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One minute with... James Meakin

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What’s keeping you busy at work?

A real mix, as always, which is the best part of the job. I’m currently providing technical advice on the sale of a fund management business and giving real estate tax advice on a proposed mixed-use development site and advising on a pre-sale debt restructuring (as well as advising on a number of M&A and real estate deals).

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

The policy driven ‘bolt-ons’ which have been made to SDLT for residential property over the past few years have led to unnecessary complexity and are in need of simplification. This started in 2013, when the 15% rate for the acquisition of ‘higher threshold interests’ was introduced, along with ATED and ATED related capital gains (which has now disappeared), and it continued with the additional measures which were designed to influence the housing market, such as the 3% surcharge for acquisitions of additional dwellings and the more recent 2% surcharge for acquisitions by non-UK buyers. These, combined with the current position for residential property with a ‘mixed use’ element and multiple dwellings relief, has led to unnecessary complexity for residential property acquisitions and uncertain and different outcomes. Fortunately, HMRC is now consulting on the mixed-use and multiple dwellings relief rules.

What advice would you give to someone starting out in tax?

Read everything and never look at one aspect of a deal in isolation. No two transactions are ever the same and the tax outcomes can be very different even if, on the face of it, things look similar.

Has a recent tax case caught your eye?

I found the Kwik-Fit Group Ltd v HMRC [2021] UKFTT 282 (TC) particularly interesting. It involved a debt reorganisation where existing loan relationships with a commercial purpose were, after the reorganisation, held to have an unallowable purpose. Therefore, debits were non-deductible. Securing a tax advantage is not among the business or other commercial purposes of a company, if it is the main, or one of the main purposes, for which the company is party to the loan relationship.

In this case, the restructuring accelerated the use of carried forward non-trading loan relationship deficits (non-trading deficits) which were ‘stuck’ in another group company (S) and the reorganisation involved assigning existing receivables to S (combined with an increase in interest rates), along with creating new loans and increasing the interest rate on an existing loan. The tribunal agreed with HMRC that a tax advantage involved a taxpayer being in a ‘better position’ vis a vis HMRC and that excessive debits and accelerated use of the non-trading deficits were tax advantages.

The decision that interest may not be deductible when a debt reorganisation is undertaken to maximise and utilise reliefs isn’t totally surprising, but the case is an interesting development on the scope of the unallowable purpose test.

What should we look out for later this year?

The results of the consultation on allowing corporate re-domiciliation to (and possibly from) the UK. This could potentially decrease the existing barriers for entities relocating to the UK (and potentially leaving the UK), increase the attractiveness of the UK as a holding company location and potentially, facilitate cross border group reorganisations which in the past have been difficult to achieve. There does of course need to be an attractive business environment in the UK (with low headline corporation tax rates) to attract businesses here in the first place.

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

My godmother used to work for the BBC and when I was younger, I was rolled out as a child extra for numerous BBC programmes, most of which are too embarrassing to mention and/or have been completely forgotten. 

Issue: 1574
Categories: One minute with