Transfer Pricing Disputes Can Be Complex, Lengthy and Onerous

Intellectual 06 Transfer 16 Financial help 30 property pricing disputes for children David Hopkins on what advisers Aude Delechat-Patel and Paula Ruffell Meg Saksida on helping need to know for their clients on dealing with double taxation university-age children financially www.tax.org.uk www.att.org.uk

Excellence in Taxation NovemberMay 20182019 www.taxadvisermagazine.com

Breaking barriers Gemma Tetlow considers the barriers to tax policymaking, page 10

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E: [email protected] T: 07891 692514

RELX (UK) Limited, trading as LexisNexis®. Registered office 1-3 Strand London WC2N 5JR. Registered in England number 2746621. VAT Registered No. GB 730 8595 20. LexisNexis and the Knowledge Burst logo are registered trademarks of RELX Inc. © 2017 LexisNexis SA-0117-027. The information in this document is current as of March 2017 and is subject to change without notice. GIVE YOURSELF A FLYING START Tolley®Exam Training: The ATT/CTA Tax Pathway Helping your career take flight The Tax Pathway enables students to study for both ATT and CTA qualifications and become members of both bodies in less time, without reducing the quality and rigour of your qualifications. Partner, Private Client Tax Personal Tax Director Benefits of the Tax Pathway London City £150,000 – £250,000 + £95,000 – £110,000 > Cost effective – students following the Tax An opportunity for a Partner to join an award-winning, Step into a Director role with a high-pro le, multi award- Pathway route will spend less time out of the forward-thinking rm, at an exciting time in its growth. winning Private Client team. Expertise in UK res non dom office as they will have one less exam. The cost eir respected Private Client team has specialist expertise in planning is important. Genuine scope exists to progress to of qualifying is likely to be less than following the advising HNW entrepreneurs, non doms and media clients. Partnership with this well-known accountancy rm. sequential qualification route for ATT and CTA. Ref 4747 Ref 4755

E: [email protected] T: 07891 692514

The UK’s special tax rules for R&D expenditure offer valuable tax relief for companies, and the scope of relief is wider than is often imagined. Companies can also reduce their corporation tax liabilities by claiming relief through the Patent Box.

The second edition of this popular and practical guide – written by James Boughton CTA, senior tax manager with Mazars LLP – has been signi icantly expanded to include commentary on the Patent Box, as well as updated guidance on R&D itself. The clear i commentary will help users to identify opportunities that might otherwise be missed, and to claim both types of relief accurately and with con idence.

The newly published 2019-20 edition of this comprehensive work is an invaluable guide for everyone involved with P11D completion. Its user-friendly A-Z section helps to avoid tax pitfalls in relation to director loans, annual parties, food and drink, medical costs, trivial bene its, payments in lieu of notice, etc.

The technicali guidance – by Dave Jennings of Qubic Tax and Ian Goodwin of Mazars LLP – is also a comprehensive all-year-round tax planning guide. Whether negotiating the pitfalls of OpRA, offering living accommodation or company cars, or planning to use legitimate tax-free bene its, the book offers detailed and practical commentary. i

Other recent releases from Claritax Books include:

www.claritaxbooks.com 01244 342179 CONTENTS

CONTENTS

Welcomes Features 2 CIOT President’s welcome Open and transparent Ray McCann Intellectual property Loss relief 4 ATT Vice-President’s 6 Switch it on David Hopkins explains why 20 Down on the farm Sara Bonavia welcome advisers need to make it their business considers the income tax aspects of loss Deadlines to know more about intellectual relief for farmers Jeremy Coker property OMB PERSONAL TAX GENERAL FEATURE LARGE CORPORATE TAX OMB Technical From the Technical team Tax reliefs 9 Counti ng reliefs Bill Dodwell looks at 36 Making Tax Digital for VAT recent work done about the usage and (MTD) cost of tax reliefs 37 Brexit: behind the scenes MANAGEMENT OF TAXES GENERAL FEATURE 38 Partnership expenses update Policy making 39 Business Rates: an inquiry 10 Breaking barriers Gemma Tetlow The widening net by the Treasury Commi� ee considers the barriers to tax policymaking IR35 John Chaplin and Sam Moore 23 40 Structures and Buildings GENERAL FEATURE MANAGEMENT OF TAXES provide guidance on the poten� al Allowances: dra� challenges faced by MNEs with legisla� on interna� onal supply chains as a result of IR35 reform 41 Off payroll working in the private sector: HMRC EMPLOYMENT TAX INTERNATIONAL TAX consulta� on LARGE CORPORATE TAX 42 Scotland update Entrepreneurs’ relief 43 FCA con� nues work on Stephen Woodhouse and protec� ng pensions 26 Shift ing sands Charlott e Flack consider the recent changes to Entrepreneurs’ Relief over the past year Briefi ngs EMPLOYMENT TAX OMB From Ar� llery House Parental support 45 Be part of the CIOT 30 Helping the younger generati on Meg diversity, transparency Saksida examines the tax implica� ons of and inclusion commi� ee Intangibles the various ways in which parents can 46 Harrow and North 12 Hive downs James Tryfonos considers help university-age children fi nancially the reform of the intangibles regime in London Branch: 30th PERSONAL TAX INTERNATIONAL TAX anniversary recep� on FA 2019 and provides a refresher on and dinner at the House how it works in prac� ce on a pre-sale of Lords hive down MANAGEMENT OF TAXES 47 Devolu� on evolu� on LARGE CORPORATE TAX INTERNATIONAL TAX 48 CTA Examina� on Structure Refresher Session: 10 Transfer pricing important changes to the CTA examina� ons that you 16 Dealing with double taxati on Aude and need to know Delechat-Patel Paula Ruff ell provide guidance on achieving relief 49 ATT President’s 30th from transfer pricing double taxa� on anniversary recep� on LARGE CORPORATE TAX INTERNATIONAL TAX 50 Women in tax: Sco� sh Branch 51 Bridge the Gap: an Evening with Lord Carnwath Penalti es 32 Risky waters Jon Preshaw looks at the new legisla� on which imposes civil penal� es on those who ‘enable’ off shore Branch events non compliance 52 Dates for your diary MANAGEMENT OF TAXES Input tax 34 Hey Praesto! Keith Gordon looks at a case Recruitment which considers the recoverability of input tax incurred on legal costs The best industry roles 53 MANAGEMENT OF TAXES INDIRECT TAX www.taxadvisermagazine.com | May 2019 1 President’s page [email protected] BETTER TOGETHER Ray McCann

Open and transparent

elcome to May, the end of my year as Address last May was a statement of intent. But President – and with time quickly running such statements must also make strong business Wout a busy sense of panic has set in. The sense; if only 10% of our female members decided East Midlands Branch conference at the National to attend the Spring conference it would be sold out Space Centre (the only place where tax will take three times over before any male members turned you further than the CIOT) was followed by our up! Our membership and student base is incredibly Spring Conference in Cambridge. This splendid diverse. Understanding the extent to which all our event was sold out, for which much credit goes to members (regardless of such things as age, gender, our Conferences Committee led by Peter Rayney. race, background, religion, disability, or sexual He surprised us with the news that he had married preference) feel encouraged and able to participate + Patricia, whom he had met at a previous Cambridge fully in the CIOT is the first step to ensuring they conference! April also saw the Spring Admissions can. For more on how you can help with this, ceremony and as always it was great meeting our see page 45. newest members, ADIT graduates, those celebrating Then there is our relationship with HMRC, quite! 50 years of membership and their families. I am certain that I am not the only former Inspector April’s big event was ATT President Tracy (or CTA) who looks on with disbelief at how Easman’s reception, the ATT’s official 30 th HMRC behaves at times. The lack of pragmatism, anniversary celebration. I am sure that we all willingness to drag issues out for year after year and warmly congratulate Tracy and the whole ATT on the pursuit of trivial amounts of tax and penalties all 2,500 CIOT MEMBERS HAVE ALREADY this tremendous milestone. I wish Tracy well for the contribute to the increasing discontent in HMRC’s remainder of her year as President. performance. Issues such as the loan charge have CHOSEN TO BECOME JOINT MEMBERS OF Over the past year I tried to bring something resulted in widespread concern that HMRC is ‘out of different to the role of President on issues that are control’ (in the words of the March parliamentary important to me, and I hoped, to you. Safeguarding report). In truth HMRC depends upon the UK THE ATT. our reputation, maintaining high professional having an honest taxpayer population where most standards, encouraging diversity and inclusion, taxpayers do their best to be compliant. Setting improving the transparency of Council, and, of or expecting standards that are utterly divorced As an existing CIOT member, you Secondly, you will also get access to course, our relationship with HMRC. from real life so that even doing your best is not already receive several benefits but benefits unique to ATT including but An open and transparent organisation in which good enough does not increase confidence in the all of our members can contribute is key to us administration of tax. Instead it risks removing you can get access to an additional not limited to: being relevant in a changing tax world. So, involving it altogether. We expect (and are entitled to collection of benefits that are only those outside of Council in what we do and being expect) better. available to ATT members by becoming • Tolley’s annual tax guide interested in, and acting upon, what they say is So finally thank you to my fellow elected central to having a Council that is in touch with the Officers, Glyn, Peter, and John for their support. a member of the ATT. • Finance Act hard copy whole of the CIOT. Over the past year Council has I wish a Glyn well for his term as President. To • Whillan’s tax rates and tables continued to build upon the work of past Presidents everyone on Council, the Officers of the CIOT (Peter, First and foremost, you will be entitled • Conferences and a change process led by Glyn Fullelove will see John, Paul and Roz), and to all of the CIOT staff for new faces and different skills increasingly supporting the incredible work you do, not least our events to use the ATT designation so you can • Pinsent Masons Tax Enquiry the work of a Council entrusted with a large and team who ensured that I was always in the right let current and prospective clients and Help Facility successful charitable business. place at the right time. To George, Hamant and Chris I am determined, as is Council, that there in our media team, if, despite your efforts, I said the employers know you are dedicated to should be no watering down of our educational wrong thing at times, that was all down to me. And your profession. requirements or our high professional standards so to all of you, the members of the CIOT, it has been there was no easy or obvious answer to the issue of great meeting so many of you on my travels, you unqualified advisers. Yes, there is noise but no clear know how valuable you are. See you around. plan has emerged as to what might be done. Key In today’s dynamic world, membership of a tax professional body can be a reliable to this of course is HMRC; if HMRC are not willing to treat you, i.e. CTAs, in a way that recognises constant that is there to support you throughout your career. Why not have two your full value then why should an unqualified constants? Join the ATT today! adviser bother? But when the next tax scandal hits the headlines the focus will once again fall on us, irrespective of cause, risking a knee jerk reaction It has been www.att.org.uk/joint from Government that does not address the real great meeting issues or rebuild the confidence of the public in the tax profession. you on my travels, On diversity and inclusion, I want the CIOT to Ray McCann you know how @ourATT on lead. Having a stellar all female panel support a President, CIOT highly successful female politician deliver the CTA [email protected] valuable you are v 2 May 2019 | www.taxadvisermagazine.com BETTER TOGETHER +

2,500 CIOT MEMBERS HAVE ALREADY CHOSEN TO BECOME JOINT MEMBERS OF THE ATT.

As an existing CIOT member, you Secondly, you will also get access to already receive several benefits but benefits unique to ATT including but you can get access to an additional not limited to: collection of benefits that are only available to ATT members by becoming • Tolley’s annual tax guide a member of the ATT. • Finance Act hard copy • Whillan’s tax rates and tables First and foremost, you will be entitled • Conferences to use the ATT designation so you can • Pinsent Masons Tax Enquiry let current and prospective clients and Help Facility employers know you are dedicated to your profession.

In today’s dynamic world, membership of a tax professional body can be a reliable constant that is there to support you throughout your career. Why not have two constants? Join the ATT today! www.att.org.uk/joint

@ourATT on v ATT Welcome ANNUAL TAX [email protected] CONFERENCES 2019 Jeremy Coker

expressed both by individuals caught up in Deadlines it as well as professional colleagues. There are some really sad stories in relation to the he Association organises an Annual ax onference which is held across several locations in the . his conference concentrates on hen I last wrote for this page in hardship caused by HMRC’s approach in March, I expected that I would seeking collection of sums due. Whatever topical issues with an emphasis on the practical issues faced on a daily basis by the axation echnician. Whave loads to write for May’s the position, no single case is the same and edition about my initial reaction once Brexit I hope anyone involved at least got in touch ur knowledgeable speakers will illustrate their lectures with practical examples gained from their experience. he conference also happened. Despite two deadlines, it appears with HMRC before 5 April 2019. If you need gives you an ideal opportunity to network with likeminded professionals. Attendance at the Annual ax onference will contribute to all we have had are false starts and, whether a quick guide on what to do or the options your ontinuing Professional evelopment. or not we have a reasonable excuse for the available to you, as I mentioned at the extension that is the last I am saying about meeting for those in smaller practices at the that this month – other than it would be nice CIOT Residential conference in Cambridge, if HMRC were as flexible with some of their LITRG has a good summary of articles on Topics will include: deadlines. their website (https://tinyurl.com/y65efu29). A deadline that was not missed was the Sticking your head in the sand is not really ial ta and T or AT uate – ats ne an at takes eect in celebration of ATT at 30. A fabulous event an option for anyone affected by this. As lanning with partneri – tips and traps of the partnership structure was hosted by our President, Tracy Easman, members of this Association, we are bound aital gain ta – recent an tre canges incling isposals o resiential at the London Transport Museum. There by the rules in the Professional Conduct in am .30 propert an ntrepreners relie pm is more about this event on page 49. It was Relation to Taxation (PCRT), and this should a delight to meet and talk to some of the always be our guide. We shall continue to uate – recent T cases an canges not st rexit original members of the Association and hear monitor developments on this. reinal tanar – how developments in Professional Standards and AML first-hand the history of how the Association One of the arguments put forward by came to be. What shone through that evening some of those affected by the Loan Charge will affect your work as a tax professional was how dearly the members hold the is that a number of the arrangements arose mlyment tae uate – incling oparoll orking Association in their hearts. It would be remiss out of reactions to the introduction of IR35. orporation tax losses – practical iplications o recent canges of me not to mention the excellent video At the same Cambridge conference, Keith celebrating the event that was brilliantly Gordon, fresh from his victory in the IR35 put together by members of staff and the case involving Lorraine Kelly, gave his views Technical team, which can be viewed at www. on, well, IR35. As mentioned on this page in Conference pricing: youtube.com/watch?v=6IBf1OSm1pc. the past, we are aware that HMRC have been • ATT/CIOT members and students: 10 Across I had the pleasure to attend the Branches looking into the pay arrangements involving the The above reduced rate also applies to AAT, ACCA, ICAS, CIMA and Conference in Warwick along with Glyn quite a few well-established presenters – or Fullelove, the CIOT Deputy President. It was a are they entertainers? We understand that Accounting Technician Ireland Member(s) or Student(s) pleasure to meet and speak to so many of the additional decisions in relation to similar • Non Members: 20 volunteers on our branch network. They all cases may soon be revealed. Despite their do so much work behind the scenes to ensure ‘crackdown’, the Government still thinks that that the branch programmes are delivered the IR35 rules do not work. Based on the each year. It was Malachy McLernon’s responses to the Government’s consultation last event as chair of the conference and I on ‘off-payroll’ working in the private sector, Date City Venue Speakers wish to thank him, as well as all the other we understand that it intends to extend the hursday May ritl oubleree by ilton ristol ity entre Michael teed plus A echnical fficer volunteers, for all their hard work over the reforms to the private sector. We should have years. I look forward to visiting more of the an idea of their proposals in the summer and aturday May nn oliday nn London loomsbury Michael teed plus A echnical fficer branches in the coming year. I would like the new rules are expected to come in from 6 to echo my request that members should April 2020. hursday May ay aydock Park Racecourse Mike hexton plus A echnical fficer please continue to feed in any issues that they There is a lot going on and, if you want uesday une unlane oubleree by ilton unblane ydro Mike hexton plus A echnical cers encounter in their daily jobs that they think to keep up to date, everything I mentioned, the ATT should take up with the authorities, and more, will be covered at the ATT Annual hursday une elat Radisson lu Mike hexton plus A echnical fficer because that is the only way the ATT can truly conferences www.att.org.uk/attconf2019 hursday une eatle nternational entre for Life Michael teed plus A echnical fficer represent members’ interests. Contact details which kick off this month. I look forward to are at the bottom of this article. seeing some of you there. Wednesday uly irmingam urys nn Michael teed plus A echnical fficer The conference also provided an opportunity to listen to some of the members of staff from Head office explain what they did to ensure that the wheels of the Association continue to roll smoothly and I was well impressed. I remain reassured I look forward to ISIT ATTORU/acn that we have a great team and they do an visiting more of amazing job. TO REISTER AND FOR ORE INFORATION Hardly a day goes by without a Jeremy Coker the branches in the comment in the press on the Loan Charge. Deputy President, ATT coming year It is interesting to note the variety of views [email protected]

4 May 2019 | www.taxadvisermagazine.com ANNUAL TAX CONFERENCES 2019

he Association organises an Annual ax onference which is held across several locations in the . his conference concentrates on topical issues with an emphasis on the practical issues faced on a daily basis by the axation echnician.

ur knowledgeable speakers will illustrate their lectures with practical examples gained from their experience. he conference also gives you an ideal opportunity to network with likeminded professionals. Attendance at the Annual ax onference will contribute to your ontinuing Professional evelopment.

