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One minute with...James Ross

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What’s in your in-tray? 
A couple of M&A transactions, an HMRC enquiry into a cross-border financing structure, a couple of family office property investment structures, the establishment of an investment fund, a supply chain restructuring that has been provoked at least in part by the BEPS project, and an inward investment proposition that is being discussed with HMRC. As ever, it’s a varied diet, which is much the way I prefer things and one of the reasons I first joined McDermott.
What caught your eye in the Finance Bill? 
The government had already made it clear that it wanted the UK to lead the pack on implementing BEPS, but it was something of a surprise that the Finance Bill includes provisions to incorporate the revised transfer pricing guidelines in the BEPS Actions 8–10 report into UK law.  The ink is barely dry on the report, and it would be fair to say that it does not yet represent a settled consensus. The US in particular is understood to be very ambivalent about some aspects of the report. There is a very significant risk that the way in which tax authorities apply the arm’s length principle will diverge even further than it does at present. 
If you could make one change to a tax law or practice, what would it be?
The corporation tax code increasingly seems to be creaking under the strain of having to deal with major multinationals on the one hand and one-person or quasi-partnership companies on the other. Economically, these are very different beasts. There are already a number of areas in which the code distinguishes between SMEs and larger companies. We should perhaps look at going further and taxing smaller, closely held companies on a transparent basis (rather like the American S corporation concept, though on a mandatory rather than an elective basis). This would allow the government to deal with the personal service company issue that has bedevilled it for so many years (particularly as the main corporation tax rate has fallen). It would also allow the corporation tax code to be focused on larger companies (which might, for example, allow base broadening measures to be introduced without having a negative effect on SMEs).
Comment on a current trend.
There has undoubtedly been much more interest recently in the use of UK holding and IP management companies in corporate structures, given the reputational risks associated with structures that are not aligned with substance. If a group realises significant lightly taxed profits in a jurisdiction in which it has little in the way of operations and employees, it may well attract negative publicity. Many groups are therefore keen to ‘do the right thing’. The main attraction of the UK is that it is a relatively easy place to align profits with substance, as so many multinational groups already have significant operations and employees in the UK. Reforms to the corporation tax regime in recent years have made it all the more attractive. 
Can the UK learn anything from the US regarding tax policy (or vice versa)?  
In terms of the legislative process, I think the UK has very little to learn, at least at the moment. A former US Treasury Secretary once commented that a tax code should look ‘like somebody designed it on purpose’. Whatever one thinks of the reforms to the corporate tax regime in the last six years, the Treasury’s policy making process based around ‘roadmaps’ has at least sought to bring a degree of coherence and predictability to the corporate tax code. Unfortunately, there has still been the occasional lapse into precipitate, knee jerk changes (most notably, diverted profits tax). By contrast, it is very hard to see much rationale underpinning the US international tax system as it stands, though that is mainly a product of Congressional gridlock.  
Finally, you might not know this about me but … 
I’m a member of Surrey County Cricket Club, and (work permitting) can frequently be found on summer Friday evenings at the Oval enjoying the Twenty20.  
Issue: 1308
Categories: One minute with