Like many tax practitioners with investment fund clients, advising on the suitability and introduction of a UK qualifying asset holding company (or QAHC) into a new or existing structure has become a fixture, with the interaction between the tax rules, corporate law and accounting throwing up some interesting issues. To begin with, these were almost universally UK-credit focused, but as clients come to realise the benefits on offer, a number of them are starting to explore whether QAHCs could be useful for more unusual asset classes. The rules could be simpler and the regime is unlikely to become a wholesale replacement for existing Luxembourg and Irish structures, but it provides a real alternative in many cases and HMRC’s focus on making it work is rather refreshing. QAHCs aside, I’m busy on a range of investment fund matters, as well as a number of restructuring mandates.
If you could make one change to tax, what would it be?
The complexity of some tax rules can be excused by the need to keep pace with the increasingly complex world in which they operate, but for others there is no such excuse. A particular bug-bear of mine is stamp duty on marketable securities. Applying provisions from the year the Tesla coil was invented to a world of semi-autonomous cars bearing that name, can range from the mildly annoying to the down-right absurd. It is now perfectly conceivable that a document will never exist in physical paper form. In addition, features such as the ‘voluntary’ nature of the tax, its nebulous nexus concepts and oddities such as the contingency principle not only require repeated explanation but are regularly met with bemusement from non-tax colleagues. The modernisation and simplification of stamp duty has long been mooted, but post-pandemic it feels increasingly anachronistic. Some may disagree, but I think it is time for stamp duty to finally be consigned to the history books.
Are there any new rules that are causing a particular problem?
Whilst the intention behind Pillar Two may be laudable, it’s rushed and rather haphazard implementation is proving problematic for a number of clients. We’re lucky in the UK to at least have draft legislation for the income inclusion rule and the qualifying domestic minimum tax, which puts us ahead of pretty much the entirety of the OECD. The EU seems intent on adhering to the 31 December 2023 implementation timeline, but in some member states even draft legislation remains lacking.
For clients, in particular in the US, the current state of affairs is confusing, if not a little infuriating. How can they understand and plan for such a potentially fundamental change to the international tax framework with such uncertainty? By their nature, clients for whom Pillar Two is potentially relevant operate in multiple jurisdictions. Therefore, even if we are able to give tentative advice on the UK rules, this is only one piece of a jigsaw. Moreover, in the UK context, the effective importation of the OECD model rules and commentary (current and future) is a recipe for ambiguity, and potentially even arbitrage between jurisdictions taking different interpretations of those rules, which fundamentally cuts across the purpose of the proposals. The heavy reliance of the rules on accounting principles of consolidation is also proving a challenge – the rationale for this is understandable, but it adds yet another blind spot for tax lawyers who are reliant on accounting firms to give anything more than preliminary advice on the potential application of the rules to a worldwide group.
You might not know this about me but...
I’m technically a published playwright and until my second year of university had delusions of pursuing acting as a career. Fortunately, my parents dissuaded me, and I opted for tax law instead. On occasion I still entertain the idea of doing a little am-dram on the side, but for the most part grappling with complex tax problems is sufficient to satiate my more creative side.
Like many tax practitioners with investment fund clients, advising on the suitability and introduction of a UK qualifying asset holding company (or QAHC) into a new or existing structure has become a fixture, with the interaction between the tax rules, corporate law and accounting throwing up some interesting issues. To begin with, these were almost universally UK-credit focused, but as clients come to realise the benefits on offer, a number of them are starting to explore whether QAHCs could be useful for more unusual asset classes. The rules could be simpler and the regime is unlikely to become a wholesale replacement for existing Luxembourg and Irish structures, but it provides a real alternative in many cases and HMRC’s focus on making it work is rather refreshing. QAHCs aside, I’m busy on a range of investment fund matters, as well as a number of restructuring mandates.
If you could make one change to tax, what would it be?
The complexity of some tax rules can be excused by the need to keep pace with the increasingly complex world in which they operate, but for others there is no such excuse. A particular bug-bear of mine is stamp duty on marketable securities. Applying provisions from the year the Tesla coil was invented to a world of semi-autonomous cars bearing that name, can range from the mildly annoying to the down-right absurd. It is now perfectly conceivable that a document will never exist in physical paper form. In addition, features such as the ‘voluntary’ nature of the tax, its nebulous nexus concepts and oddities such as the contingency principle not only require repeated explanation but are regularly met with bemusement from non-tax colleagues. The modernisation and simplification of stamp duty has long been mooted, but post-pandemic it feels increasingly anachronistic. Some may disagree, but I think it is time for stamp duty to finally be consigned to the history books.
Are there any new rules that are causing a particular problem?
Whilst the intention behind Pillar Two may be laudable, it’s rushed and rather haphazard implementation is proving problematic for a number of clients. We’re lucky in the UK to at least have draft legislation for the income inclusion rule and the qualifying domestic minimum tax, which puts us ahead of pretty much the entirety of the OECD. The EU seems intent on adhering to the 31 December 2023 implementation timeline, but in some member states even draft legislation remains lacking.
For clients, in particular in the US, the current state of affairs is confusing, if not a little infuriating. How can they understand and plan for such a potentially fundamental change to the international tax framework with such uncertainty? By their nature, clients for whom Pillar Two is potentially relevant operate in multiple jurisdictions. Therefore, even if we are able to give tentative advice on the UK rules, this is only one piece of a jigsaw. Moreover, in the UK context, the effective importation of the OECD model rules and commentary (current and future) is a recipe for ambiguity, and potentially even arbitrage between jurisdictions taking different interpretations of those rules, which fundamentally cuts across the purpose of the proposals. The heavy reliance of the rules on accounting principles of consolidation is also proving a challenge – the rationale for this is understandable, but it adds yet another blind spot for tax lawyers who are reliant on accounting firms to give anything more than preliminary advice on the potential application of the rules to a worldwide group.
You might not know this about me but...
I’m technically a published playwright and until my second year of university had delusions of pursuing acting as a career. Fortunately, my parents dissuaded me, and I opted for tax law instead. On occasion I still entertain the idea of doing a little am-dram on the side, but for the most part grappling with complex tax problems is sufficient to satiate my more creative side.
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