Topics will include: ial ta and T or AT uate – ats ne an at takes eect in lanning with partneri – tips and traps of the partnership structure aital gain ta – recent an tre canges incling isposals o resiential am .30 propert an ntrepreners relie pm uate – recent T cases an canges not st rexit reinal tanar – how developments in Professional Standards and AML will affect your work as a tax professional mlyment tae uate – incling oparoll orking orporation tax losses – practical iplications o recent canges Conference pricing: • ATT/CIOT members and students: 10 Across the The above reduced rate also applies to AAT, ACCA, ICAS, CIMA and Accounting Technician Ireland Member(s) or Student(s) • Non Members: 20

Date City Venue Speakers hursday May ritl oubleree by ilton ristol ity entre Michael teed plus A echnical fficer aturday May nn oliday nn London loomsbury Michael teed plus A echnical fficer hursday May ay aydock Park Racecourse Mike hexton plus A echnical fficer uesday une unlane oubleree by ilton unblane ydro Mike hexton plus A echnical cers hursday une elat Radisson lu Mike hexton plus A echnical fficer hursday une eatle nternational entre for Life Michael teed plus A echnical fficer Wednesday uly irmingam urys nn Michael teed plus A echnical fficer

ISIT ATTORU/acn TO REISTER AND FOR ORE INFORATION INTELLECTUAL PROPERTY

INTELLECTUAL PROPERTY

Switch it on David Hopkins explains why advisers need to investment in intangible assets in the UK: 2015) found that firms in the UK make it their business to know more about market sector invested an estimated £134.2 billion in knowledge (intangible) intellectual property assets, compared to £141.7 billion in tangible assets. At that time, 47% KEY POINTS n today’s innovative world, it is (£63.5 billion) of intangible investment exciting to think that businesses can in the UK market sector was protected zz What is the issue? The financial sector profession is Iseize the opportunity to create extra by intellectual property rights (IPRs). well versed on the treatment of IP in wealth just by identifying and managing This figure continues to rise. financial terms but at times there may their intellectual property – their IP – The financial sector profession is be less of an understanding of what and leveraging it to their commercial well versed on the treatment of IP in exactly IP is, its benefits and whether advantage. financial terms but at times there may it is protectable. There is a recurring correlation be less of an understanding of what zz What does it mean to me? between innovation and the registration of exactly IP is, its benefits and whether it There is a recurring correlation intellectual property, yet many businesses is protectable. between innovation and the are unaware of what may constitute IP, Financial sector professionals registration of intellectual property, and how they can go about protecting will be aware that ‘self-help’ business yet many businesses are unaware and monetising it. This is where you, the providers and web platforms make of what may constitute IP, and how financial professional, could be uniquely it easier than ever for businesses to they can go about protecting and placed to help your business clients meet their own accountancy and monetising it. commercialise the innovative ideas, financial support needs. A natural zz What can I take away? creations and assets that make up their IP. response to that is for professionals This is where you, the financial We live in a knowledge-based to look at how they can enhance their professional, could be uniquely economy. Intellectual property can play own value proposition to ensure that placed to help your business clients fundamental role in the sustainability they can maintain and grow their commercialise the innovative ideas, and growth of a business. In 2015, a client base. One option is to provide creations and assets that make up their IP. report issued by the Office of National complementary business advice, StatisticsONS ( – Experimental estimates of such as an IP audit, highlighting the importance of IP. PROFILE Name David Hopkins What is IP? Position Business Engagement Manager Intellectual property is not just one Company The Intellectual Property Office thing, but a collection of rights. Every Email [email protected] business is likely to own or use IP in Proﬁle Dave regularly gives talks about IP at business exhibitions, one form or another on a daily basis, workshops and seminars. Prior to joining the IPO he worked in a for example, its web site, a logo or a range of private sector organisations in the manufacturing, service trading name. and distribution sectors. There are four main types of IP:

6 May 2019 | www.taxadvisermagazine.com INTELLECTUAL PROPERTY

1. Patents – protect the processes that make things work, what they’re made of and how they’re made 2. Trade Marks – a sign, for example a word, logo or slogan, which distinguishes the goods and services of one business from another 3. Designs – protect the visual appearance of a product, including the colour, shape, texture, material and ornamentation 4. Copyright – protects written or recorded creative and artistic material, including websites, logos, photographs, documents, financial plans, music, drawings, literature and advertising materials, etc. Copyright is automatic, and free, and has the advantage of not needing registration in the UK.

Other types of IP include trade secrets, know how/show how, creations such as plant varieties – intangible assets that can play a significant role in a business’s plans for sustainability and growth if they are understood and managed with care.

IP in business planning It makes commercial sense to ensure that a business’s IP strategy and business plan are closely aligned, since business plans and commercialisation strategies will include an evaluation of the assets and resources that will make the business successful. The business model should reflect the IP owned or licenced by the business and reflect how these might be managed in order to impact on the commercial viability of the business.

Trade marks – a little more detail There are currently over four million limited companies in the UK. In the 12 months to March 2018, over 620,000 new companies were incorporated. When incorporating a limited company for a client, an early port of call will undoubtedly be a search of the Companies House website for conflicting names – but how many will think to carry out a trade mark search too? An important point to note is that company law is different from trade mark law. Just because a name is registered at Companies House it doesn’t create an automatic right for that name to be used in business. A third party may raise an objection to the use of a name if they own the trade mark for a similar business undertaking. A registered trade mark: zz can be sold, franchised or licensed zz may deter third parties using the trade mark without the owner’s permission zz makes it much easier to take legal action against anyone who uses the trade mark without permission www.taxadvisermagazine.com | May 2019 7 INTELLECTUAL PROPERTY

zz allows Trading Standards Officers or TOP TEN TIPS FOR BEING AN IP-SAVVY ADVISER the Police to bring criminal charges against counterfeiters if they use the 1. Consider including IP content on your own website that your clients can access, trade mark. and include a link to IPO business advice at www.ipo.gov.uk/business 2. Include IP as a core subject when in discussions with your clients 3. Recommend that clients review or audit their intellectual property Popular examples of where trade 4. Encourage clients to undertake infringement searches before launching a new mark protection has been a wise course product or service of action include Aardman Animations. 5. Ensure that IP is included in business plans and that an IP strategy is developed The Oscar-winning studio behind 6. Remind clients that it is important to keep new and innovative ideas out of the animated films Wallace and Gromit and public domain until registration, and ensure that they make all employees aware of Chicken Run has been able to generate the importance of confidentiality extra revenue by licensing its work. For 7. Ensure that you and your clients create agreements with commissioned parties to JoJo Maman Bebe, the popular retailer of establish the ownership of IP (e.g. transferring the copyright of a website to your maternity wear, baby clothes and nursery client’s business) products, protecting its trade mark was 8. If your client is thinking about trading overseas then remind them to consider key to growing its business. Case studies protection in those countries (both for manufacturing and for selling into) can be viewed in full at www.gov.uk/ 9. Build up your professional network to include IP attorneys government/case-studies. 10. Finally, take the time to audit your own business for IP.

Patents from patents. Businesses who innovate businesses via a UK-wide network of Patents can be a powerful tool. One may also benefit from R&D Tax Credits – IP professionals who have a wealth of benefit to owning a patent or other IP referencing the link between innovation expert knowledge that can help you and right is as a device to keep potential and intellectual property again. your clients. These include professional competition out of the market place. Fold-up bike firm, Brompton, has membership bodies including the The patent process can be costly for been able to exploit its patents and Chartered Institute of Patent Attorneys a business, however, so it is prudent trade marks to ensure that it stays at the (CIPA) and the Chartered Institute of to include IP within business plans to forefront of its market with its innovative Trade Mark Attorneys (CITMA). ensure that there are economic benefits bike products. When family double Growth hubs and business support to undertaking the process. glazing company Sashmate came up with networks can help too. In England, each Businesses who own granted a time and labour-saving device that region has a growth hub offering support patents may be able to benefit from would allow a single fitter to clamp and to businesses, whilst in Scotland, Wales Patent Box, a scheme started by HMRC remove the sash, safely and easily, by and Northern Ireland, similar help can be in April 2013. It offers an incentive for themselves, a patent application allowed found through the devolved authorities. companies to retain and commercialise them to benefit from their invention, Finally, there are a number of Patent existing patents and to develop and prevent copycat products flooding libraries and Business IP Centres located new innovative patented products. the market. in libraries across the country that can Businesses can then apply a lower rate offer IP advice. of corporation tax to any profits earned Designs Designs can be registered too. The Where to go next? ADDITIONAL RESOURCES designer of Carbon Black, a revolutionary The IPO is aware that financial sector wheelchair made from carbon fibre, professionals may not be as confident zz The Intellectual Property Office was able to protect his innovation by as they would like to be in their (www.ipo.gov.uk) registering his design. Design rights understanding of IP rights, so it has put zz HMRC Patent Box (www.gov.uk/ registered by worldwide novelty goods together a comprehensive toolkit of guidance/corporation-tax-the- brand Smiffys has meant that it has been online resources to help businesses and patent-box) able to enforce its intellectual property their advisers make the most of IP: zz The Chartered Institute of rights, helping lead the fight against zz www.ipo.gov.uk/business acts as Trade Mark Attourneys www.( counterfeit goods. an online advice centre offering a citma.org.uk) wealth of guidance, case studies and zz The Chartered Institute of Patent Attourneys www.ci( pa.org.uk) Valuing IP free tools. The inclusion of IP valuation improves zz IP Basics is a collection of bite-sized Growth hubs the accuracy of a business’s worth. It animations exploring the key aspects zz England (www.lepnetwork.net/ can help a business to access finance of IP and can be found at tinyurl. growth-hubs) and funding, and be of benefit in com/y27tub7r. zz Invest Northern Ireland (www. transactions, joint ventures, mergers and zz The IP Equip online IP course is free investni.com/support-for-business/ acquisitions and company restructuring. to complete at tinyurl.com/y57l4tvg. protect-your-intellectual- The IPO published ‘Hidden Value’ in It can be accessed via desktops, property.html) 2017 – an in-depth look at the business tablets and smartphones and is also zz Scottish Enterprisewww.scottish- ( valuation market. It discusses methods CPD accredited. enterprise.com- of valuing IP including by cost, income zz Hidden Value is a report produced zz Wales (www.businesswales.gov. and market value. The report identifies by the IPO with guidelines for wales/innovation/support-and- around 40 companies who provide businesses on how to value IP and funding/intellectual-property) specialist IP valuation services in the UK. can be accessed at tinyurl.com/ zz UK-wide network of Patent libraries yxbaxhqh. and Business IP Centres located in IP Professionals, IP advice and zz Case studies can be viewed in libraries (www.bl.uk/business-and- business advice full at www.gov.uk/government/ ip-centre/national-network) Further information is available to case-studies.

8 May 2019 | www.taxadvisermagazine.com TAX RELIEFS

TAX RELIEFS

Bill Dodwell looks at recent work done about the usage and Counting reliefs cost of tax reliefs

he very fi rst project from the brand billion. Reliefs with both structural and substanti ally reduce yield.’ Strangely, the new Offi ce of Tax Simplifi cati on looked expenditure components totalled £87 billion. £12,000 exempti on from capital gains tax Tat tax reliefs (ti nyurl.com/y3jabz6e). Expenditure reliefs cost £147 billion. doesn’t have a costi ng against it. The exam questi on set by then Chancellor The novelty for the January 2019 editi on Pensions are a big money item. George Osborne was to cut the volume of is that we now have some idea how many HMRC think that pensions tax relief UK tax law by proposing the removal of taxpayers benefi t from the principal reliefs. and the exempti on for the income of outdated or unnecessary reliefs. In the end, The most costly – by far – is the personal pension funds costs about £25.6 billion. forty-seven reliefs disappeared and scarcely allowance, which now costs £107 billion – The exempti on from employer’s NIC for anyone noti ced. compared to total income tax receipts of pension contributi ons costs a further £18 What everyone did noti ce was the eff ort £195 billion. The data shows that 47 million billion, which includes additi onal employer put in to counti ng the number of tax reliefs individuals benefi ted from it and over 16 contributi ons funded by employee salary in UK legislati on. The report said: ‘During million individuals paid no income tax as sacrifi ce. 2.6 million self-employed people our voyage of discovery (which has lasted a a result. Even this is an under-esti mate as save £5.2 billion from their lower nati onal mere fi ve months rather than the fi ve years HMRC note that they don’t have complete insurance contributi ons, even though they of USS Enterprise) we found 1,042 reliefs, records on everyone with income below now receive the same state pension as allowances and exempti ons; far more than the personal allowance. 31 million people employees. These are all classifi ed as tax any of our initi al esti mates.’ The report quite benefi tt ed from the awkwardly-named expenditures but have of course been part reasonably noted that not all tax reliefs were primary threshold (the NIC personal of the tax and NIC landscape for decades. the same type: some are there to encourage allowance) at a cost of £26.4 billion. A mere 41,000 individuals manage to investment, for example, whilst others 22 million people benefi t from the ISA benefi t from entrepreneurs’ relief, although are simply part of the basic structure of a exempti on (which now costs £3.5 billion), the cost of this is £2.4 billion in 2016-17 – parti cular tax. with 18 million people receiving the personal some £58,500 each, on average. HMRC has published data for many savings allowance, worth up to £200 pa at Enterprise investment schemes reliefs years about tax reliefs but the upsurge in an exchequer cost of £455 million. 5 million are worth over £700 million in reduced parliamentary interest generated by the individuals use the dividend allowance, income tax for 44,000 people and a further Public Accounts Committ ee and the Treasury no doubt including many pensioners and £120 million in CGT savings. The reliefs Select Committ ee has clearly prompted owner-managers of companies. Slightly presumably support investment of some much greater investi gati on into this broad oddly, perhaps, the ISA relief is treated as £2.4 billion in qualifying companies – but no topic. In January 2019, HMRC published an expenditure, whilst the personal savings doubt it is almost impossible to show how the latest bulleti n ti( nyurl.com/yckv9pqk), and dividend allowances, which have similar such investment might change were the tax noti ng: ‘We are currently reviewing the eff ects for millions, are treated as structural reliefs to be withdrawn. structure and scope of this publicati on. In i.e. simply part of the income tax framework. Corporati ons tax reliefs for R&D, future publicati ons we intend to include a HMRC give a projected cost of the main patent box and the creati ve scheme reliefs wider list of tax reliefs and associated costs. residence exempti on for capital gains tax of cost some £5 billion annually, compared We also plan to review and improve the some £27 billion – but they don’t have data to corporati on tax of £58 billion. 40,000 presentati on of these stati sti cs.’ on the number of benefi ciaries. There are companies get R&D relief but only 1,200 HMRC costed the principal tax reliefs about 25 million homes in the UK and other have managed to add on the Patent Box at some £430 billion, which compares data suggests that about 65% are owner- relief as well. to Nati onal Accounts Taxes of £737 occupied – so perhaps that gives us some No doubt the debate will conti nue billion (based on the Offi ce of Budget idea of the millions of possible benefi ciaries. whether all these reliefs are eff ecti ve Responsibility’s Spring Statement analysis). HMRC insert an important cauti onary note – even though it’s surely clear that the Minor reliefs (those costi ng less than £50 ‘The esti mated cost of this exempti on from vast majority are here to stay. Having a million each) cost a further £690 million. capital gains tax does not represent the yield much bett er idea how many taxpayers Structural reliefs – things which are a if this exempti on were to be abolished, as are aff ected is a useful contributi on to fundamental part of a tax–totalled £196 consequenti al behavioural eff ects would the debate.

PROFILE Name Bill Dodwell Email [email protected] P r o ﬁ l e Bill is Tax Director of the Offi ce of Tax Simplifi cati on and Editor in Chief of Tax Adviser magazine. He is a past president of the Chartered Insti tute of Taxati on and was formerly head of tax policy at Deloitt e. He is a member of the GAAR Advisory Panel. Bill writes in a personal capacity. www.taxadvisermagazine.com | May 2019 9 POLICYMAKING

POLICYMAKING

KEY POINTS zz What is the issue? There are long-standing problems with the UK’s tax system. But tax reform is not an easy area and governments of all stripes have long struggled to overcome the barriers. Breaking zz What does it mean to me? Some of the difficulties facing modern tax systems will require international coordination, such as effectively taxing multinational digital service providers. But others are firmly within the control barriers of the UK government. zz What can I take away? The barriers to reform are real but – we Gemma Tetlow considers the believe – not all insurmountable. barriers to tax policymaking

his might seem an odd time to be talking about tax reform. Working out Thow to leave the EU is consuming most of politicians’ attention, leaving little space to think about domestic issues – let alone the unglamorous question of how to reform the tax system. But it will become increasingly difficult for politicians – if they want to govern effectively – to avoid this question over the next decade or so. There are long-standing problems with the UK’s tax system. There is growing pressure to prop up revenues in the face of increasing demands on public spending from an ageing population and economic trends that are undermining the tax base. These could provide the impetus needed to address Jaffa Cake case demonstrates – it reduces Many of the problems are some of the failings in the tax system. But tax government revenues and is a poorly widely acknowledged and have been reform is not an easy area and governments focussed way of supporting lower-income comprehensively analysed. Despite this, of all stripes have long struggled to overcome households. successive governments have either avoided the barriers. The fact that many people think making reforms or have tried but failed to do Some aspects of taxation are inherently that national insurance still pays for so. For example, George Osborne attempted political. Setting tax rates is the most their pension or the NHS makes it easier marginally to widen the VAT base in 2012 obvious one. It should always be for elected for politicians to raise this tax. This – applying VAT to pasties and static homes politicians to decide how much the tax and puts a greater tax burden on earned – but both proposals were quickly reversed. benefit system should redistribute and income than unearned income, bearing Philip Hammond attempted to increase tax between whom. disproportionately on those on lower and paid by the self-employed in 2017 – bringing But there are other elements of the tax medium pay than if the same revenue was it slightly closer to the tax paid by employees system on which there should be cross-party raised through income tax. The list goes – but also quickly had to reverse. agreement. For example, most politicians on and on. Both of these attempts underline the should have a desire – all else equal – to have These shortcomings have significant difficulties of making reforms that are a stable tax system that raises revenues in a costs. For example, the Mirrlees Review unpopular with the public and the media. In simple and efficient manner. It should also be showed that the Government could both cases there was little public discussion uncontroversial that the tax system should raise tax revenues by £11 billion a year of the reforms in advance, meaning there treat similar individuals, carrying out similar (equivalent to just under 2% of the UK’s was scant public understanding of the activities, the same. annual tax take at the time it was written) rationale for reform. This was despite there But on these measures the current UK by widening the VAT base, even after being a community of experts – particularly tax system falls short. Stamp duty on the sale allowing for a targeted package of support in the case of the proposed reforms to class of properties seizes up the housing market to compensate lower income families. 4 National Insurance contributions for the and means the amount of tax levied on a Eliminating all reduced rates of VAT may self-employed – who had been advocating property depends – perversely – on how be an unfeasibly radical proposal. Current for similar reform. frequently it changes hands. VAT is charged political discourse – advocating for further Future governments will need to on an unusually small share of goods sold in exemptions for sanitary products, for reform the tax system not only to deal with the UK, compared to other countries. This example – certainly makes reform in this these historic shortcomings but also to creates incentives for businesses to expend direction less likely. But these calculations address ongoing economic trends that are time and effort trying to prove that their demonstrate that there are significant undermining the revenue-raising capacity of goods should not pay VAT – as the infamous costs from failing to address these issues. the tax system.

