If you could make one change to tax, what would it be?
At the time of writing, we are on our fourth chancellor in three months and next year’s rate of corporation tax has been swinging like a pendulum. Against this background, I would be more than happy if nothing changed at all for several years. If you twisted my arm, I would say that the current off-payroll working rules should be revisited (as they so nearly were). At present, we are seeing situations where an individual is being advised that their personal company is genuinely carrying on business on its own account but the end client does not have the information (including any clear legal test) in order to be able to adopt that approach with confidence. A system where the contractor could apply to HMRC for ‘approved’ contractor status, which could be verified by the end client sounds potentially workable but also horribly familiar.
What do you know now that you wish you’d known at the start of your career?
I wish I had known how complex tax legislation would become (bearing in mind that, when I first started practising, the loan relationships code was considered by some to be over-voluminous and unnecessarily impenetrable). This complexity now arises both in terms of the broad concepts behind the rules (such as the anti-hybrid rules and the corporate interest restriction) and the detailed way in which these concepts are drafted on implementation. To some extent, this is driven by good intentions and good practice. However, the sheer volume of words means that it is increasingly difficult for group tax functions to have confidence that they have truly considered every quirk of every set of rules. Would this have caused me to choose a different career path had I known it at the time? Well, I’m still doing it...
Has a recent tax case caught your eye?
Gunfleet Sands Ltd and others v HMRC [2022] UKFTT 35 (TC) is the latest in a series of cases in which the fundamental question at issue has been whether expenditure incurred for the purposes of furthering a large infrastructure project should be allowable (either by way of capital allowances or as revenue expenditure). Whilst this situation has improved since the structures and buildings allowance was introduced to fill the gap left by the abolition of industrial buildings allowances, my non-UK colleagues are continually amazed at the difficulties we can face in justifying why tax relief should be available for all of the expenditure on a life-limited project.
What issues have clients been raising?
A legacy of the pandemic that is becoming a consistent issue for a variety of clients is how to deal with the tax risk presented by internationally mobile employees. After two years of largely working remotely, we initially had to advise on the consequences of existing employees seeking the ability to spend some or all of their time in a jurisdiction other than the jurisdiction of their main place of work. Increasingly, we are seeing employers begin to explore the global talent pool and to make hires of senior individuals who may never be based in the same jurisdiction as their employer. This raises permanent establishment issues as well as payroll tax and social security concerns and potential transfer-pricing issues. These queries are very fact-dependent and we are now at a point where any Covid-related flexibility afforded by taxation authorities is coming to an end. It is to be hoped that HMRC’s call for evidence on hybrid and distance working continues with sufficient momentum for clear and easily applied rules to emerge to reduce the compliance burden on employers.
You might not know this about me but...
To pass the time during lockdown, I started participating in a weekly online poker game with some former colleagues and other members of the profession (they know who they are!). This largely consisted of me trying to learn how to play poker whilst giving £10 each week to one of the other players. What have I learned? Don’t play cards with tax lawyers unless you can afford it.
If you could make one change to tax, what would it be?
At the time of writing, we are on our fourth chancellor in three months and next year’s rate of corporation tax has been swinging like a pendulum. Against this background, I would be more than happy if nothing changed at all for several years. If you twisted my arm, I would say that the current off-payroll working rules should be revisited (as they so nearly were). At present, we are seeing situations where an individual is being advised that their personal company is genuinely carrying on business on its own account but the end client does not have the information (including any clear legal test) in order to be able to adopt that approach with confidence. A system where the contractor could apply to HMRC for ‘approved’ contractor status, which could be verified by the end client sounds potentially workable but also horribly familiar.
What do you know now that you wish you’d known at the start of your career?
I wish I had known how complex tax legislation would become (bearing in mind that, when I first started practising, the loan relationships code was considered by some to be over-voluminous and unnecessarily impenetrable). This complexity now arises both in terms of the broad concepts behind the rules (such as the anti-hybrid rules and the corporate interest restriction) and the detailed way in which these concepts are drafted on implementation. To some extent, this is driven by good intentions and good practice. However, the sheer volume of words means that it is increasingly difficult for group tax functions to have confidence that they have truly considered every quirk of every set of rules. Would this have caused me to choose a different career path had I known it at the time? Well, I’m still doing it...
Has a recent tax case caught your eye?
Gunfleet Sands Ltd and others v HMRC [2022] UKFTT 35 (TC) is the latest in a series of cases in which the fundamental question at issue has been whether expenditure incurred for the purposes of furthering a large infrastructure project should be allowable (either by way of capital allowances or as revenue expenditure). Whilst this situation has improved since the structures and buildings allowance was introduced to fill the gap left by the abolition of industrial buildings allowances, my non-UK colleagues are continually amazed at the difficulties we can face in justifying why tax relief should be available for all of the expenditure on a life-limited project.
What issues have clients been raising?
A legacy of the pandemic that is becoming a consistent issue for a variety of clients is how to deal with the tax risk presented by internationally mobile employees. After two years of largely working remotely, we initially had to advise on the consequences of existing employees seeking the ability to spend some or all of their time in a jurisdiction other than the jurisdiction of their main place of work. Increasingly, we are seeing employers begin to explore the global talent pool and to make hires of senior individuals who may never be based in the same jurisdiction as their employer. This raises permanent establishment issues as well as payroll tax and social security concerns and potential transfer-pricing issues. These queries are very fact-dependent and we are now at a point where any Covid-related flexibility afforded by taxation authorities is coming to an end. It is to be hoped that HMRC’s call for evidence on hybrid and distance working continues with sufficient momentum for clear and easily applied rules to emerge to reduce the compliance burden on employers.
You might not know this about me but...
To pass the time during lockdown, I started participating in a weekly online poker game with some former colleagues and other members of the profession (they know who they are!). This largely consisted of me trying to learn how to play poker whilst giving £10 each week to one of the other players. What have I learned? Don’t play cards with tax lawyers unless you can afford it.
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