Real estate structuring work has been at the forefront of my 2024 so far. This has included some thorny SDLT questions (are there any other kind?), grappling with the option to tax anti-avoidance rules and trying to obtain a passing familiarity with the latest changes to the REIT regime. Corporation transactional activity is also looking good, so there has also been a range of questions stemming from M&A transactions and their associated negotiations which keep life in a commercial firm interesting.
If you could make one change to a tax law or practice what would it be?
I would remove the profusion of TAARs, RAARs, and assorted other avoidance tests like TCGA 1992 s 137 and FA 2003 s 75, and replace them with a single, broad-based general anti-avoidance rule which applies across all UK taxes. The lack of a general anti-avoidance rule (distinct from the current anti-abuse rule) has meant that tribunals have tried to press gang unlikely culprits like the unallowable purposes rule into service for which they are unfit. The courts should be developing principled tax avoidance jurisprudence of broad application instead of poring over the draftsman’s idiosyncrasies in a dozen slightly different tests.
Are there any draft rules that are causing a problem?
HMRC have helpfully published draft regulations which are intended to remove the majority of landlord–tenant payments from the scope of the construction industry scheme. However, due to concerns about potential abuse, the draft rules are narrowly targeted. As drafted, they fail to capture ordinary commercial situations such as nominee landowners and works being done on the building fabric which is not within the tenant’s demise and therefore will not achieve their policy aim. It would be disappointing if this opportunity to remove the CIS from an area which is completely outside the target sector for the regime were squandered.
What do you know now that you wish you’d known at the start of your career?
Getting into a habit of reading case law early will pay dividends, especially if you, unlike me, are blessed with the ability to remember case names. So often the interpretation of a particular combination of sections in a statute will be ambiguous, and in those circumstances the crux of your job is to be able to predict how a court or tribunal might resolve the ambiguity. You cannot do that without a good sense of judicial reasoning, which only comes from reading and re-reading cases.
Has a recent tax case caught your eye?
The decision in BCM Cayman LP v HMRC [2023] EWCA Civ 1179 was interesting reading. The Court of Appeal decided that limited partners of a Cayman limited partnership which was a partner of a UK limited partnership were not themselves partners of the UK limited partnership. Whilst the case was a direct tax one, it will have ramifications for those considering stacked partnerships in other contexts, particularly SDLT where relief can depend on whether the transfer is between a partnership and a person who is a partner in that partnership. Part of the reasoning turned on Cayman limited partnership law prohibiting limited partners from participating in the business of the partnership; it will be interesting to see whether the limited partner role in other jurisdictions is circumscribed in similar terms.
What should we be looking out for this year?
The new Luxembourg/UK double tax treaty coming into force in April 2024 has led to a number of clients reassessing existing Luxembourg holding structures for UK real estate. When the non-resident capital gains tax rules were introduced in 2019 there was a rebasing of assets brought newly into charge. There is no such concessionary measure here; clients are faced with a real cliff edge between a UK tax-exempt disposal before 1 April and a fully taxable one – sweeping up all historic gains since 2019 – afterwards.
And finally, you might not know this about me but...
As will become readily apparent if you hear me speak, I was born and originally qualified in New Zealand. My father, trying to baptise me in the national religion, enrolled me in rugby at the tender age of seven. It will be no surprise to anyone who knows me that I permanently retired from my rugby career upon turning eight.
Real estate structuring work has been at the forefront of my 2024 so far. This has included some thorny SDLT questions (are there any other kind?), grappling with the option to tax anti-avoidance rules and trying to obtain a passing familiarity with the latest changes to the REIT regime. Corporation transactional activity is also looking good, so there has also been a range of questions stemming from M&A transactions and their associated negotiations which keep life in a commercial firm interesting.
If you could make one change to a tax law or practice what would it be?
I would remove the profusion of TAARs, RAARs, and assorted other avoidance tests like TCGA 1992 s 137 and FA 2003 s 75, and replace them with a single, broad-based general anti-avoidance rule which applies across all UK taxes. The lack of a general anti-avoidance rule (distinct from the current anti-abuse rule) has meant that tribunals have tried to press gang unlikely culprits like the unallowable purposes rule into service for which they are unfit. The courts should be developing principled tax avoidance jurisprudence of broad application instead of poring over the draftsman’s idiosyncrasies in a dozen slightly different tests.
Are there any draft rules that are causing a problem?
HMRC have helpfully published draft regulations which are intended to remove the majority of landlord–tenant payments from the scope of the construction industry scheme. However, due to concerns about potential abuse, the draft rules are narrowly targeted. As drafted, they fail to capture ordinary commercial situations such as nominee landowners and works being done on the building fabric which is not within the tenant’s demise and therefore will not achieve their policy aim. It would be disappointing if this opportunity to remove the CIS from an area which is completely outside the target sector for the regime were squandered.
What do you know now that you wish you’d known at the start of your career?
Getting into a habit of reading case law early will pay dividends, especially if you, unlike me, are blessed with the ability to remember case names. So often the interpretation of a particular combination of sections in a statute will be ambiguous, and in those circumstances the crux of your job is to be able to predict how a court or tribunal might resolve the ambiguity. You cannot do that without a good sense of judicial reasoning, which only comes from reading and re-reading cases.
Has a recent tax case caught your eye?
The decision in BCM Cayman LP v HMRC [2023] EWCA Civ 1179 was interesting reading. The Court of Appeal decided that limited partners of a Cayman limited partnership which was a partner of a UK limited partnership were not themselves partners of the UK limited partnership. Whilst the case was a direct tax one, it will have ramifications for those considering stacked partnerships in other contexts, particularly SDLT where relief can depend on whether the transfer is between a partnership and a person who is a partner in that partnership. Part of the reasoning turned on Cayman limited partnership law prohibiting limited partners from participating in the business of the partnership; it will be interesting to see whether the limited partner role in other jurisdictions is circumscribed in similar terms.
What should we be looking out for this year?
The new Luxembourg/UK double tax treaty coming into force in April 2024 has led to a number of clients reassessing existing Luxembourg holding structures for UK real estate. When the non-resident capital gains tax rules were introduced in 2019 there was a rebasing of assets brought newly into charge. There is no such concessionary measure here; clients are faced with a real cliff edge between a UK tax-exempt disposal before 1 April and a fully taxable one – sweeping up all historic gains since 2019 – afterwards.
And finally, you might not know this about me but...
As will become readily apparent if you hear me speak, I was born and originally qualified in New Zealand. My father, trying to baptise me in the national religion, enrolled me in rugby at the tender age of seven. It will be no surprise to anyone who knows me that I permanently retired from my rugby career upon turning eight.
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