10 May 2019 | www.taxadvisermagazine.com POLICYMAKING

PROFILE Name Gemma Tetlow Position Chief Economist Company Institute for Government Email [email protected] Tel 020 7747 0469 Proﬁle Gemma is Chief Economist at the Institute for Government. She works across the institute’s programmes of work, which aim to improve the effectiveness of government through providing rigorous research and analysis, topical commentary and offering a space for discussion and fresh thinking. She is currently leading a specific programme of work looking at the barriers to tax reform and how they could be overcome. Previously, she was Economics Correspondent at the Financial Times, reporting on economic developments in the UK and globally. Before that, she led the Institute for Fiscal Studies’ work on public finances and pensions.

time when it could be announced alongside prices and transaction volumes in this narrow a cut in fuel duty than it would be once fuel segment of the UK housing market. duty revenues have dwindled further. Mr Osborne also made fundamental It will be increasingly difficult for future reforms to corporation tax – lowering the governments to duck the question of tax headline rate but widening the base on which reform when revenues are under pressure it is charged. Again, the reform was done because this will come at the same time as in such a way as to reduce total revenues, upward pressure on public spending grows. meaning a giveaway to many companies Growth in public spending on pensions and even if they lost access to previous tax reliefs. pensioner benefits has been held in check Overall, however, efforts at tax reform over the past decade by increases in the have been limited over the past 30 years. state pension age: there are roughly the The last Labour party manifesto was same number of pensioners now as in 2010. notable for promising a significant tax But by 2030 there will be 1.5 million more. increase. But this was mainly intended to Growth in spending on pensioner come from raising the rates of existing benefits will be accompanied by further taxes, rather than changing the structure demands for more spending on health and of the tax system. A majority of the long-term care. The OBR estimates that, if additional revenues was expected to come age-related demands for higher spending from raising the rate of corporation tax An increasing number of people – for on health and social care are met, the UK and increasing income tax rates for those example, in construction and professional government may need to devote an extra with income over £80,000 a year. There services – now work for their own companies 1.9% of national income (or around £40 was little mention of a desire to address and so can receive their income through billion in today’s terms) to health and long- long-standing structural inefficiencies. dividends. Profits and dividends are more term care spending by 2030. History suggests that making lightly taxed than employment income, Some recent successful tax reforms significant reforms without cash to when account is taken of employers’ national demonstrate how the barriers can be give away is harder. But it will become insurance contributions. The benefits of overcome. Mr Osborne successfully increasingly important for future incorporation have grown as the corporation managed to reform stamp duty in 2014, governments – whatever their political tax rate has fallen, though more recent replacing the slab structure with a new persuasion – to address this question. cuts to annual dividend allowances have marginal rate schedule. This removed one of Some of the difficulties facing modern substantially reduced the attractiveness the more egregious aspects of the previous tax systems will require international of incorporation. The Office for Budget system, though left in place a fundamentally coordination, such as effectively taxing Responsibility estimated in 2016 that faster flawed tax on property transfers. multinational digital service providers. than expected growth in incorporations Two features of that reform perhaps But others are firmly within the control would cost the exchequer £4.4 billion a allowed the proposal to pass without much of the UK government. The barriers to year by 2021-22, equivalent to 0.5% of total public outcry. First, the changes were such reform are real but – we believe – not all expected revenues in that year. that sales of property worth less than insurmountable. That is why we, at the Increasing fuel efficiency of cars £937,500 incurred a lower tax charge than Institute for Government, are carrying out – coupled with the Government’s before – this covered around 98% of all work to look more closely at the barriers unwillingness to raise the rate – is property transactions. Second, the reform – from political difficulties to the lack undermining revenues from fuel duty. At reduced total revenues from stamp duty land of public understanding, from practical the moment this tax raises £28 billion a tax by around £800 million a year. It is always challenges to Parliamentary ones – and year, or 3.6% of all government revenues. easier to sell reforms when many people develop recommendations for how they As people switch to electric vehicles, fuel gain. The reforms, however, also created new could be overcome. Our objective is to duty will become a thing of the past. If the problems. The large increase in stamp duty ensure that tax changes, if – and likely Government still wants to raise revenues rates on the very highest value properties when – they come, are done in the most from drivers – and to tackle better the has likely contributed to sluggishness in the effective way rather than simply the least negative externalities of driving – it will need prime London housing market. It has also politically costly way. We are interested to prepare for some form of road charging. made stamp duty revenues much more in hearing from anyone with views on That is likely to be easier to implement at a heavily dependent on what happens to these issues. www.taxadvisermagazine.com | May 2019 11 INTANGIBLES

INTANGIBLES Hive downs KEY POINTS zz What is the issue? One of the measures in Finance Act 2019 (FA 2019), with eff ect from 7 November 2018, reforms the intangibles regime. Its intenti on (so the Policy Paper says) is to ‘reduce fricti ons that inhibit commercial mergers and acquisiti ons’. zz What does it mean to me? This may be an issue where prior intra-group transfers have taken place, especially where there is a hive out scenario. zz What can I take away? PROFILE Although Purchasers should sti ll be wary if they intend to realise any Name James Tryfonos IFAs post-acquisiti on and factor this Position Tax solicitor into their deliberati ons (or price) the Company Pinsent Masons removal of the de-grouping charge Email [email protected] will sti ll be incredibly benefi cial in not Tel 020 7667 0131 creati ng immediate tax charges. As P r o ﬁ l e James Tryfonos is a solicitor at Pinsent Masons. He advises such, the changes should remove one on a broad range of corporate tax issues, including acquisiti ons, of the fricti ons in M&A transacti ons. corporate structuring and group reorganisati ons.

ne of the measures in Finance Act James Tryfonos considers the reform of the intangibles 2019 (FA 2019), with eff ect from O7 November 2018, reforms the regime in FA 2019 and provides a refresher on how it intangibles regime. Its intenti on (so the works in practi ce on a pre-sale hive down Policy Paper says) is to ‘reduce fricti ons that inhibit commercial mergers and acquisiti ons’. By taking a pre-sale hive Most recently, FA 2019 Schedule 9 Pre-sale hive down transaction down as an example, this arti cle provides further amended the position (this time This may be an issue where prior a refresher on how this should work in beneficially) by providing that goodwill, intra-group transfers have taken place, practi ce. to the extent it relates to qualifying IP, especially where there is a hive out acquired post-April 2019 must now be scenario. A hive out prior to a sale may The intangible ﬁ xed asset regime amortised at a fixed rate, currently set be considered where target Company Broadly speaking, intangible fixed assets at 6.5%. The amortisation is however has a trade which Purchaser wants but (IFAs) are (in the main) goodwill and limited to six times the expenditure that target Company has been trading intellectual property. As such, IFAs can on that ‘qualifying IP’ (which includes for many years, in many different guises be immensely valuable. The specific IFA patents, design rights and copyrights). and has different trades and historic regime was introduced for companies in Note that IFAs transferred within a tax issues or other potential liabilities. April 2002. Until that time, companies’ corporate group should retain their Vendor would be glad to sell target IFAs were treated no differently from characteristics prior to that transfer. Company as the tax liabilities remain other assets and were taxed under By way of summary, figure 1 may be a within that Company and by selling the general principles (as they still are for helpful reference point. shares Vendor removes itself from the individuals). As can be seen, the question of when potential risk (subject of course to any The IFA regime has been changed the asset is acquired is key. secondary liabilities or indemnity or on several occasions since. One of the When connected parti es transfer tax covenant between Purchaser and benefits of the regime was the ability assets to and from each other, if those Vendor). Purchaser of course only wants to amortise but from 3 December 2014, parti es are also grouped, provisions can the trade and not the additional risks. any goodwill or certain customer related apply to make that transfer tax neutral. There is a commercial choice at this assets purchased from a connected The IFA regime is no diff erent, allowing stage to determine whether an asset individual (or firm with a connected grouped enti ti es to transfer IFAs within sale or share sale is the preferred route. member) would lose the right to the group on a tax neutral basis, unless But there is another option: the pre-sale amortisation. From 8 July 2015, this and unti l that transferee company leaves hive out (we shall look at hive down as an restriction was extended to cover IFAs the group at which point de-grouping example), as set out in figure 2 below. purchased from unconnected third charges potenti ally arise. The de-grouping The pre-sale hive down allows the parties also. rules for IFAs look back six years. Purchaser to get the assets it wants

12 May 2019 | www.taxadvisermagazine.com INTANGIBLES

without the additional risks via a share disposal which qualifies for SSE. de-grouping. sale transaction (generally considered a SSE broadly exempts any gain or SSE can therefore be immensely ‘cleaner’ transaction). Vendor receives disallows any loss upon the sale of shares valuable for companies for chargeable capital gains treatment which may where the specified conditions apply. gains purposes (although it is worth essentially be tax neutral if it benefits For SSE to apply, the seller needs to have noting that the rules can disallow from the substantial shareholding held 10% or more of the ordinary share otherwise valuable losses arising on exemption (‘SSE’). capital of the target company and be de-grouping and disposals for some The sticking point was often the de- beneficially entitled to 10% or more of companies). grouping charge on IFAs. the profits available for distribution, and There is an issue in our hive down the assets available on a winding up, to scenario however, as the one year Chargeable gains equity holders. holding period is unlikely to have been To explain the point, we’ll start with There are also trading requirements met by the newly established Newco. the chargeable gains treatment in our but these have recently been relaxed Fortunately, TCGA 1992 para 15A Sch example (the IFA regime was based on, in respect of the seller (although still 7AC allows the holding period to factor in and split out from, this after all). remain in respect of the company being and include the time when another group Say Company owns land (assuming disposed of). company carried on the trade which is the transactions in land rules do not As of 1 April 2017, these conditions transferred to Newco. It is important, apply) or another asset subject to need to have been met for the period in order for this treatment to apply, for chargeable gains treatment in the UK, of one year beginning no more than six Newco to continue carrying on the trade the transfer from Company to Newco will years before disposal. The increase to a immediately after the disposal. be on a no gain, no loss basis thanks to, six year rather than two year ‘look-back Care needs to be taken at this stage Taxation of Chargeable Gains Act 1992 period’ (following Finance (No.2) Act however, where there was no group in (TCGA) s 171 (assuming the group test 2017) should help more companies have the first place. In our scenario, Vendor is met, as is the case here). The historic tax free gains when they eventually sell and Company form a group which Newco base cost for the Company will be the their minority shareholding (not so good then joins. This is within the remit of the asset’s base cost for Newco. for those with post-SSE sale minority TCGA 1992 para 15A Sch 7AC treatment. If Newco then leaves the gains group holdings being held at a loss). What if Vendor was an individual? within six years of the transfer of a The chargeable gains de-grouping There would be no chargeable gains chargeable asset to it whilst still owning rules link back to SSE via TCGA 1992 group under TCGA 1992 s 171 initially, that asset (or an asset it has rolled over s 179(3D) which provides that where the and so, one would assume that by the gain on the original asset into), TCGA de-grouping charge arises as a result of a creating Newco as a subsidiary to the 1992 s 179(3) applies to create a deemed sale subject to the SSE, the de-grouping Company a group is created (of which disposal for Newco. Newco is treated as gain or loss is treated as forming part the Company is a ‘member of the group’) having sold and immediately reacquired of the consideration for sale of the thereby being within the scope of TCGA the asset for its market value at the time target company. 1992 para 15A Sch 7AC. of the no gain, no loss transfer. This As a result, the gain is effectively Sadly, HMRC’s capital gains manual will usually create a gain or a loss. See extinguished by SSE. This also means at CG53080C takes a different view. Example 1. that any intra-group acquired asset held HMRC read the condition that the trade As we can see, the de-grouping at less than market value has its loss be carried on by a ‘member of the group, charge in this situation falls on the entity disallowed (but this is usually reflected while it was a member of a group’ as leaving the group. However, should the in pricing). meaning at a time before Newco was parties so agree, a gain or loss arising For the company leaving the group, created, i.e., in HMRC’s view, if Company under TCGA 1992 s 179 de-grouping it is still treated as having sold and then was a sole corporate entity not within rules can be transferred from the entity immediately reacquired the chargeable a corporate gains group (for example leaving the gains group to another entity assets at market value subject to de- owned by individual(s) and without remaining within the group under TCGA grouping. It is just a question of whether any subsidiaries) then the creation 1992 s 171A. This can be useful where that gain or loss is taxable/relievable of Newco does not form a group for SSE does not apply and there are capital (and for whom), depending on whether these purposes. losses which may be utilised elsewhere the sale is within SSE or not. Readers can take their own view on in the group. As a result, those chargeable assets this interpretation and note that caution (assuming the carrying base cost is must be taken when deviating from SSE less than market value) get a step up HMRC guidance. The author, however, Special rules apply where the de- in base cost to the market value at the is yet to be convinced that if one sets grouping charge arises by way of share time of the intra-group transfer upon up Newco (without the assets being transferred to it upon subscription), EXAMPLE then this in and of itself creates a group; thereby allowing Company, in its new Company holds a chargeable asset which it bought for £200,000. It transferred this to capacity as ‘a member of a group’, to use Newco in 2015 when its market value was £2 million. At this point, the no gain/no loss the assets ‘while it was a member of a principle applies. group’ as prescribed by TCGA 1992 para Newco leaves the group (other than by way of share disposal; for example by issuing 15A Sch 7AC. suffi cient shares to a third person) in February 2019, when the asset has a market value Some may seek to create Newco of £2.2 million. Newco has a deemed disposal with a chargeable gain of £1.8 million earlier in time to strengthen the ignoring indexati on and other adjustments (incidentally, indexati on has been frozen from December 2017; s.26 Finance Act 2018). This is the £2 million market value at argument but it is likely that HMRC’s the date of de-grouping less the original base cost of £200,000 Newco inherited from interpretation may still leave advisers Company. and clients uneasy. The other alternative ‘fix’ could be to www.taxadvisermagazine.com | May 2019 13 INTANGIBLES

PRE SALE HIVE OUT reacquisition as at the time of the intra- group transfer. From 7 November 2018 however, FA 2019 s 26 introduced new CTA 2009 s 782A which effectively removes Vendor Purchaser any de-grouping debit or credit INSIGHTFUL Shares arising in respect of an IFA where the requirements of SSE are met. Interestingly however, instead of IN-DEPTH Cash allowing the IFA to become part of the consideration for the share disposal Company Newco (as is the case for chargeable assets), IN PRINT CTA 2009 s 782A is an exclusion to the provisions of CTA 2009 s 780 taking Transfer effect (new CTA 2009 s 780(5)(aa)). Tolley’s range of books provide a comprehensive of trade As a result then, the legislation and assets whilst allowing a company to be sold and straightforward account of the law and without creating a de-grouping charge, practice of tax. Key titles include: Newco does not allow a tax written down value (TWDV) step up/down to market value >Tolley’s Value Added Tax (which was the case for the chargeable assets’ step up in base cost). Newco will still hold the initial TWDV for the asset > Tolley’s National Insurance Contributions (which it inherited from Company) create a group prior to the introduction IFA and so will still be taxed on any future >Tolley’s Capital Gains Tax of Newco in the structure through the Turning back to the treatment of IFAs, disposal of the IFA based on the addition of other companies into the unlike chargeable gains which have been difference between the TWDV (upon >Tolley’s Income Tax structure. linked to SSE via the treatment described sale) and the proceeds received. Both approaches appear to be above since 2011, Finance Act 2011 One rationale behind this is > Tolley’s Inheritance Tax unnecessary steps indicating that made no amendment to the IFA de- presumably that tax relief may have HMRC’s interpretation is at odds with grouping charges. been provided during the life of the draftsman’s intention (and what the As a result, the transfer of IFAs from, the asset through amortisation (if >Tolley’s Corporation Tax legislation actually says). in our example, Company to Newco will available). The potential issue with this One could of course take sufficient be tax neutral pursuant to Corporation is that it is the Vendor which may have > Tolley’s Tax Planning umbrage with CG53080C until ultimately Tax Act 2009 s 775 but, without the had the benefit of that amortisation the tax tribunal gives its interpretation link to SSE, a de-grouping charge could prior to the Purchaser acquiring the >Tolley’s Customs and Excise Duties Handbook of the provision but then again, why previously arise under CTA 2009 s asset. Purchaser due diligence should should taxpayers incur the cost, risk and 780. That provision works in a similar therefore still focus on IFAs, particularly uncertainty of tax litigation in order to way to the de-grouping charges for if the Purchaser ever intends for Newco correct HMRC’s over-zealous narrowing chargeable gains provision, with Newco to sell the intra-group acquired IFA (and of tax legislation? Such considerations being subject to a deemed realisation ensure that the purchase of Newco is are beyond the scope of this article. of the IFA and immediate market value priced accordingly). A charge may not arise on purchase Transfer Treatment of Newco, but if the IFA asset has increased in value but been subject to Pre-April 2002 acquired/created IFA (or Outside the IFA regime; treat as an asset amortisation (for example at a fixed such asset acquired since then from a subject to chargeable gains (or an income rate thereby potentially diverging from connected company) receipt where relevant) economic reality) during the time when IFA acquired from a third party or IFA regime, able to amortise the Vendor group owned the asset, the For more information and to order now visit: unconnected company or created after amortisation is effectively recovered by April 2002 but before 8 July 2015 HMRC from the Purchaser on any future lexisnexis.co.uk/print19 sale (if at a price higher than TWDV). IFA acquired from a connected individual IFA regime, able to amortise Again, the effect of this will be subject (or firm) after April 2002 but before 3 to the amortisation position of the December 2014 relevant IFAs; and as such, the relevant IFA acquired from a connected individual IFA regime, but no amortisation for time when the asset was acquired as (or firm) on or after 3 December 2014 goodwill and customer related intangibles discussed above. On the whole then, although IFA acquired from a third party or IFA regime, but no amortisation for Purchasers should still be wary if unconnected company or created on or goodwill and customer related intangibles they intend to realise any IFAs post- after 8 July 2015 but before 1 April 2019 acquisition and factor this into their deliberations (or price) the removal IFA acquired from a third party or IFA regime, with no amortisation for of the de-grouping charge will still be unconnected company or created on or goodwill or customer related intangibles after 1 April 2019 unless the goodwill relates to qualifying IP incredibly beneficial in not creating which may be amortised at a fixed rate up immediate tax charges. As such, the to six times the qualifying expenditure changes should remove one of the frictions in M&A transactions.

