome that HMRC say they are not looking to undermine commercial practice, but the proposals are far-reaching and the document acknowledges throughout that they could have unintended consequences. Some are identified (with mitigants), but inevitably further points will be flushed out as the consultation progresses.
You might not know this about me but...
I loved maths puzzles as a child. I still do, if I’m honest, and part of what attracted me to tax is that interpreting the UK tax code often feels like solving one big maths puzzle, with words instead of numbers.
One minute with Emily Szasz, Partner at Freshfields.
What’s keeping you busy at work?
I’m working on a broad range of cross-border transactions: private capital buyouts, take privates, founder sales, strategic M&A, joint ventures, capital markets and carve outs. I’m also helping clients with contentious matters, many flowing from historic M&A deals. There’s nothing like analysing a previous deal through a contentious lens to spot the bear traps on the next one.
What do you know now that you wish you’d known at the start of your career?
Firstly, see every piece of work as a learning opportunity. The curve is steep and the climb slow as you accumulate what feel like unconnected pieces of knowledge, but at some point it clicks and you can fit new information into a broader framework. Secondly, relish the fact that it is impossible to know all tax: there will always be something new to learn. Thirdly, no one can advise on the tax consequences of a transaction in a vacuum, so take time to learn the commercial context of whatever you are working on.
If you could make one change to tax, what would it be?
Stamp duty reform would normally be top of my list, but I won’t go for that given we’re expecting legislation for the new single tax on securities soon (fingers crossed!).
Instead, I’d streamline the chargeable gains treatment of deferred consideration. Currently, this turns on whether the consideration is ascertainable or unascertainable (a distinction laid out in Marren v Ingles [1980] 3 All ER 95). We see this give rise to several issues in practice, particularly on share disposals.
Firstly, unascertainable consideration (e.g. an earnout) can cause tax leakage, even where the seller is disposing of SSE exempt shares. The earnout is not treated as proceeds for the underlying shares but as consideration for a separate asset – the right to receive the earnout – itself disposed of when the earnout is received. That disposal is not eligible for the SSE.
Secondly, outside an SSE context, a seller typically pays upfront tax on any deferred cash consideration, the amount charged depending on whether it is ascertainable or unascertainable. Relief or a refund is generally available if the deferred consideration is not later received, but upfront dry tax charges are never attractive to sellers.
The policy rationale for these distinctions is not clear. I’d fix it so that tax on deferred cash consideration is incurred only when received, and so that SSE is available on the whole of any deferred consideration (whether ascertainable or unascertainable), if received in connection with the sale of an exempt shareholding.
What’s topical in your world?
We’re looking very carefully at HMRC’s consultation on modernising the taxation of distributions and repayments of capital from companies, published on Tax Update day. These rules have remained largely unchanged for 60 years, and HMRC say they are considering how to modernise them so they do not produce distortive outcomes. It is welcome that HMRC say they are not looking to undermine commercial practice, but the proposals are far-reaching and the document acknowledges throughout that they could have unintended consequences. Some are identified (with mitigants), but inevitably further points will be flushed out as the consultation progresses.
You might not know this about me but...
I loved maths puzzles as a child. I still do, if I’m honest, and part of what attracted me to tax is that interpreting the UK tax code often feels like solving one big maths puzzle, with words instead of numbers.
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