14 May 2019 | www.taxadvisermagazine.com

Tolley’s range of books provide a comprehensive and straightforward account of the law and practice of tax. Key titles include: >Tolley’s Value Added Tax > Tolley’s National Insurance Contributions >Tolley’s Capital Gains Tax >Tolley’s Income Tax > Tolley’s Inheritance Tax >Tolley’s Corporation Tax > Tolley’s Tax Planning >Tolley’s Customs and Excise Duties Handbook

For more information and to order now visit: lexisnexis.co.uk/print19

TRANSFER PRICING

KEY POINTS zz What is the issue? One of the important changes for international tax practitioners is an increase in enquiries over transfer pricing issues – especially into a group’s transfer pricing policies. Dealing What does it mean to me? Transfer pricing disputes can be complex, lengthy and onerous. Tax authorities will often request a large volume of information from businesses. Companies may choose – somewhat with double reluctantly – to settle with tax authorities even when this may give rise to double taxation. zz What can I take away? Knowing which options are available can increase the prospects of a taxation successful settlement that eliminates any double taxation. Aude Delechat-Patel and Paula Ruffell provide guidance ne of the important changes for on achieving relief from transfer international tax practitioners pricing double taxation Ois an increase in enquiries over transfer pricing issues – especially into a group’s transfer pricing policies. Many of these enquiries follow the changes to the OECD Transfer Pricing guidelines (and those from the UN), mandated by the Base Erosion and Profit Sharing (BEPS) Inclusive Framework. This trend is likely to continue as the changes agreed in October 2015 make their way into general practice globally. This view is supported by HMRC’s recent launch of the Profit Diversion Compliance Facility, which sets HMRC’s sights not only on large businesses, but also the mid-market. Transfer pricing disputes can be functions in the UK, including head office for a meeting with UK local complex, lengthy and onerous. Tax customer support. See Figure 1. management and HMRC to review the authorities will often request a large zz HMRC issued a transfer pricing Group’s business model and supply/ volume of information from businesses. enquiry notice during the year value chain showing that, although Companies may choose – somewhat following the submission of the a large volume of support calls from reluctantly – to settle with tax authorities UKTech’s tax returns. UKTech submits new customers are routed through even when this may give rise to its contemporaneous transfer the UK call centre, the functions double taxation. pricing documentation in the form and costs associated with providing Using an example of a typical double of an BEPS-compliant master file and these functions are low value-adding taxation dispute, this article presents local file. in comparison to the functions some key points to help navigate transfer zz HMRC follows up with both informal performed and costs incurred pricing disputes and reach a prompt and formal information requests in Canada. resolution. The example uses the UK and over a period of two years, leading to zz HMRC contends that the Group’s Canada but the principles apply to many UKTech submitting large quantities of transfer pricing policy does not reflect jurisdictions in a very similar way. information. This includes invoices, the economic reality of the functions/ financial modelling, accounting risks performed/assumed by the Case study in double taxation records, branding strategy, UK entity and rejects the Group’s Tech Co Group (‘the Group’) is management profiles, organisational remuneration of the UK on a cost headquartered in Canada and has charts and email correspondence. plus basis. HMRC’s reasoning is that developed a platform providing zz Although HMRC’s guidance states that the functions the UK entity performs technological services. transfer pricing disputes will typically are client-facing and at the revenue- zz Intellectual property is developed be resolved within 18 months for the end of the supply chain, and that, and owned by CATech Inc (Canada) majority of cases, and 36 months for without the functions performed by (‘CATech’). those which are particularly complex the UK, customers would quickly get zz CATech makes sales to customers and high risk, little progress has been frustrated and leave the platform. worldwide. made so far. zz HMRC uses the profit split method zz UKTech Co (‘UKTech’) is remunerated zz The Group flies in two key senior based on headcount as a splitting on a cost plus 8% basis for its support Group personnel from the Toronto factor, and issues a closure notice

16 May 2019 | www.taxadvisermagazine.com TRANSFER PRICING

PROFILE Name Aude Delechat-Patel Position Associate Director Company Grant Thornton UK LLP Email [email protected] Dealing Tel 020 7184 4754 Proﬁle Aude is an associate director in Grant Thornton’s Transfer Pricing team. Aude is a senior tax lawyer (qualified in England and Wales and in Canada), with a broad range of experience in both advising on transfer pricing and resolving complex and high value international tax disputes through negotiation and litigation. She has a vast experience in managing projects on an international scale, including advisory and structuring matters. She is with double able to translate complex issues into clear practical explanations – fluently in both English and French.

PROFILE Name Paula Ruffell taxation Position Senior Manager Company Grant Thornton UK LLP Email [email protected] Tel 020 7728 2623 Proﬁle Paula is a senior manager in Grant Thornton’s National Tax Investigations and Disputes team. Paula was a lawyer in HMRC Solicitor’s Office for nearly nine years where she advised on some of the most complex corporate and personal tax disputes on behalf of HMRC. Paula has deep experience of tax litigation in all UK courts and tribunals, from the First-tier Tax Tribunal through to the Supreme Court and the Court of Justice of the European Union (CJEU). She specialises in resolving tax disputes and investigations with HMRC.

Convention, amended by the 2014 treaty partners ratify the Convention, or Protocol – in force ). when the two countries reach a bilateral The UK’s double tax treaties (‘DTT’) agreement. are largely based on the OECD Model Tax Convention which aims to eliminate Option 1: Do nothing double taxation by determining which Seeking effective double tax relief can of the two contracting states has the be a long and arduous process. For that right to tax a specific income. The UK reason, the taxpayer may decide that it benefits from one of the world’s largest is more commercially viable to simply on the basis that as the UK entity DTT networks and has double tax treaties accept the assessment and regard employs 30 people and the Canadian with more than 130 countries. Note that the double taxation as an added cost entity employs 70 people, 30% of the vast majority of the UK’s DTT include of doing cross-border business. This the worldwide revenues should be a mutual agreement procedure (‘MAP’) might be the case if the business needs allocated to the UK entity, and taxed provision. The UK has ratified the BEPS immediate resolution (e.g. it is preparing accordingly. Multilateral Convention which significantly for an IPO) or if the amounts at stake zz The Group transfer pricing policy is enhances the MAP, to the benefit of are small and the issues have limited that the revenue was generated by taxpayers. The UK has accepted binding impact on other countries than the two and is attributable to the Canadian arbitration. When these new provisions directly affected. entity, and has, as such, been duly take effect will depend on when the UK’s In this scenario, the group would pay taxed in Canada. For that reason, the tax as assessed by each jurisdiction, a significant portion of the Group’s FIGURE 1: CASE STUDY IN accepting the assessments raised, revenue has been taxed in both DOUBLE TAXATIO and bearing the costs of any potential Canada and the UK. interest and/or penalties imposed by the zz This results in double taxation, being CATech Co tax authorities. the inclusion of the same income in Canada This option would bring the the tax base by more than one tax matter to an immediate close, with no administration. Headcount: 70 further action necessary. This would, Routine support, however, expose the Group to double What are the options? incl. customer taxation. In the UK, an assessment that Whilst the income between the two support is not appealed can be treated as a Group entities may or may not have been ‘settlement’. incorrectly allocated, the Group should Should the company accept HMRC’s be entitled to obtain relief for double assessment, then it will not have any taxation in accordance with the double tax UKTech Co further domestic recourse. If, however, provisions of the tax convention entered UK the taxpayer decides to fight the between the two jurisdictions involved Headcount: 30 assessment, then there are a number of (1978 Canada – UK Double Taxation options open to it.

www.taxadvisermagazine.com | May 2019 17 TRANSFER PRICING

Option 2: Appeal to First-tier Tribunal a dispute appears to be the a result of a ‘Competent authorities’ (in our example (Tax) (‘FTT’) misunderstanding; it is unclear why HMRC Canada and the UK) interact with each An appeal may be brought against the has not agreed with evidence given, and other with a mandate to eliminate closure notice within thirty days after the why they want to use other evidence; it double taxation. issue of HMRC’s notice. This appeal would is not clear what information HMRC has Competent authorities can act be dealt with before the FTT. used, and/or they may have made wrong either unilaterally (e.g. changing only the The number of transfer pricing assumptions and/or it is believed that decision of the UK tax authority to grant cases that have been litigated differs additional information is being repeatedly the taxpayer relief from double taxation drastically depending on the jurisdiction. sought without a clear explanation. without the involvement of the other For example, in the UK there has been HMRC will let taxpayers know within contracting state) or bilaterally (where the one transfer pricing case (DSG Retail Ltd 30 days of receiving an application if two competent authorities negotiate with & Others v HMRC [2009] UKFTT 31 (TC)) they agree ADR is right for resolving each other to try to reach an agreement – HMRC’s appetite to litigate transfer the dispute. If the dispute is accepted over which of them has the best right to pricing disputes has historically been low. the taxpayer will be asked to fill in an tax the income). On the other hand, Canada does not shy agreement known as a ‘Memorandum One advantage of MAP includes away from litigating transfer pricing cases. of Understanding’. This sets out the ADR that the taxpayer’s ability to request Other jurisdictions like India and the USA, process. If the terms of the memorandum MAP assistance is not restricted by any also have many transfer pricing cases are broken at any time, HMRC can remove statutory dispute resolution process being litigated. the dispute from the ADR process. or prior domestic administrative Appealing to the FTT may be time- HMRC can reject applications for ADR procedures. In theory, MAP may be consuming (i.e. a hearing is likely to last and, if there are multiple factual issues or requested while under enquiry. Be a week or more and the taxpayer may be points of law, then ADR may not be the mindful that, in this case, the taxpayer waiting for over a year to get a hearing right mechanism. must submit a MAP request ‘within date). Hearings are public, something ADR can be effective in resolving 3 years of the first notification of that many groups would wish to avoid. A disagreements of facts and therefore the action which results or is likely settlement could still be achievable right should be ideally considered early on in to result in double taxation’ (HMRC up to the tribunal steps. transfer pricing discussions. Furthermore, Statement of Practice 1 (2018) on Mutual Once an appeal has been notified, it ADR does not affect appeal rights, Agreement Procedure (MAP), published is still possible to engage in alternative including a statutory review. It is not 20 February 2018: https://www.gov.uk/ dispute resolution mechanisms. That said, used often for transfer pricing but in government/publications/statement- prospects of litigation should always be the authors’ view, this may be a missed of-practice-1-2018/statement-of- considered and using a litigation approach opportunity. practice-1-2018). There are cases where can lead to favourable settlements being the deadlines to submit a MAP request agreed, with reductions in penalties Option 4: Mutual Agreement were missed. also possible. Procedure Competent tax authorities consult This option is invoked when a person each other as necessary to determine Option 3: Alternative dispute considers that the actions of one of both corresponding adjustments, and the resolution countries’ tax administrations result or will process can be concluded quickly and In the UK, alternative dispute resolution result in taxation not in accordance with settle a number of past and future years (‘ADR’) can be engaged at any time during the relevant tax treaty. The taxpayer can depending on the jurisdictions involved. a compliance check, e.g. when a taxpayer is request competent authority assistance MAP cannot be undertaken in unable to reach an agreement with HMRC, or under the mutual agreement procedure conjunction with domestic judicial where progress in the enquiry has stalled. (‘MAP’) (i.e., under Article 23 of the processes. Thus, the notice of appeal ADR can be used when, for example, double tax treaty between the UK and before the First Tier Tribunal would need communications have broken down with Canada in this case.). to be stayed before entering into MAP. HMRC; there are disputes about the facts; The objective of MAP is that the However, it should be noted that

ACHIEVING RELIEF FROM TRANSFER PRICING DOUBLE TAXATION - ALTERNATIVE REMEDIES

Alternative Dispute Resolution

Mutual Agreement Procedure (2-3 years)

Appeals Process (deadline 30 days from closure notice)*

Enquiry (18-36+ months) Arbitration after MAP (according to the MLI or EU Directive 2017/1852 or Double Tax Treaty)** Closure notice

* Check procedural details to lodge an appeal in relevant jurisdiction ** Other remedies may be available, such as APA with rollback

18 May 2019 | www.taxadvisermagazine.com TRANSFER PRICING

not all jurisdictions are experienced at reasonable time. Governments therefore simply part of the cost of doing cross- MAP and problems can arise where local have an incentive to ensure that the MAP is border business. law allows jurisdictions to withdraw conducted efficiently to avoid the necessity zz Don’t be tempted to prematurely enter decisions made, thereby lengthening of subsequent supplemental procedures. into a settlement with a tax jurisdiction the process significantly. This is not the Furthermore, the adoption in DTTs, before considering whether alternative case for the UK and Canada. However, through the Multilateral Instrument solutions, such as MAP, may be although taxpayers will be involved in (‘MLI’), of a mandatory binding arbitration available to you. the process to a certain degree, they provision to resolve issues that the zz HMRC says it will resolve transfer cannot force competent tax authorities competent authorities have been unable pricing disputes within 18 months for to reach an agreement and, above all, to resolve within a two (to three)-year most cases, however experience is that taxpayers will not be involved in the period, should considerably reduce the disputes often last 36 months or more. actual discussions between competent risk of lengthy MAP as the parties will zz Companies need to be able to explain tax authorities and cannot direct the be wary of the ruling of an independent their business model, supply chain, conclusion towards the result they impartial third party. In our view, although value chain and functional analysis i.e.( prefer. The entire process can also take arbitration may not actually occur, the functions, risks and assets) – as well years to reach completion. But the wider threat of the facility should speed up any as any changes to the business model adoption of mandatory arbitration will in MAP (should both entities involved in any and supply/value chain. If there is a many cases render MAP more effective. cross-border negotiations both reside clear picture of where value is added in an EU-territory, the European Union in the business, it will be easier to Option 5: Arbitration Convention on the elimination of double demonstrate why profits should be Arbitration was introduced in the taxation in connection with the adjustment attributed to a particular jurisdiction. Model Tax Convention in 2008. When of profits of associated enterprises, It may be, for example, that the UK incorporated into the relevant DTT it 90/463/EEC (EUAC) could be invoked). The is a key part of the supply chain, but is an integral part of MAP. As a result, UK has indicated acceptance of mandatory not the value driver of the group, as it should promote a swifter MAP and binding arbitration but note that both it does not perform key functions for increase the willingness of the taxpayer jurisdictions have to agree before the DTTs the group. to request MAP. will effectively be amended. The OECD has zz Knowing which options are available BEPS Action 14 includes a a helpful ‘matching’ tool on its website. In can increase the prospects of a commitment to mandatory binding the case of the UK/Canada the DTT already successful settlement that eliminates MAP arbitration for those countries that provides for arbitration, which is helpful. any double taxation. agree to adopt it (Article 24 Paragraph zz Don’t forget to also consider interest, 6). The purpose of arbitration is to Conclusions penalties and time limits for domestic provide an effective conclusion within a zz Don’t accept that double taxation is and double tax treaties!

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www.taxadvisermagazine.com | May 2019 19 LOSS RELIEF

LOSS RELIEF Down on the farm

Sara Bonavia considers the income tax aspects of loss relief for farmers

KEY POINTS zz What is the issue? As well as being governed by the normal loss relief rules for trading businesses, additional rules apply in respect of farming trades. zz What does it mean to me? denies sideways loss relief if losses have although in practice there may be scope for Where activities within a farm have arisen in the five consecutive previous tax a farmer to have two, geographically distinct been diversified, careful consideration years. This article considers the income tax farms. However, this does not mean that should be given to the results of aspects of loss relief for farmers. all the activities carried out are farming – it activities that fall into the category of may be that the farming activities make a ‘farming’ as opposed to other activities, What is farming? loss, whilst the other activities are profitable. such as letting income and income from The definition of ‘farming’ in ITA 2007 s 996 This distinction is important and can have an feed in tariffs. is ‘the occupation of land wholly or mainly impact on the loss relief position. zz What can I take away? for the purposes of husbandry but does Advisers should be clear on the not include market gardening’, albeit that Normal rules difference between a farming client’s the following rules also apply to market Profits and losses are calculated for farmers accounting period and the tax year, as gardening trades as defined. In practice, in the same way as for other trades, with loss well as the specific rules for each type there are areas that are clearly within the relief being available under the normal rules. of loss claim.

© IStock/sqback definition (for example, livestock rearing Under these rules, losses from the continuing and the growing of crops), but as farmers trade can be set against other income of the s well as being governed by the increasingly seek to diversify, it is becoming same or the previous tax year under ITA 2007 normal loss relief rules for trading more common for them to have multiple s 64, and/or capital gains of either the same Abusinesses, additional rules apply activities and sources of income (for or the previous tax year under ITA 2007 s 71 in respect of farming trades. Providing example, from feed-in tariffs for solar panels and TCGA 1992 s 261B, subject to the loss a farmer’s trade meets the normal sited on their land or renting a surplus field relief capping rules found in ITA 2007 s 24A. commerciality tests, these additional for caravan storage). Similarly, the extended carry-back rules rules can offer benefits, such as the ability ITTOIA 2005 s 9(2) generally requires for losses arising in early years of trading and to average their profits over two or five that all the farming activities of a trader in on cessation also apply to farmers. years (thus giving relief against significant the UK are aggregated and treated as one Claims for sideways loss relief are annual fluctuations). The rules can also be trade. Therefore, it is not possible to have, capped in the normal way under the rules restrictive, such as where the five year rule say, separate cattle and sheep rearing trades, for non-active traders (being those engaged

20 May 2019 | www.taxadvisermagazine.com LOSS RELIEF

PROFILE Name Sara Bonavia Position Manager Company RSM UK Tax and Accounting Limited Email [email protected] Tel 0845 057 0700 Proﬁle Sara has over 15 years’ experience advising private individuals, unincorporated businesses and trusts on their tax affairs, and her specialities include handling and resolving HMRC investigations. Sara qualified as a Chartered Tax Adviser in 2007 and is also a Fellow of the Association of Taxation Technicians. Sara has contributed to other tax publications with articles, sharing her knowledge and experience.

for less than 10 hours a week) in ITA 2007 impacted. In the Parliamentary debate on a profit in the year to 31 December s 74A (applied to individuals by Finance Act an earlier 1960 restriction that required 2011 after five consecutive years of 2008) and are subject to the normal rules on trading losses to be offset to have arisen on losses. She then makes a loss in the trading commercially with a view to realising ‘a commercial basis and with a reasonable year to 31 December 2012 which she a profit contained in ITA 2007 s 66. expectation of profit’, Anthony Crosland wishes to set against her other taxable MP is quoted as saying, ‘it is impossible to income for 2012 /13. However, when Averaging believe that farming is growing less and adjusted to calculate the losses on a Recognising the potential for fluctuating less prosperous every year so that genuine tax year basis, she has made losses in farming profits, farmers are able to elect to farming losses are growing. On the contrary, all five preceding tax years, including average their profits over either two or five common sense suggests the conclusion that 2010/11 and 2011 /12, such that the five tax years (ITTOIA 2005 s 221 et seq). These farming is prosperous, that genuine farming year rule applies and no sideways loss claims can be made if the profits for one losses are not on the increase and that what relief claim is possible in 2012 /13 (or year are less than 75% of the other and can has been on the increase in recent years are any subsequent tax year until a profit is provide valuable tax relief for farmers who hobby-farming losses’. realised in a tax year and the five year remain profitable but may be subject to tax The five year rule is very specific – ITA rule clock is reset). at different rates year on year. 2007 s 67 denies sideways loss relief if losses An additional quirk in this rule is have been made in each of the previous five that the year of commencement is Five-year rule tax years, not accounting periods, before any disregarded for the purpose of counting Additional rules apply to losses generated claims for capital allowances. This ensures the five tax years. from farming. The ‘five-year rule’ was that the rules cannot be manipulated by introduced in 1967, specifically to prevent changes in accounting reference dates. 31 March hobby farmers claiming to be farming and The application of this rule can give The application of the five-year rule, offsetting the losses against their other unexpected outcomes, as illustrated by the and the need to apportion tax adjusted income, thus generating a tax saving. The example of Marjorie Brown, found in HMRC’s business results to tax years rather than theory was that genuine farmers wouldn’t manuals, BIM85630. accounting periods raises an interesting make losses, and therefore wouldn’t be On an initial glance, Marjorie has made question. Although it is clear that the www.taxadvisermagazine.com | May 2019 21 LOSS RELIEF

MARJORIE’S TAX ADJUSTED MARJORIE’S PROFITS RESTATED FOR TAX YEARS PROFITS Tax Year Profit/loss Calculation Accounting year Tax adjusted profit/loss 2007/08 (2,060) (270/365*(1,100)) + (95/366*(4,800)) before CAs 2008/09 (5,382) (270/366*(4,800)) + (95/365*(7,000)) 31 December 2006 (3,700) 2009/10 (5,841) (270/365*(7,000)) + (95/365*(2,600)) 31 December 2007 (1,100) 2010/11 (1,611) (270/365*(2,600)) + (95/365*1,200) 31 December 2008 (4,800) 2011/12 (254) (270/365*1,200) + (95/366*(4,400)) 31 December 2009 (7,000) 2012/13 (4,640) (270/366*(4,400)) + (96/365*(5,300)) 31 December 2010 (2,600) 31 December 2011 1,200 31 December 2012 (4,400) purposes of identifying opening years. and forecast significant expenditure with farming clients can be a very valuable 31 December 2013 (5,300) ITA 2007 s 68 exercise. Care must be taken here, as ITA 2007 s 68 provides that loss relief it is essential that the results declared can be claimed for a longer period, are valid in accordance with generally figures for accounting periods to 31 if the farmer can demonstrate that a accepted accounting practice and tax December need to be apportioned, can hypothetical competent farmer would legislation. HMRC’s guidance in BIM42201 the same be said if the accounting period reasonably expect future profits, but is well worth reading. is instead to 31 March? Interestingly, would not reasonably have expected to the guidance published by HMRC only become profitable until after the end of Settling cases references 31 December and 5 April the particular tax year – the legislation Although advisers would hope to resolve accounting periods. in this area is prescriptive and strictly HMRC compliance checks into their In practice, 31 March and 5 April interpreted by HMRC, meaning that farming clients’ affairs through the are generally treated as coterminous for the bar to disapply s 67 by virtue of normal enquiry process, this is not always purposes of identifying taxable profits, and s 68 is high. The case of Christopher possible. This leaves the option to take a this approach has been included within John French and Margaret Alexander case to Tribunal, although many farming the opening year rules legislation in s 208 French v HMRC [2014] UKFTT 940 (TC) cases may be suited to the alternative ITTOIA 2005, meaning that no overlap considered this point – confirming that, dispute resolution (ADR) process. This profits are generated in the case of a 31 ‘the objective of s68(3) is to preclude a gives the valuable opportunity for the March (or 1–4 April) year-end, unless farmer from enjoying the sideways and client, adviser and HMRC to sit around a the taxpayer elects to disapply the rule. carry-back offset for farming losses, only table to discuss the case and develop a Advisers should note that this and other if the actual farmer has been slower in rapport that can ensure that the relevant sections concerning basis periods comprise anticipating profit than “the notional facts are explored and conclusions new legislation on the introduction competent farmer”, so denying relief to drawn. A passionate farmer can clearly of ITTOIA in 2005. No corresponding the incompetent farmer.’ demonstrate their aims and objectives, rules existed in ICTA 1988 and hence, in There is, however, specific guidance the history of their business and particular, there will be many current in relation to the restriction of losses involvement. This can prove invaluable businesses established before these after five years in connection with in convincing HMRC that they are trading rules were enacted with overlap profits stud farms (BIM55725). Following an with a view to realising a profit and are a to deal with on cessation or a change in agreement reached in 1982 with the genuinely competent farmer – although accounting reference date. Thoroughbred Breeders Association, this does not mean that there is then Notwithstanding this, the author HMRC will accept that, as stud farming carte blanche for claiming losses – is has seen an example of HMRC not is a long term venture, sideways loss still governed by the rules as set out accepting that 31 March can be treated as relief can be available for up to 11 years in statute. coterminous with 5 April when applying ITA after commencement, providing that the 2007 s 67 and still expecting an adjustment business has the potential to be profit Conclusion to be made, even in the case of a taxpayer making in the future. This interpretation Clearly the farming landscape has who has consistently used 31 March as the only applies to the period following changed significantly from the 1960s accounting date since commencement. commencement of a new business, when the five-year loss rule was As in the example of Marjorie Brown, not at any later point in the life of the introduced; however, the legislation, is illustrated above, this can lead to business, including the period following still very relevant today. Advisers should unexpected results in the case of a year of the transfer of an existing business as a be clear on the difference between small profit in a run of years of larger loss. going concern to a new owner. a farming client’s accounting period This concept of requiring adjustment for and the tax year, as well as the specific the five-day period seems to be a cause of Timing expenditure rules for each type of loss claim. Where confusion within HMRC, with the advice Although there is certain expenditure activities within a farm have been given in its Talking Points agent webinar the timing of which cannot be diversified, careful consideration should on basis periods on 8 January 2016 being controlled, there may be revenue (as be given to the results of activities that that there is no need to adjust between opposed to capital) expenditure over fall into the category of ‘farming’ as 31 March and 5 April, citing BIM81020 which the farmer is able to influence the opposed to other activities, such as as a reference, even though ITTOIA 2005 timing. In the event of a run of losses, letting income and income from feed ss 208–210 strictly only apply for the exploring the future expected profitability in tariffs.

22 May 2019 | www.taxadvisermagazine.com IR��

IR��

The widening net John Chaplin and Sam Moore provide guidance on the potenti al challenges faced by MNEs with internati onal supply chains as a result of IR35 reform

KEY POINTS zz What is the issue? HMRC have announced that the off - payroll working regime in the public sector will be extended to large and medium sized businesses in the private sector from April 2020. A consultati on document has been issued on the detailed operati on of the new law which includes certain modifi cati ons to the, already enacted, public sector rules. The questi ons raised in the consultati on document, however, do not fully account for the greater diversity and complexity of the private sector and there are sti ll some aspects of the 2017 n the 2018 Budget, the Government will inform the relevant clauses for the draft public sector rules which would prove announced that it intends to extend the Finance Bill legislati on (which is expected to highly challenging if rolled out to the Ipublic sector rules for off -payroll working be published in the Summer). private sector. The way in which the public to all medium and large sized businesses in The consultati on document has recently sector rules would apply to MNEs with the private sector with eff ect from 6 April been published in which HMRC acknowledge internati onal supply chains is one small 2020. that ‘the needs of private sector organisati ons but highly signifi cant example of this. The off -payroll working rules have been diff er to those in the public sector and zz What does this mean to me? considered in previous editi ons of Tax Adviser. that the range of acti viti es undertaken are For many organisati ons, skill is more However, in summary, the legislati on: substanti ally wide ranging and therefore important than locati on in making 1. shift s the responsibility for determining some changes are required’. However, whilst resourcing decisions. This arti cle looks at how the public sector off payroll whether a worker (engaged via an the consultati on document does propose working rules, if introduced to the intermediary such as a Personal Service some changes to the 2017 public sector rules, private sector with only consequenti al Company (PSC)) is a ‘disguised employee’ it is our view that these proposed changes do amendments, would apply to MNEs with from the intermediary to the ‘client’; and not go far enough in recognising the greater internati onal supply chains. As part of 2. shift s the responsibility for operati ng complexity and diversity of the private sector. this, we look at some examples of how PAYE, NIC and Apprenti ceship Levy corporate structure and the individual’s on ‘disguised employees’ from the Cross-border complexity residence and work locati on can give intermediary to a ‘fee payer’ (typically a One small example of the complexity to what might at fi rst glance appear to be UK agency or managed services provider address in the private sector is how IR35 unexpected results. (MSP) – though the defi niti on is broader reform impacts multi nati onals in connecti on zz What can I take away? and can include the client itself). with cross border supply chains. To meet the requirements of the new In the public sector, this issue did not law, large businesses are likely to need The experience of the public sector has come parti cularly to the fore, refl ecti ng signifi cant change programmes. The been that this (prima facie small) change the predominantly domesti c nature of the absence of draft law at this stage, had a substanti al impact on the use of the supply chains. however, means that they will need to conti ngent workforce (in terms of contractor However, in recent years, much of the work with a certain amount of ambiguity. turnover, day rate att riti on, unfi lled vacancies private sector has moved away from this Simultaneously businesses can engage and growth of non-compliant structures) trend as the gig economy and agile working with HMRC as part of the consultati on and it is likely that the impact on the private practi ces have grown hand in hand. These process to ensure that the impact of issues sector will be no less profound. trends have been aided by improvements more peculiar to the private sector are fl agged and that the resultant legislati on is The Government is undertaking a in technology facilitati ng remote working. more tailored to the private sector. consultati on over the coming months on the As a result, for many large corporates, skills detailed operati on of the new rules which are now more important than locati on in www.taxadvisermagazine.com | May 2019 23 IR��

determining how to resource a parti cular role PROFILE or project with workers being drawn from across the globe. Name John Chaplin For example, an IT contractor may Position Associate Partner work from his home in the UK for a client Company EY based in Germany. Another may be based in Email [email protected] India, travelling occasionally to see his client Tel 020 7951 4654 P r o ﬁ l e in the UK. John Chaplin is an Associate Partner in in EY’s People Advisory Services team and advises clients in respect of all employee This arti cle looks into how the 2020 related matt ers. He leads the team advising clients in respect of reforms would apply in these situati ons, conti ngent workers and has over 30 years of experience gained working both for HMRC assuming the public sector legislati on at and in the profession. ITEPA 2003 Chapter 10 Part 2 is introduced to the private sector with only consequenti al Name amendments as well as taking into account Sam Moore Position Director any published guidance available at the date Company EY of writi ng. Email [email protected] Tel 020 7951 8179 Territorial scope of small companies P r o ﬁ l e Sam is a Director in the Financial Services Offi ce employment exception tax team at EY. He advises a diverse portf olio of clients in the FS The Government had previously announced sector across all areas of employment tax risk, governance and cost that small businesses in the private sector management. will not be subject to the changes and will conti nue to be subject to the existi ng ‘intermediaries’ regime in ITEPA 2003 Chapter HMRC already recognises this challenge on foreign operati ons. 8 Part 2. For this purpose, the government in relati on to short term (employed) business The UK’s PAYE regime is subject to has explained that they intend to use similar travellers coming into the UK, allowing a territorial limitati on (see for example criteria as in Companies Act 2016 to defi ne corporate data to be used as a proxy for an Clark (H.M. Inspector of Taxes) v Oceanic ‘small businesses’. individual’s residence status, only requiring Contractors Incorporated [1982] BTC 417) with The consultati on document elaborates additi onal evidence as the individual’s the result that PAYE will only be in point if the on HMRC’s thinking, focussing parti cularly on physical presence in the UK increases (see employer is UK resident or is not UK resident the need for an expanded defi niti on to cover HMRC’s EP Appendix 4 agreement). but has a place of business in the UK. non-corporate enti ti es as well as pointi ng Multi nati onals are likely to need to This is broadly mirrored in the public to a need for anti -avoidance provisions ’to similar practi cal guidelines in relati on to sector off payroll working legislati on. The ensure that parti es connected to, associated their contractor populati on, albeit with a obligati on to determine whether the worker with, or controlled by the client cannot take reduced evidenti al requirement, recognising is a disguised employee sits with the client if advantage of the provisions to exclude small the looser relati onship between client and it is resident or has a place of business in the private sector clients from having to consider worker than exists between employee UK. Likewise, the PAYE obligati on falls on the the status of their off -payroll workers’. and employer. last on-shore payer in the supply chain before Whilst the details of the small companies the person controlled by the worker (e.g. the excepti on is likely to be expanded upon Residence of client and fee payer PSC) or failing that the client. during the course of the consultati on Beyond worker residence issues, there Whilst this appears to some extent logical exercise, key questi ons for multi -nati onal is a questi on of the extent to which the and ensures consistency with the positi on of groups are likely to focus on the applicati on assessment and withholding obligati on falls employees, the practi cal applicati on of the of the small companies excepti on to non-UK rules may be more challenging. enti ti es and groups – including the applicati on FIGURE 1: FRENCH RESIDENT Figure 1 illustrates an extreme example of the excepti on to UK branch operati ons and CLIENT WITH UK BRANCH/ of a French resident ‘client’ with a UK branch representati ve offi ces. REPRESENTATIVE OFFICE or representati ve offi ce engaging with a French resident MSP, which then engages Residence, domicile and workplace of a French PSC, to provide a UK non-resident the worker UK NR worker worker who works predominantly in France Where the rules do apply, it is worth noti ng with ad hoc but undertakes occasional UK workdays. that it is likely not all disguised employees will UK workdays In this example, the French resident be brought into income tax in full. client has a branch in the UK and the In parti cular, the public sector rules existence of this UK presence triggers an contain provisions (under ITEPA 2003 s PSC (France) obligati on on the French client to determine 61R(4)-(5)) which ensure that a worker is not contracts £ whether the worker is a disguised employee subject to more tax than he would otherwise (and potenti ally operate PAYE), regardless be liable to if he were an employee of the MSP (France) of whether or not the work in the UK client having regard to his residence, domicile contracts £ is undertaken for the benefi t of the UK and work locati on. operati on or whether UK staff are involved in A practi cal questi on arises in this instance Client (France) the facilitati on of the service. as to the level of due diligence required of It is clear in this example, that the UK clients in relati on to their workforce. The branch needs to infl uence the French HQ’s nature of the statutory residence test, in UK processes and data fl ows; however, it may be parti cular, requires an understanding of the branch diffi cult in practi ce for the branch operati on worker’s personal factors which would not to infl uence change over its larger HQ. normally be known to any corporate client. Somewhat unusually, the public sector

24 May 2019 | www.taxadvisermagazine.com IR��

rules also contain a ‘deemed residence’ FIGURE 2: CHINESE RESIDENT through Mutual Agreement Procedure provision at ITEPA 2003 s 61R(7). This ENTITY ENGAGING DIRECTLY may be diffi cult to commercially justi fy. provides that a client is treated as UK WITH A UK PSC Faced with such a scenario, it is possible resident (even if it is not UK resident or has some contractors may choose to terminate a place of business in the UK) if: their contracts and retreat from providing zz it is also deemed to be the fee payer UK R worker services to the UK as a practi cal means of (i.e. there is no other UK payer before working at least protecti ng their bott om line. parti ally in the UK the person controlled by the worker); zz the individual is UK resident; and Conclusion zz the individual at least spends some of It is clear that the public sector rules are in his/her working ti me in the UK. PSC (UK) need of modifi cati on in order to ensure that contracts £ they are workable for the private sector. An example of this is set out in fi gure The impact on cross border supply chains is 2. This shows a Chinese resident enti ty Client (China) just one such example. engaging directly with a UK PSC for the It is hoped that with eff ecti ve provision of services of a UK worker who engagement, HMRC might be encouraged spends at least some of his ti me working of the UK’s DTT network, it is worth to minimise the extraterritorial impact of in the UK. considering whether these might limit the the legislati on when it is introduced to the In this example, the public sector UK’s taxing ambiti ons. private sector, allowing businesses to focus rules would place the obligati on to A criti cal questi on is which Arti cle under on UK resident contractors (being the likely determine whether or not the individual is a the DTT would cover the deemed income preponderant risk to the Exchequer). disguised employee and apply PAYE on the created under off -payroll working. At the very least, clear guidance should Chinese enti ty. In the February 2019 issue of Tax be provided by HMRC as swift ly as possible In practi ce, this may be near impossible Adviser, Keith Gordon looked at the Court on the directi on of travel of the new law, to enforce. In such a case, were the Chinese of Appeal decision in the case of Fowler v the burden of proof/due diligence required enti ty not to apply PAYE, it may be diffi cult HMRC. This addressed the questi on of how in respect of their contractor base covering for HMRC to assert that PAYE should be to approach a deeming provision in the informati on not typically held by the client imposed on the individual under reg 72 or country of source when determining the and clarity over the interacti on with DTTs. reg 141 Income Tax (PAYE) Regs 2003 given: applicable Arti cle in a DTT. For multi nati onals, the temptati on zz PAYE recovery from the individual At the date of writi ng, no guidance has having read this, may be to wait unti l the under reg 72 requires the high bar of been released from HMRC setti ng out their publicati on of the draft legislati on and hope employer taking ‘reasonable’ care with views on the matt er. this ulti mately provides clarity. However, the failure to deduct PAYE being ‘due to If the majority decision in Fowler one of the key learnings of the reform in an error made in good faith’ (Conditi on were to be applied to off -payroll working, the public sector was that waiti ng for the A) or the individual receiving relevant Art 15 (income from employment) of the draft law to be tabled resulted in rushed payments knowing that the employer OECD DTT would be in point. If this were implementati on and challenges with the ‘wilfully failed’ to deduct the correct combined with ITEPA 2003 s 61R this may contractor base. amount of PAYE (Conditi on B); then automati cally deny treaty relief in Instead, with approximately one year to zz Reg 141 results in direct collecti on some circumstances. For example: go unti l implementati on we would advocate on the individual ‘in cases of casual zz for UK resident fee-payers, treaty a triple track approach in which: employment’ and ‘any other case in relief in Art 15(2) would not be in point zz detailed planning is accelerated in the which HMRC are of the opinion that (because the worker would be working ‘known’/’likely’ outcomes of the reform; deducti on of tax by reference to the for, or on behalf of, a UK resident zz informati on is gathered and tentati ve tax tables is likely to be impracti cable’. employer); planning undertaken over the more Given the express deeming provisions zz for UK branches of overseas residence extreme aspects of the law not yet in the primary taxing act for off payroll fee-payers Art 15(2) may be in point faced in the public sector; and working, it is doubtf ul, that the overseas provided that the remunerati on is not zz businesses fully engage with HMRC residence status of the client would be borne by a UK PE (although the UK’s 59 to ensure that the new law is suitably suffi cient to meet this ‘impracti cable’ day rule may be in point). adapted to the needs and challenges of bar and, even if this test were to the private sector. be met, there is the more practi cal IR35 requires a further leap beyond challenge that a special arrangement ITTOIA 2005 s 15 (the deeming provision Finally, it is worth noti ng that whilst relies on noti fi cati on from/agreement referred to in the Fowler case). ITTOIA 2005 this arti cle has deliberately focused on with HMRC. s 15 simply treats income as being from how the new off -payroll working rules will another source (i.e. employment income apply to cross border working scenarios, As a result, the deemed residence becomes a trading receipt) whereas IR35 there are existi ng legislati ve provisions provision could theoreti cally result in the reform requires the client to construct that should be considered in determining a paradoxical outcome of the individual a hypotheti cal employment relati onship business’ liability to PAYE in relati on to its being able to claim a deducti on in his Self- between the worker and the fee-payer and internati onal supply chain. A key example of Assessment tax return under reg 185(5)-(6) imagine that deemed income were paid this is the applicati on of the host employer Income Tax (PAYE) Regs 2003 for the ‘tax from the latt er to the former. rules at ITEPA 2003 s 689 to foreign agencies treated as deducted’ – thus creati ng a loss In such circumstances, it is not or other overseas businesses involved in to the Exchequer. beyond doubt that contractors may fi nd resource augmentati on or the supply of it diffi cult in practi ce to obtain double tax labour. In the interests of brevity we have Double Tax Treaty (‘DTT’) relief in the country of origin against the not considered these provisions; however, Thus far, we have focussed on UK domesti c PSC’s corporati on tax bill or dividend tax. in practi ce multi nati onals should take an all- law provisions; however, given the breadth Furthermore, resoluti on via the courts or round view in assessing their risks. www.taxadvisermagazine.com | May 2019 25 ENTREPRENEURS’ RELIEF

ENTREPRENEURS’ RELIEF

KEY POINTS zz What is the issue? Entrepreneurs’ Relief (ER) has become a focus for reform over the past year. zz What does it mean to me? Some have recommended that it be abolished on the basis that the availability of the relief does not Shifting sands sufficiently influence the decisions of entrepreneurs to establish new ventures while the costs of the relief Stephen Woodhouse Charlotte Fleck (estimate at £2.7bn) could be better and consider the used in other areas. recent changes to Entrepreneurs’ Relief over the past year zz What can I take away? The relief has survived the threat of abolition – for now – but with significant changes. The changes reflect a mix of positive effects with a potentially substantial restriction of the relief which may not have been fully appreciated.

ntrepreneurs’ Relief (ER) has become a focus for reform over the Epast year. Some have recommended that it be abolished on the basis that the availability of the relief does not sufficiently influence the decisions of entrepreneurs to establish new ventures while the costs of the relief (estimate at £2.7bn) could be better used in other areas – see Resolution Foundation Report (tinyurl.com/yykdpf6y). The relief has survived the threat of abolition – for now – but with significant changes.

Qualiﬁcation Period The qualification period during which the requirements for claiming relief has to be satisfied has increased from one year to two years. This applies to disposals of shares after 6 April 2019 regardless of when those shares were required, which may verge on having retroactive effect for individuals who acquired shares more than one, but less than two years ago. Overall, the change might be expected to have a limited impact as most shareholdings which have benefitted from a significant increase in value might be expected to have been held for at least two years – and it’s understandable that a relief focussed on entrepreneurs requires more than 12 months’ article (‘Breaking Barriers’, Tax Adviser, A second election may be made by ownership. December 2018). the individual for that chargeable gain Also, this change will not affect claims The effect of the changes is that, for to be treated as accruing to them on for relief in respect of shares acquired dilutions occurring on or after 6 April a subsequent disposal of shares. This through the exercise of EMI options as 2019 which result in an individual’s effectively prevents a ‘dry’ tax charge the qualification period does not apply shareholding falling below the 5%, an from arising on the notional disposal of to them. individual may effectively ‘crystallise’ the shares, with no proceeds of sale to their gain up to that point. The individual cover the tax. Dilution protection must elect for their shareholding to be The provisions to protect ER in the event treated as disposed of and reacquired of a shareholder being diluted below immediately before the point of dilution Personal Company Requirements the 5% personal company threshold (thus creating a chargeable gain to which The third – and potentially most (see below) were discussed in an earlier ER may apply). substantial – change relates to the

26 May 2019 | www.taxadvisermagazine.com ENTREPRENEURS’ RELIEF

PROFILE Name Stephen Woodhouse Position Partner Company Pett, Franklin & Co Tel 0121 348 7878 Email [email protected] Proﬁle Stephen has spent more than 30 years working in various Shifting sands large City firms qualifying across a range of tax matters. He specialises in employee share schemes and related remuneration issues including share valuation. He has advised on domestic and international matters, Stephen Woodhouse and Charlotte Fleck consider the becoming an acknowledged expert on various employee benefit trusts. recent changes to Entrepreneurs’ Relief over the past year PROFILE Name Charlotte Fleck Position Assistant Solicitor Company Pett, Franklin & Co LLP Email [email protected] Proﬁle Charlotte Fleck is a lawyer at specialist share schemes firm Pett Franklin and has experience advising on and implementing all forms of employee share plan, from statutory all-employee plans to bespoke arrangements for key executives. Charlotte speaks regularly on employee incentives and related tax matters and is co-author of the Tolley’s Tax Planning chapter on Employee Benefit Trusts.

requirement for the person claiming Condition B was introduced at a the relief (other than in respect of shares late stage in order to simplify the acquired through EMI options) to have a determination of whether relief is minimum 5% interest in the share capital available and in practice is likely to be of the Company. the test relied on in most cases. This condition has, since the inception of ER, only required the shareholder to have a 5% interest in the nominal value of Impacts the Company’s share capital and its voting The change which will have the most rights. This was clear from the legislation impact is likely to be the introduction and recognised as such by HMRC. of the 5% economic participation The law has now been extended requirement. to encompass a requirement for the This change will have potentially individual to be entitled to receive either: adverse effects on some employee shareholders in successful, high (i) 5% of the dividends and assets growth companies (in effect, available to ‘equity holders’ on introducing a penalty on success) while also increasing complexity and a winding up of the business creating the risk of the structure of (Condition A); or companies and financing arrangements (ii) 5% of the sale proceeds due to being influenced more by tax than holders of ordinary shares on a commercial considerations. notional disposal of the Company (Condition B). Impact on growth companies The difficulty for growth companies EXAMPLE 1 results from the impact of the Assume the following: economic participation requirement Mrs X starts a company with three colleagues. linked to the effect of the dilution They each invest £100,000 and acquire 25% of the Company. protection capping relief to the The value of the Company increases to £2m, at which time additional investment is value of the shares at the time the required which dilutes the owners to 4.5% each. dilution happens. The Company is eventually sold for £100m with no further dilution. The problem with this is that the With an anti-dilution election at the time of the increase in share capital, the effect value of growing companies tends of the legislation is that Mrs X receives sale proceeds of £4.5m, but only £500k not to increase consistently over the attracts ER. life cycle of the Company. Rather, The consequence is that tax is payable as follows: there will be value jumps as particular Tax on notional gain on dilution = ((25% * £2m)–£100k)* 10% = £40k milestones are reached – including Tax on gain on sale = ((4.5%*£100m)–£500k) * 20% = £800k. capital raising – with the result that The result is a total gain of £4.4m and tax of £840,000 with an overall effective rate capping the relief at the point when of 19.09%. new funding is obtained may result Contrast this with pre-6 April 2019 arrangements under which Mrs X retained 5% of in the biggest part of any overall voting rights and nominal value after being diluted to 4.5% in economic value. Under gain not benefitting from the relief. these, she would previously have benefited from ER on her entire £4.4m gain, resulting Further, the scope to mitigate this is in tax of £440,000 – a difference of £400,000. reduced by requiring an economic 5% participation.

www.taxadvisermagazine.com | May 2019 27 ENTREPRENEURS’ RELIEF

This is illustrated by example 1. With would be placed on Condition B relating to Tax avoidance this potential impact on effective tax the share of sale proceeds. The legislation provides that the effect rates, it is to be expected that there will The legislation tests the application of ‘any avoidance arrangements’ is to be a concentration on the applicability of of sale proceeds based on the market be ignored. This covers arrangements if the new legislation. This has a number of value at the date of sale – i.e. in effect, the ‘the main purpose of, or one of the main further impacts. share of those proceeds – but this must purposes of, the arrangement is to secure still be tested throughout the two year that …’ broadly, ER is available. Condition A qualification period leading up to sale by This is a sweeping provision and would The application of the 5% test is likely to be reference to the circumstances applying seem to limit substantially any planning relatively straightforward with companies at all times to a notional sale. That is, it is to secure that the relief applies. For with a single class of ordinary share and necessary to test whether, if the company instance, if, as suggested earlier, new it may be that Condition A may be met. had been sold at the beginning of the two investment is structured in the form of However, if the first condition is to be relied year period for the value for which shares loan capital, it could be argued that the on, particularly with multiple share classes, were sold at the end of that period, would loan capital is used with a main purpose difficulties may arise. the shareholder have received 5% of the of securing the relief, in which case its For example, the test applies to the proceeds? effect would be ignored and the relief notional entitlement to distributions rather lost. than actual distributions made. This will Impact on Forfeiture Provisions require the notional entitlement to be This creates a particular problem with DOTAS tested at all times throughout the two year forfeiture and vesting conditions for qualification period taking account of the A further constraint on the development employee shares. circumstances applying at each stage. This of planning to secure ER would be the Let us assume that employee shares may be determined by factors which are possible application of the Disclosure of for a senior employee whereby that external to share rights per se – e.g. the Tax Avoidance Schemes legislation (or employee acquires 5% of the share capital financial performance of the Company – DOTAS). In particular, the use of ‘financial immediately, but subject to forfeiture in which may make this difficult to assess. products’ falling within Hallmark 9 of accordance with a vesting schedule under Also, if there is more than one class the DOTAS legislation will lead to a which 20% of the shares vest each year, of share with discretionary dividend requirement to notify HMRC and obtain a but with discretionary early vesting at the entitlements determined by the Directors, it DOTAS number if, broadly, there is a tax determination of the Board of Directors in is arguable that this condition will never be advantage and either the arrangement the event of a sale prior to vesting. fulfilled as, at any one time, the holders of involves a contrived term which would With that structure, it would appear neither class could demonstrate entitlement not have been entered into but for the tax that the shares would only attract ER if to share in dividends which could instead be advantage or one or more abnormal steps there were no company sale until seven allocated to the other class or classes. without which the tax advantage could years after the shares were first acquired Further, the test applies by reference to not be obtained. (due to there being no right to share in the definition of ‘equity holders’ calculated sale proceeds for unvested shares without by reference to the corporate tax rules the exercise of discretion), even if tax and Summary concerning group relief with the individuals national insurance contributions are paid The effect of the reforms on ER should be claiming relief replacing the parent on the full value without any reduction for considered in combination. company in the calculations required. With the effect of forfeiture due to an election any share structure other than a simple, While acting to preserve the relief in the being made for them to be ignored under single class, this is likely to result in complex face of recommendations to abolish it, the section 431 ITEPA. The corollary to that is calculations requiring specialist advice. amendments are likely to result in a more that there would be no protection under substantial restriction on the value of the the anti-dilution legislation if the dilution relief than was first appreciated. Use of loan capital occurred within the five years following the The changes reflect a mix of positive The legislation increases the risk of the acquisition. effects with a potentially substantial legislative requirements resulting in a restriction of the relief which may not have distortion of the commercial structure of Favouring option plans been fully appreciated. companies to ensure that relief is protected. These rules do not apply to shares acquired In particular, the combined effect of the For example, companies may wish to through the exercise of EMI options. economic participation requirement with the seek loan financing rather than increase Consequently, the senior member of operation of the dilution protection capping their share capital. This would be intended management in the previous paragraph relief to the value of the shares at the time to result in the return payable on the loan would not face the seven year wait and the dilution happens creates challenges for capital being excluded from the calculation loss of relief on an early exit if they had successful companies. As values jump as of the 5% calculation for all of profits instead been granted EMI options with an particular milestones are reached – including available for distribution, assets available on a winding up and the proceeds of sale of the equivalent five year vesting schedule. capital raising – capping the relief at the whole of the ordinary share capital of the This is an important point for advisers to point when new funding is obtained may Company. consider when designing and implementing result in the biggest part of any overall gain This may lead to additional complications share plans. It also produces a result which not benefiting from the relief. – e.g. with the accounting treatment and might be seen as acting against the intent Further, the scope to mitigate this the prioritisation of participation in assets of the ER rules. ER was introduced to is reduced by requiring an economic in the event of an insolvent liquidation – ‘incentivise and reward entrepreneurs who, 5% participation with stringent anti- and potential risks with the anti-avoidance with significant initiative and risk, play a key avoidance rules. legislation and DOTAS rules considered role in building and growing a company’. It The result is likely to be a substantial below. might be thought that with these objectives, reduction in the estimated £2.7bn annual the rules should favour individuals who cost of ER and challenges for advisers to Condition B invest and put their money at risk rather than ensure that their clients obtain the value of For this reason, in many instances, reliance option holders who take no such risk. the relief which they would expect.

28 May 2019 | www.taxadvisermagazine.com Commerce & Industry Group Annual Conference

Wednesday 2 October 2019 In partnership with: Pinsent Masons LLP, 30 Crown Place, London EC2A 4ES indly hosted by: Topics to include: • The role of tax policy and how • Digital Services Tax it affects legislation • Making Tax Digital – practical • conomic update lessons learned and next steps • Business isk eview • The future of the tax department

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www.taxadvisermagazine.com | May 2019 29 PARENTAL SUPPORT

PARENTAL SUPPORT

KEY POINTS zz What is the issue? The Financial Times’ 2018 Millennial study showed that 77% of their Millennial sample had received some form of fi nancial support from their parents. But have they gift ed tax effi ciently? zz What does it mean to me? It seems to be, that generati onal wealth maintenance now relies more on the generosity of the older generati on. Most of the younger generati on are receiving this support. zz What can I take away? There are many possible soluti ons giving an opti mal tax outcome for both parti es.

ypically, young people aspire to do at least as well in life as their parents. TIn previous generati ons, with the right atti tude to study and work, this was generally achievable. Rising house prices, infl ati on, the burden of student loans and other demographic factors however, mean such aspirati ons are becoming increasingly diffi cult. In 1960, not only did the older generati on have The Rolling Stones and Helping Stevie Wonder, but the average cost of a house in London was £2,189 (source: Nati onwide). In these years where ‘Doc Martens’ and paisley were the height of fashion, the salary for an executi ve offi cer was £1,140 (source: UK Parliament). That the younger is 52% of the price of an average house. Stati sti cs from 2018 show the percentage is now around 12% and that is using a generous £28,028 average salary (source: BBC). Our younger generati on, the ‘Millennials’ are having a tough ti me of it. They are generation struggling to get on the housing ladder, struggling to pay their rent, and – poor things – they listen to music from Kanye West. It seems to be, that generati onal wealth maintenance now relies more on the generosity of the older generati on. Meg Saksida examines the tax implicati ons of the Most of the younger generati on are various ways in which parents can help university- receiving this support. The Financial Times’ 2018 Millennial study showed that 77% of age children fi nancially their Millennial sample had received some form of fi nancial support from their parents. pay Tilly the cash lump sum, or pay her the IHT, and higher rate/additi onal rate income But have they gift ed tax effi ciently? income arising from it to cover her costs. tax (with only one of them enti tled to the Let’s look at a couple of examples, and (lower) £500 tax free personal savings some possible soluti ons giving an opti mal tax Cash giving allowance) will be already incurred on the outcome for both parti es. Gift ing the income net income paid out to cover Tilly’s expenses. Say Anthony and Amanda, both aged 50, If Anthony and Amanda gift Tilly the interest working full ti me and in the 45% and 40% from the lump sum, from an IHT perspecti ve Gift ing the lump sum income tax bracket respecti vely, decide to either the ‘maintenance of the family’ In order to benefi t from Tilly’s basic rate pay the university expenses for Tilly aged (although Tilly is over 18, she is in full-ti me status for the income, Anthony and Amanda 19, so she doesn’t have to work through educati on) or ‘regular gift s out of income’ would need to gift Tilly the lump sum of the university. They have available £650,000, would serve to exempt the gift . Although cash outright. There would be no CGT on currently earning 3% interest, generati ng the parents retain control of the capital, the the gift as the asset (cash) is exempt. For IHT £19,500 income gross per annum, enough to downsides of this arrangement are that the purposes it would be a ‘Potenti ally Exempt cover her annual living costs. They can either capital will sti ll be in the parents’ estate for Transfer’ (PET) and would only become fully

30 May 2019 | www.taxadvisermagazine.com PARENTAL SUPPORT

chargeable if the couple did not survive for PROFILE the next seven years. If this happened, Tilly, as the donee, would need to pay any IHT due. Name Meg Saksida The advantages are, assuming the Position Freelance tax consultant and lecturer couple do live for seven years, fi rstly the Company Meganomics £650,000 would be outside their estates Tel 07521 082546 Email at death, saving IHT at 40%, and secondly, [email protected] P r o ﬁ l e Meg Saksida BA, FCA, CTA, TEP is a lecturer, writer, editor, the interest income would be taxed directly marker and tax consultant. Meg’s specialty is personal taxes with a on Tilly at basic rates, rather than the focus on the issues surrounding internati onal clients here, and Briti sh higher or additi onal rates incurred by her expats abroad. Meg is passionate about tax training and educati on, and is an examiner parents. However, even though the income for two UK tax qualifi cati ons. tax has been reduced, the problem with direct gift ing, is that Mum and Dad would lose control of the capital. Even if Tilly is house, the benefi t to Tilly is only living in Amanda to ensure the Gift with Reservati on sensible and responsible £650,000 is a lot of the house, so again for IHT purposes this gift of Benefi t rules would not apply. responsibility for a 19 year old. would be exempted by the ‘maintenance A more risk averse way to achieve a of the family’ exempti on. However, by the Into a trust similar tax advantage may be to put the parents purchasing the house themselves, If the parents chose to give the property into capital into a discreti onary trust. Anthony the SDLT would be an extra 3% as it would a trust, although the IHT implicati ons would and Amanda could make themselves trustees invariably be their second home. This is an mean the gift would be a chargeable lifeti me of the trust, thereby retaining some control additi onal cost of £19,500 on a £650,000 transfer and the tax would be at 0% (under as to when and how much of the trust fund is purchase and represents the approximate the nil rate bands) they could benefi t from distributed to Tilly. cost of a full year for Tilly at university. holdover relief. Holdover relief under S260 is The tax benefi ts are three-fold. Firstly, It would be more tax effi cient to gift available if both CGT and IHT are chargeable the gift of cash into the trust is CGT free. the cash to Tilly, resulti ng in a PET for IHT as a result of a transacti on. Because Tilly is Secondly, as long as the gift is under the purposes, and she can then purchase the over 18, the holdover relief is not denied on £650,000 joint nil rate bands, although it will property herself. The advantages are the the basis that the trust is sett lor interested, be a ‘Chargeable Lifeti me Transfer’ (CLT) for same as directly giving cash described above, as this only applies to spouses/CPs and IHT purposes, it will be chargeable at 0%, but again this arrangement retains the risk minor children. and not become chargeable at a maximum (albeit reduced) of Tilly having full control By deferring the gain to the trust, the tax Helping of 40% unless Anthony or Amanda do not over the asset. Anthony and Amanda would on it will not actually need to be paid unti l survive for the next seven years. If this need to be careful that they didn’t receive the trust disposes of the asset. However, as happened the trustees would be responsible anything other than an insignifi cant benefi t this asset is residenti al property, in which for paying the IHT. in the house in the future, to ensure the pre- Tilly will live, she will probably expect main Thirdly, the interest generated by the owned asset rules did not apply. residence relief on any future gain in the capital in the trust, although initi ally taxed Someti mes parents wish to give trust. Since 10 December 2003 a choice the younger at the rate applicable to trusts at 45%, will assets that they already own, for the next needs to be made to either have holdover ulti mately be taxed on Tilly at her basic rate. generati on to either benefi t them from the relief or PPR on the gain in the trust, so if This is achieved through a tax repayment income or for them to use. The problem holdover relief is claimed by Anthony and via her self-assessment. The ulti mate is that if they are not CGT exempt assets, Amanda, no PPR would be available on any taxati on of the income would not only save there may be a CGT charge if the gain on future gain in the asset in the trust. 20 or 25% in comparison with her parents, the disposal of the gift is more than the generation but she should also be able to use her full annual allowance. Gift ing is deemed to Business property personal allowance, and will be enti tled to be a chargeable disposal and gift ing to a If the asset were business property, such as an £1,000 of personal savings allowance, connected party renders the considerati on shares in an unlisted trading company, s 165 both that could be set against directly against at market value, irrespecti ve of whether any holdover relief may be used to defer the the income. proceeds were received. This could leave gain. A trust does not need to be used to be In additi on to the costs of establishing the parents with a ‘dry’ tax charge, i.e. tax eligible for this relief, but like gift ing cash, if a and running a trust however, there are some without cash. trust was not used full control of the shares downsides to consider. If the cash required Conti nuing with our example, if the would be given to Tilly. to generate enough income for Tilly exceeds £650,000 was a house purchased by Anthony the joint nil rate bands, a 20% ‘entry’ IHT and Amanda in 2000 for £220,000, and they Summary charge will be levied on the excess amount, gift ed this to Tilly, they would be liable to a There are tax effi cient ways to benefi t payable six months aft er the end of the CGT charge of £56,924 each, assuming each the younger generati on through giving. A month the trust was set up or 30 April if later. had a full annual allowance (2018/ 19 rates). trust may be bett er than direct giving as it Exit charges and 10-yearly charges are also enables the older generati on to retain some incurred inside the trust as a discreti onary Directly control of the asset, but enjoys the same trust is inside the relevant property regime. If the house was gift ed directly to Tilly, the benefi ts as direct giving. If an asset is to be These are both charged at a maximum of tax on the gain would become payable and gift ed, it is bett er to gift one not standing 6%. Further, HMRC is consulti ng on potenti al need to be found from other funds owned at a gain for CGT, or to simply give cash. If changes to trust taxati on. by Anthony and Amanda. No holdover the asset is pregnant with a gain, a business relief would be available under S260 as asset is bett er than other property to gift as Asset giving this would be a PET and not chargeable for holdover relief will be available on both a Instead of gift ing cash, Anthony and Amanda IHT. No holdover would be available under direct gift and a gift into a trust. Be careful may choose to buy a house for Tilly that S165 either as a residenti al property is not gift ing residenti al property into trusts. she can live in during the university years a business asset. Again only a ‘de-minimis’ Either holdover or PPR can be claimed, and beyond. If they retain ownership of the benefi t could be retained by Anthony and but not both.

www.taxadvisermagazine.com | May 2019 31 PENALTIES

PENALTIES

KEY POINTS zz What is the issue Legislation introduced in Finance Act 2016 imposes civil penalties on those who ‘enable’ offshore non-compliance. These rules are wider in scope than the new offence of failing to prevent the Risky waters facilitation of tax evasion. zz What does it mean to me? The provisions can apply in a broad Jon Preshaw looks at the new legislation which range of circumstances and advisers will need to consider the extent to imposes civil penalties on those who ‘enable’ which their own position, as well as the position of their clients, is impacted. offshore non-compliance zz What can I take away? The provision raises significant challenges for advisers when they act for clients making disclosures to HMRC where the issue involves an offshore matter. Careful consideration will need to be given to the extent to which a conflict of interest may arise. Additionally, the rules present risks for those advising on offshore matters more generally. As a result, processes should be put in place to ensure that any penalty risk is addressed.

ax advisers are facing a wide range of new rules intended to address Ttax non-compliance by tackling the activities of advisers who HMRC believe are assisting their clients to evade tax. This focus on ‘enablers’ forms an important part of HMRC’s strategy to combat tax evasion. Although HMRC acknowledge that the number of such advisers is small, and it Finances Act 2017 (the ‘Corporate Criminal income are transferred offshore. is therefore tempting for the vast majority Offence’). The published consultation Given the timing of the introduction of advisers to simply disregard these rules response documents for the civil penalty of the rules, it is likely that they will come as irrelevant to their practices, the relevant regime indicate the use of civil sanctions under active consideration during the provisions are extremely broadly drawn to deal with enablers is more likely than course of enquiries into 2016/ 17 Self- and could have a significant impact on a the use of criminal sanctions, in line with Assessment returns, which may only wide range of professional advisers and HMRC’s selective prosecution policy. The recently have been opened. financial service providers. With that in Criminal Finances Act provisions have been The legislation imposes a penalty mind, it is important that advisers carefully the subject of significantly greater focus, where a person (‘P’) enables another consider the implications of the new rules. both from professionals and financial person (‘Q’) to carry out offshore non- Most of the new rules are untested service providers, than the civil sanctions. compliance. Carrying out offshore non- and HMRC’s willingness to invoke the However, if the civil and criminal powers compliance involves either: various provisions formally is as yet not are applied in accordance with HMRC’s zz Committing an offence of cheating the clear. The rules could have significant intended approach, the civil sanctions will public revenue, fraudulent evasion of reputational and financial costs for be used more frequently than the criminal income tax or the new strict liability advisers who are caught by them. There sanctions. It is therefore important criminal offences at s106B-D of are a very broad range of provisions to for those who may be subject to the TMA 1970; or consider and this article is not intended to rules to understand their scope and the zz Engaging in conduct which makes Q be exhaustive. Instead it focusses on one implications for their business. liable to a tax-geared civil penalty for specific set of rules, the civil provisions Schedule 20 applies to acts carried out making an incorrect return, failing intended to address offshore tax non- on or after 1 January 2017 and imposes to make a return, or making a return compliance. penalties for errors in respect of income more than 12 months late. tax, capital gains tax and inheritance tax Offshore tax non-compliance where those errors relate to an offshore ‘Enabling’ is very widely drawn Schedule 20 Finance Act 2016 introduced matter. The definition of offshore matter to include encouraging, assisting or a stand-alone penalty regime for enablers mirrors that used in the Requirement to otherwise facilitating the conduct which of offshore tax non-compliance. Schedule Correct and offshore taxpayer penalty gives rise to the offence or to the penalty. 20 is intended to provide a civil regime provisions. It includes circumstances where The definition is wide enough to cover which mirrors the criminal regime for tax is payable by reference to income a range of activities over and above the failing to prevent the facilitation of tax arising offshore or assets held offshore giving of advice, such as the establishing evasion which is found in the Criminal along with circumstances where assets or of corporate structures, the transfer

32 May 2019 | www.taxadvisermagazine.com PENALTIES

PROFILE Name Jon Preshaw Position Tax director Company PwC Tel 0141 355 4049 Email [email protected] Risky waters Proﬁle Jon is a director in tax dispute resolution within PwC. He works with a wide range of clients to assist them in managing the tax risks in their businesses. As well as his role within PwC, he is a member of the CIOT’s Management of Taxes committee.

of appeal against both the principle that a This risk is likely to be addressed in penalty will apply and also the quantum of most circumstances if the service provider any penalty. However, it should be noted establishes reasonable prevention that there is no specific reasonable excuse procedures in connection with the Criminal defence in the rules. Finances Act 2017 offence of failing to prevent the facilitation of tax evasion. It Addressing the risks for advisers and would be anticipated that the existence of service providers reasonable prevention procedures which It is a precondition of the offence that the addressed the Corporate Criminal Offence enabler knew that their actions would risk would enable a service provider to enable the offshore non-compliance, or demonstrate that, at the time the service that their actions were likely to enable the is offered, it had taken specific steps to offshore non-compliance. The inclusion ensure that offshore non-compliance in of the precondition is intended to address the form of tax evasion would not arise. circumstances where an enabler turns a A second category of risk arises where blind eye to the consequences of their the product or services being provided actions. The consultation which led to the give rise to tax complexity such that introduction of Schedule 20 indicated: the client or customer might, without ‘Those who unreasonably adopt a position appropriate specialist advice, make errors of wilful blindness to tax evasion which in reporting tax liabilities associated with they have enabled are not merely careless it. The service provider is likely to be aware and should not be able to rely on a of the inherent complexity and the need

© IStock/4X-image pretence of ignorance to avoid penalties for the typical client to take and follow for their deliberate enabling act.’ appropriate advice. Service providers of funds or the provision of banking or The test is a subjective one, may need to consider the extent to which investment services. addressing P’s actual state of awareness reasonable prevention procedures aimed rather than objectively considering at addressing the Corporate Criminal Penalty charges what P ought to have known about their Offence risk would be sufficient to address The rules impose penalties on the ‘enabler’ actions. An objective test would have this risk, because such procedures may be of the higher of 100% of the Potential Lost raised even greater levels of complexity. intended to address deliberate acts rather Revenue arising or £3,000. The penalty The contrast between the High Court than careless errors. With that in mind, where there is an offshore asset transfer and Court of Appeals’ decisions in service providers and advisers will need is the higher of 50% of the Potential Lost Mehjoo v Harben Barker [2014] EWCA to be prepared to defend their approach Revenue or £3,000. The penalty is subject Civ 358 [2014] illustrates the difficulty in the event that any of their products or to the standard reductions for ‘telling, which such an approach could have services are used by clients without taking helping and assisting’ and for disclosure, created. However, despite the express advice and careless errors subsequently which is a feature of most of the direct position adopted in the consultation, the arise on the part of the client. tax penalty provisions introduced in wording of the legislation lacks clarity. In the meantime, given the lack of recent years. The provisions also include In particular, questions arise as to the clarity around the scope of the rules, it the now-standard power allowing the extent to which a service provider might would be helpful for providers of both enabler’s details to be published if the be penalised in circumstances where it financial services and tax advice if HMRC tax loss exceeds £25,000. Clearly the had simply not sufficiently considered were able to provide specific guidance on financial consequences of a penalty arising the risk of non-compliance, rather than how the rules are expected to operate, would be significant, but the reputational turned a wilful blind eye to it. particularly in the context of careless consequences of the publication of an Service providers will need to errors. The guidance provided in respect of enabler’s details could have even greater consider their approach in circumstances the Corporate Criminal Offence provisions consequences. where a product or service might be has been helpful to both practitioners Given the penalty mitigation rules, used by a client or customer to evade and service providers in establishing and advisers will need to be alert to the tax, for example by adding additional refining reasonable prevention procedures potential for conflict in the event that a due diligence procedures. Service to ensure they are not exposed to the client either needs to make a disclosure or providers will also need to consider the offence. However, if it is the case that the that an allegation is made that penalties extent to which they could be exposed civil sanctions at Schedule 20 are more are due from a client in respect of offshore to civil penalties under the Schedule 20 likely to be invoked than the criminal income or gains. regime in the event that the client fails to sanctions, guidance of equivalent detail The provisions include a specific right comply with their tax obligations. from HMRC would be welcome.

www.taxadvisermagazine.com | May 2019 33 INPUT TAX

INPUT TAX

KEY POINTS zz What is the issue? As most readers will know, a VAT- registered business is required to account to HMRC for the VAT that it charges its customers (output tax), but (in most cases, at least) can claim a credit for the VAT has incurred on its own purchases (input tax). zz What does it mean to me? Usually, there is little dispute as to what input tax may be claimed. However, one common area of difficulty is where a third party is introduced to the factual mix. This was at the heart of the recent case Praesto Consulting UK Ltd v HRMC [2019] EWCA Civ 353. Hey zz What can I take away? Where supplies are made to more than one person, it might assist matters by ensuring that the invoicing accurately reflects this fact so as to reduce the possibility of dispute with HMRC. However, even when that is not the Praesto! case, it is worth considering carefully whether an input tax recovery might still be appropriate. Keith Gordon looks at a case which considers the recoverability of input Background tax incurred on legal costs As most readers will know, a VAT-registered business is required to account to HMRC for the VAT that it charges its customers (output tax), but (in most cases, at least) can to name Mr Ranson and not the company in to the solicitors were given by Mr Ranson claim a credit for the VAT has incurred on the court proceedings.) on behalf of both himself and Praesto, its own purchases (input tax). Usually, there HMRC allowed the input tax claim on the that the solicitors had acted on behalf of is little dispute as to what input tax may be first invoice (i.e. that addressed to Praesto) both Mr Ranson and the company, both claimed. However, one common area of but refused the input tax on the subsequent were clients of the solicitors and that the difficulty is where a third party is introduced invoices. Praesto appealed against the solicitors had supplied their services to both. to the factual mix. This was at the heart of decision to the First-tier Tribunal which In the circumstances, Lord Justice Hamblen the recent case Praesto Consulting UK Ltd v allowed its appeal. However, the decision considered that both Mr Ranson and Praesto HRMC [2019] EWCA Civ 353. was overturned by the Upper Tribunal. The were jointly and severally liable for the company therefore appealed against the solicitors’ fees (even if only one of them was The facts of the case decision to the Court of Appeal. referred to on the invoice). Mr Ranson was an employee of a company Furthermore, the First-tier had identified called Customer Systems plc (CSP). He The Court’s decision ‘the reality of the situation’ and that the resigned and set up a company, Praesto The lead judgment was given by Lord Justice solicitors acted for both Mr Ranson and Consulting UK Ltd (Praesto), whose business Hamblen. He identified the two issues Praesto ‘in relation to what was effectively competed with CSP. CSP commenced that the Court needed to address. These litigation brought against both of them by a action against Mr Ranson (and also against ultimately restated the two questions raised trade competitor’. Similar expressions were three former CSP employees who had by the First-tier being: given elsewhere by the First-tier such as ‘the taken up employment with Praesto). It was zz whether the invoices related to services reality of the relationship’ and ‘the substance acknowledged that Mr Ranson’s actions provided by the solicitors to Praesto; and of the relationship’. were on behalf of the company, Praesto. Had zz if so, whether those services had a direct As Lord Justice Hamblen noted, Praesto CSP’s legal actions been successful, it was and immediate link to Praesto’s taxable (and its profits in particular) was the main recognised that Praesto would be joined in as activities. target of CSP’s litigation and, therefore, a party to account for any damages. Praesto had ‘an objectively reasonable fear Although CSP were successful at the In order to address these questions, of litigation by CSP’. Praesto therefore ‘had High Court, Mr Ranson appealed against the his Lordship summarised the findings of a very real interest in ensuring that CPS’s decision and the Court of Appeal allowed the fact reached by the First-tier (the First- claim failed’. appeal. The litigation with CSP then came to tier hearing being the principal forum for His Lordship rejected HMRC’s argument an end. However, Praesto sought to claim the identifying the facts in any such dispute). (based upon the fact that the invoices were input tax charged on the invoices issued by Although there was no express finding of a addressed only to Mr Ranson), concluding Mr Ranson’s solicitors throughout the course contractual relationship between Praesto that that provided ‘no legal bar to the of the litigation. (Praesto was the addressee and the solicitors, Lord Justice Hamblen conclusion reached by the FTT’, although on the first invoice issued but, thereafter, interpreted the factual findings as ‘clearly he accepted that it was a fact that had to be all invoices were issued to Mr Ranson establish[ing] such a relationship’. In taken into consideration when identifying personally. This was because CSP had chosen particular, it had been held that instructions the reality of the situation.

34 May 2019 | www.taxadvisermagazine.com INPUT TAX

PROFILE Name Keith Gordon Position Barrister, chartered accountant and tax adviser Company Temple Tax Chambers Tel 020 7353 7884 Email [email protected] Proﬁle Keith M Gordon MA (Oxon), FCA CTA (Fellow) is a barrister, chartered accountant and tax adviser and was the winner in the Chartered Tax Adviser of the Year category at the 2009 Tolley Taxation awards. He was also awarded Tax Writer of the Year at the 2013 awards. He provides litigation support and advises on tax and related matters to accountants, tax advisers and lawyers.

that the prosecution of the managing They make it clear that the case was director would have a major impact on the ultimately one determined on its own company’s business. facts rather than one identifying any new However, Lord Justice Hamblen proposition of law. However, within that considered that the Upper Tribunal had message, there is the important point erred in this regard. In particular, there that the facts need to be brought to the were clear factual distinctions between the attention of the First-tier Tribunal. Where Becker and Praesto cases. He considered HMRC went wrong before the Upper that the P&O case (P&O Ferries (Dover) Ltd Tribunal was in their attempt to retry the v Commissioners of Customs & Excise [1992] case and reargue the facts of the case. VATTR 221) was more alike the present. That That is why it is very relevant that (whilst was a case arising from the tragic events HMRC’s approach succeeded in the Upper in 1987 when the ferry, The Herald of Free Tribunal) the Court of Appeal’s decision is Enterprise, overturned near Zeebrugge. based solely on the facts as found by the The company and a number of employees First-tier. were subject to criminal prosecution and the So far as the ‘direct and immediate company paid for the legal representation of link’ test is concerned, it should also be all defendants. P&O was entitled to the input remembered that this terminology can In the Upper Tribunal, HMRC had tax credit. be somewhat misleading. Indeed, in successfully argued that the First-tier had Given the First-tier’s findings of fact, Lord Becker itself, it was acknowledged by the failed to make an express finding as to Justice Hamblen concluded that the First-tier CJEU that ‘a taxable person has a right whether Praesto was entitled to the legal was fully entitled to consider that there was to deduct [input tax] even where there services provided by the solicitors. Had a sufficient link between the expenditure and is no direct and immediate link between HMRC not won their appeal on the second Praesto’s taxable supplies. a particular input transaction and one or issue, the Upper Tribunal would have Lord Justice Haddon-Cave gave a more transactions’. This is because the remitted this specific question to the First- concurring judgment emphasising the right to deduct exists if the expenses are tier for further findings of fact. However, ‘crucial findings of fact’ made by the First- ‘part of [the trader’s] general costs and are, Lord Justice Hamblen concluded that (whilst tier which ‘are effectively determinative as such, components of the price of the another Tribunal might have interpreted the of both issues under appeal’. Indeed, he goods or services’. For a later confirmation facts differently) the First-tier considered proceeded to describe those findings of fact of this broader test, see Sveda (‘Sveda’ the material before it and reached a as ‘clear, unequivocal and directly relevant UAB v Valstybinė mokesčių inspekcija prie permissible decision. to the issues in question’ and as having been Lietuvos Respublikos finansų ministerijos Accordingly, his Lordship answered the expressed in ‘trenchant terms’. Case C-126/ 14). first question in Praesto’s favour. Interestingly, however, the Court was The second question focused more on not unanimous. The Master of the Rolls What to do next working one’s way through various cases (Sir Terence Etherton) gave a dissenting Where supplies are made to more than one which have considered legal costs. The judgment. This focused on the second person, it might assist matters by ensuring Upper Tribunal decided that this case fell test – the direct and immediate link. At the that the invoicing accurately reflects this down on the ‘Becker’ side of the line. In risk of sacrificing accuracy for the sake of fact so as to reduce the possibility of Finanzamt Köln-Nord v Becker (C-104/ 12), brevity, his Lordship’s concerns centred on dispute with HMRC. However, even when a company was unsuccessful in its attempt the speculative nature of the link between that is not the case, it is worth considering to recover the input tax on legal fees it had Praesto’s business and the legal costs it had carefully whether an input tax recovery paid for the defence of criminal proceedings incurred. He also noted that the P&O case might be appropriate – particularly in any taken against its managing director. The CJEU was not binding on the First-tier (let alone case where a decision to the contrary had concluded that there was no direct and the Court of Appeal) and pre-dated the case was made in the light of the Upper immediate link between the expenditure and law which adopted the ‘direct and immediate Tribunal’s decision. the company’s taxable supplies because the link’ test. However, it should be remembered legal proceedings related to the protection On the basis of the majority verdicts, that this case does not set any precedent of the private interests of the accused however, Praesto’s appeal was allowed. and therefore each case will turn on its own in relation to his personal behaviour. In facts. Nevertheless, this emphasises the Becker, there was no reasonable likelihood Commentary need to ensure that all the relevant facts of the company being joined in the criminal The final four paragraphs of Lord Justice are brought to the First-tier’s attention in proceedings. Nor was there any suggestion Hamblen’s judgment are worth reading. the form of admissible evidence. www.taxadvisermagazine.com | May 2019 35 TECHNICAL

Financial guidance and advice Financial guidance and advice Welcome to the May Technical Team Technical Newsdesk Mayday mayday mayday. OK, if you’re not reading this on the actual date of publication this reference might not strictly work. And more Newsdesk Articles Author(s) so in that the distress signal has nothing to do with May Day either; rather (according to Wikipedia and other sources) the expression Making Tax Digital for VAT (MTD): Sharron West, ‘mayday’ derives from the French m’aider (‘help me’), and dates back More news on applying for exemption, Emma Rawson, to 1923 when it was chosen by Frederick Stanley Mockford, a senior penalties and updated guidance Jayne Simpson radio officer at Croydon Airport in London, as a word that would p 36 indicate distress and would easily be understood by pilots and ground GENERAL FEATURE INDIRECT TAX staff in an emergency. Since much of the air traffic at the time was Brexit: behind the scenes Jayne Simpson between Croydon and Le Bourget Airport in Paris, that seemed to p 37 fit the bill. GENERAL FEATURE INDIRECT TAX Many agents and their clients might be tempted to cry ‘mayday’ Partnership expenses update Margaret Curran whilst grappling with the first two issues covered in this month’s p 38 OMB Technical Newsdesk. The requirements of Making Tax Digital commenced for many businesses with effect from 1 April 2019. The impact of Business Rates on Sacha Dalton However, as our first article explains, there is no need for distress. business: Treasury Committee Inquiry p 39 HMRC has announced a ‘light touch’ on record-keeping and filing method penalties in the first year of mandation, and businesses that GENERAL FEATURE will genuinely struggle to comply may be able to claim an exemption, Electronic Sales Suppression Margaret Curran or at least ask the Needs Enhanced Support service to m’aider. Also, p 39 whilst the EU recently agreed a further extension to Brexit until MANAGEMENT OF TAXES no later than 31 October 2019, lots of uncertainties remain and Structures and Buildings Allowances: the Emma Rawson, businesses are still being encouraged to prepare for a ‘no-deal’ Brexit. draft legislation Sacha Dalton We set out a couple of the steps we have been taking to try and ease p 40 the impact of this, both now and in the future. LARGE CORPORATE TAX OMB Loosely continuing the m’aider theme, much of our work relies Costs regime in the Upper Tribunal Margaret Curran on input from volunteers and members, and there are two areas p 40 reported this month where we would like your help. First, in relation GENERAL FEATURE to the costs regime, particularly at the Upper Tribunal – is this causing Off payroll working in the private sector Matthew Brown difficulties, and can you provide us with illustrative examples? Second, the technical consultation on extending the off-payroll working rules EMPLOYMENT TAX p 41 to the private sector from April 2020 is still open. We would very Employment and Payroll Group update Helen Thornley, much appreciate your thoughts – particularly around the practical Matthew Brown application of the rules. The last thing I would like to highlight this month is the roundup EMPLOYMENT TAX p 41 of our activity ‘north of the border’. We have extremely good Scotland update Joanne Walker relationships with the Scottish Government and Revenue Scotland, p 42 leading to a high level of trusted engagement. Also, the Scottish GENERAL FEATURE PERSONAL TAX government is undertaking a consultation on a policy framework for Financial Conduct Authority continues Kelly Sizer devolved taxes, and again we would welcome your input. work on protecting pensions p 43 PERSONAL TAX GENERAL FEATURE Making Tax Digital for VAT Anti-Money Laundering Guidance Jane Mellor p 43

GENERAL FEATURE (MTD): More news on applying for exemption, penalties and updated guidance GENERAL FEATURE INDIRECT TAX

As compliance with MTD for VAT is now mandatory for many businesses (since 1 April 2019), if you have clients who are struggling to get to grips with the new regime it is worth considering whether To contact the technical team they may have grounds for claiming exemption before enrolling about these pages, them into the MTD for VAT programme. please email: Sacha Dalton, Exemption from MTD Technical Newsdesk editor Jayne Simpson’s article in last month’s Tax Adviser summarised the [email protected] grounds in respect of which exemption can be applied for. It is likely that most claims for exemption will be based on the criterion that it

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is not ‘reasonably practicable’ to comply with the requirements of the due date to notify them of these difficulties. Taxpayer evidence MTD due to age, disability, remoteness of location or for any other and HMRC call references could assist with a reasonable excuse reason. This is clearly a subjective rather than an objective test which argument should a default surcharge be subsequently received. makes the chances of success when applying for exemption less easy Taxpayers should not sign up for MTD too early (unless they to predict. want to join the pilot) as this could cause difficulties with digital HMRC’s recent guidance in section 3 of VAT Notice 700/ 22 submission if an earlier VAT return is accidentally brought into the sets out their view of whether exemption may or may not be given regime due to sign up timing. The CIOT and ATT have published the in various circumstances that might arguably meet this criterion. MTD sign up window date ranges on their websites (tinyurl.com/ These include on the grounds of age alone (HMRC say unlikely to be yxmjlh9p). exempt) or unfamiliarity with software (again, HMRC say unlikely to be zz ‘Soft landing’ – digital links exempt). However, we expect that it will be a combination of several In notice 700/ 22 Making Tax Digital tinyurl.com/y8uev24q( ), HMRC different factors which might lead to an application for exemption sets out that a ‘soft landing ‘ applies for a period of 12 months being appropriate, and so age and/or unfamiliarity with software starting from the day of mandation into MTD (this will depend might well play a part in someone’s specific situation which gives them on your VAT stagger or whether you are in the deferred minority grounds for claiming exemption. group of taxpayers). The soft landing only relates to a relaxation If ultimately a claim for exemption is unsuccessful, every effort of the requirement to have digital links between each piece of must then be made to comply with MTD as soon as possible going accounting software used in the keeping of VAT records and forward, otherwise there will be a risk of being exposed to penalties preparation of the VAT return. During the soft landing period, you in due course. HMRC say they will be able to offer some support to can use cut/copy and paste to transfer data between software. taxpayers who are not exempt, but who are nevertheless finding it difficult to comply with MTD for VAT, via their Needs Enhanced Additional relaxations in HMRC guidance Support (NES) service. Therefore if you have clients who prefer to At the time of writing (three weeks before going to print), we manage their VAT affairs themselves rather than use your services anticipated that an updated version of Public Notice 700/ 22 will be (maybe for reasons of cost) you could advise them to contact HMRC published in April, setting out further relaxations that have been and request assistance from NES. At this stage it is not clear exactly discussed at stakeholder meetings between professional bodies and what assistance NES will be able to provide – if the problems a HMRC. These include: taxpayer is having revolve around choosing or using software, the Supplier statements – Provided the supplier statement meets the NES service will not be able to help. However if it is more to do with requirements in the public notice, these may be entered into the digital general digital skills then NES may be able to offer assistance for a records rather than each individual invoice listed on the statement. short while at least. You should ensure that there are systems controls in place that would The exemption criteria for MTD for VAT stem from the decision prevent the duplication of reporting the statements and invoices. in LH Bishop Electric Co Ltd v HMRC [2013] UKFTT 522 (TC), in which Petty cash – a summary total of petty cash purchases could be LITRG helped support the taxpayers in taking their case to tribunal. reported in the digital records rather than each purchase. The summary As the rules surrounding exemption from MTD for VAT are likely to value would be subject to a maximum threshold per entry. form the blueprint for the exemption rules which will apply to MTD for Charity volunteers – volunteer expenses can be reported in the income tax in due course, it is important that the process works well same way as employee expenses; and, where one-off events are run and is administered fairly by HMRC. We would be very interested in by volunteers the summary totals produced by the volunteers for the hearing about your experiences of claiming exemption, particularly for supplies made and received can be reported in the digital records vulnerable taxpayers, as this will help inform our feedback to HMRC instead of each transaction. on this area in due course. The CIOT, ATT and LITRG are interested in hearing about taxpayers’ experiences of MTD, particularly in respect of the sign up process and Penalties applying for exemptions. Please send feedback to your usual contact, If a taxpayer is unable to secure exemption and is mandated to join [email protected] or [email protected]. MTD, they may be concerned about the risk of penalties if things go wrong. This could be because the digital records are not being kept Sharron West Emma Rawson properly or there are problems experienced when trying to submit the [email protected] [email protected] VAT return digitally causing a late filing and/or late payment. zz ‘Light touch’ – good effort, but not quite right Jayne Simpson HMRC anticipate that taxpayers may not get everything right [email protected] initially with new MTD requirements and they have indicated that front line staff should take a ‘light touch’ approach on penalties for shortcomings in digital record keeping, or filing method, where taxpayers are making best efforts to be compliant. However this Brexit: behind the scenes would not apply in the case where taxpayers have deliberately GENERAL FEATURE INDIRECT TAX failed to engage with MTD. zz Default surcharge – when things are late We continue to receive numerous daily updates from GOV.UK setting It is important to note that the default surcharge regime is still out the UK government’s preparations for a ‘no-deal’ Brexit scenario applicable for the late filing of VAT returns and/or payment of and our members continue to make similar preparations. The CIOT VAT under MTD, and both must be received by HMRC by the due has also been working behind the scenes to clarify a number of tax date as usual, although a financial penalty only arises if the VAT is matters in relation to VAT and direct tax that would arise if the UK left paid late. If you encounter problems with MTD when trying to file the EU without a deal. We set out two examples below. the VAT return digitally, you could consider taking screen shots of the problem or documenting the issues to evidence the difficulty Abortive costs for ‘no-deal’ experienced. It is important to contact HMRC by the due date to During a roundtable meeting between HMRC and CIOT representatives notify them if the return will be filed late, although if possible the in February, the VAT and direct tax implications of expenditure by payment should still be paid on time. If you pay via direct debit businesses on preparations for a ‘no-deal’ outcome were discussed. and this is linked to the VAT return submission, contact HMRC by The CIOT subsequently wrote to HMRC highlighting two points: www.taxadvisermagazine.com | May 2019 37 TECHNICAL

zz That taxpayers preparing for ‘no-deal’ outcomes face resource, 12 months’ box. If this is not done the application will be rejected. This time and cost constraint pressures and, inevitably, mistakes may information will enable the VAT Registration Team (VRT) to identify be made in ‘no-deal’ preparations; and actively manage any registration that is conditional on the UK zz That HMRC’s future compliance activity should take into leaving the EU without a deal. consideration the unprecedented climate in which taxpayers are If there is a change to the date of withdrawal from the EU, the VRT making decisions and incurring costs, and that it should adopt a will amend the Advanced Notification date to match this new date. If suitable pragmatic compliance strategy for input VAT recovery the UK enters a transitional period or agrees a deal with the EU that and the deduction of costs for direct tax purposes incurred in allows current arrangements to continue then the registration will be preparation for a ‘no-deal’ outcome which, in the event that the cancelled. The approval of an Advanced Notification registration in UK and the EU successfully negotiate an exit agreement, turn out these circumstances is only made as a contingency for the UK leaving to have been unnecessary, abortive, or do not lead to the business the EU without a deal and the VAT number may not be used unless activity that would have been undertaken in a ‘no-deal’ scenario. that happens. The business will receive an automated notification of an Advanced Notification VAT Registration and the VRT may follow The CIOT also set out several VAT examples for holding this up with a manual letter to further explain the conditions and both. companies, option to tax and partial exemption that could create With the UK having agreed an extension to the date of withdrawal issues in circumstances where a ‘no-deal’ outcome does not arise. from the EU, we would not expect businesses to use this facility until HMRC’s response indicated that they recognised the unique closer to the 1st November.’ circumstances in which taxpayers are making decisions around ‘no- deal’ preparations and it intended to work with front-line staff in Jayne Simpson preparing them to address the arising difficulties. The current position [email protected] for recovery of VAT/deductibility of direct taxes for abortive costs would still be available to taxpayers. Recommendations included: zz Consider early engagement with HMRC in cases of legal uncertainty, including setting out the intended recovery position Partnership expenses update on costs and values. HMRC indicated that they would like to take a OMB collaborative approach to taxpayers and advisers; zz Retain documentary evidence relating to the purpose of activities Update on partnership expenses and HMRC’s guidance. and transactions; and In February a volunteer on the CIOT’s OMB sub-committee raised zz Document why the expense was incurred and why particular concerns with HMRC that HMRC had quietly changed its practice steps were taken. regarding the deductibility of business expenses incurred by partners, as distinct from the partnership itself. HMRC has since helpfully In considering any future penalty position, where a taxpayer clarified its position to that volunteer and we are pleased to be able to has taken reasonable care, there would be no penalty. However share this information with members. where there has been behaviour that may ordinarily be considered It has been HMRC’s longstanding practice to accept that such careless (not deliberate), HMRC should take full account of all relevant expenses are deductible for tax purposes if they are incurred wholly circumstances, including how a particular taxpayer is affected, any and exclusively for the purposes of the partnership trade and are not exceptional pressures they might have faced and how they were able otherwise disallowed by the usual tax rules. Where the costs are not to respond when considering the position for reasonable excuse. expensed in the partnership accounts, relief can be claimed by making appropriate adjustments in the partnership’s tax returns. VAT registration for ‘intending traders’ only in a ‘no-deal’ Following the Court of Appeal ruling in the case of Vaines outcome v HMRC [2018] EWCA Civ 45, HMRC updated its guidance in its There are a number of EU VAT simplifications available to non- Business Income Manual (at BIM82075 onwards) with the intention of established EU businesses that allow the UK customer to account for confirming the position in respect of partner expenses in accordance the cross-border transaction, thereby preventing the EU supplier from with that decision. However, the revised guidance led many readers to having to register for VAT in the UK. Examples include: perceive that there had been a change to the longstanding practice, zz Goods that are supplied with installation/assembly services in the meaning that expenses not included in the partnership’s accounts UK (with advance notification to HMRC); would no longer be allowed for tax purposes in any circumstance. zz Triangulation with an EU intermediary and UK end customer (with This was not, of course, why Mr Vaines’ argument ultimately advance notification to HMRC); and, failed. Rather, it was concluded that the expense was not incurred zz Call-off stock where the stock is held in the UK. wholly and exclusively for the trade of the partnership of which Mr Vaines was, at that time, a partner and there was no statutory basis A number of members have contacted the CIOT to raise the for claiming tax relief through an adjustment to Mr Vaines’ personal difficulties encountered by EU clients taking preparatory ‘no-deal’ tax return. Henderson LJ’s obiter dicta suggested that ‘there may be action in requesting registration for VAT in the UK as an ‘intending a small element of concessionary treatment’ to HMRC’s practice of trader’, effective from Brexit date. Where the EU VAT simplification allowing tax adjustments through the partnership return for properly is no longer available, the EU supplier will become responsible for deductible expenses incurred by partners personally. However, there accounting for VAT in the UK so a UK VAT registration number is was no suggestion that such expenses should not be allowed. essential from day one for the smooth continuation of business. HMRC listened to feedback and made further updates to its We raised this issue with HMRC and have received the following guidance to confirm its position in BIM 82080 see tinyurl.com/ response in relation to such applications: yxk8vphc as follows: ‘Businesses in the position you have described can register for ‘To be allowable as a deduction for tax purposes, the expense VAT using the Advanced Notification facility, by registering online has to be an expense incurred (typically, paid) by the partnership, requesting a voluntary registration from an advanced date of 1 for the purpose of the trade or property business carried on by the November 2019. In the ‘business activity’ section they should enter partnership or LLP, and meet the normal tests for being allowable for trade class/SIC code 99000 European Community. In the free text box tax purposes. Ordinarily, a partnership expense will be paid directly they should describe accurately what the business does and ensure from partnership funds. The starting point when a partner pays there is a positive amount entered in the ‘taxable turnover in the next something on behalf of the partnership, is they will normally then be

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reimbursed by the partnership from partnership funds. although online retailers pay some rates on UK warehouses or The partner cannot claim the expense against their share of the distribution units, the rates liability is relatively much lower than for profits in their individual return. A key point is that as an expense of high street shops. However, these debates around the competition the business carried on in partnership, the expense will normally be between high street retailers and online retailers should not be included in the accounts of the partnership (where the partnership conflated with the wider issue around the recognition of value created prepares accounts) and deducted in arriving at the commercial by business activity in highly digitalised businesses and the extent to profits of the partnership, but provided the expense otherwise meets which it is not currently recognised in the UK tax base. It is this latter the wholly and exclusively test (and any other relevant criteria), a point that the DST (which it is proposed will be introduced from April deduction may be allowed through the partnership return.’ 2020) is intended to address and this is a very different target to the Although HMRC’s preference is for all expenses of the partnership focus of property-based taxes. business to be included in the partnership accounts, it is accepted that The aim of the DST is to devise a system that recognises value this may not always be practical and deductions may still be allowed created by business activity in highly digitalised businesses that is through the partnership return provided the costs meet the usual not recognised in the current tax base. In this aim it is an adjunct deductibility criteria. to corporation tax and has no bearing on property-based business taxes. Specifically, in relation to online sellers, the DST is aimed at Margaret Curran taxing the perceived value created by users (which are the buyers and [email protected] sellers for online market places) and not the sales/profits from the sellers themselves; the DST is not a tax on online sales. There is little crossover in the tax base of Business Rates and that for the DST.

Business Rates: an inquiry The problems associated with property-based business taxes With regard to the problems associated with property-based business by the Treasury Committee taxes, we made the following points: zz In principle the taxation of land and property has several GENERAL FEATURE advantages in terms of collection and administration; ownership or occupation is reasonably easy to establish in order to identify a The CIOT submitted comments to the Treasury Committee’s inquiry liable person, and property is fixed in a location making it an easy into Business Rates to scrutinise how government policy has choice for devolution and local government financing; impacted business. The Committee is examining how Business Rates zz We suggested that the Committee referred to the IFS Mirrlees policy has changed, including Business Rates retention, alternatives Review (tinyurl.com/y62ardnx) which examined the distortionary to property-based taxes, such as the proposed digital services tax, effect of Business Rates on companies’ behaviour as what is taxed and how changes to Business Rates could impact businesses. (business property) is an input to production; for example, where A significant part of the inquiry’s terms of reference concern it is levied on commercial property investments, it potentially economic matters, which lie outside the CIOT’s expertise and disincentives businesses from equipping or expanding; and the majority of our members do not provide taxation advice or zz Taxation of property value (such as Business Rates that are levied compliance services in relation to Business Rates. However, we were as a percentage of the estimated rental value of a property) able to submit comments on one of the specific points raised in the require regular revaluations without which price variations lead terms of reference for the Inquiry regarding alternatives to property- to fluctuations in the amount of tax that needs to be paid. This based business taxes, which mentions the proposed digital services leads to a requirement for an efficient and transparent valuation tax (DST), and some of the problems associated with property-based mechanism and related appeals system. business taxes. We agreed that the pillars of good tax policy which the Inquiry’s Our full response can be found at: www.tax.org.uk/ref534 terms of reference identified were laudable aims for tax policy and to a large extent chime with the CIOT’s objectives for a tax system. Sacha Dalton These pillars are that tax policy should be fair, support growth [email protected] and encourage competition, provide certainty and be coherent. With regard to fairness we commented that views may differ on what constitutes a fair tax. Fairness is to some extent a product or consequence of the intended tax base. Electronic Sales Suppression We also suggested that there may be other ‘pillars of good tax MANAGEMENT OF TAXES policy’ which are relevant to the consideration of Business Rates: for example, if the rationale for Business Rates is to provide local services, CIOT recently responded to HMRC’s Call for Evidence on transparency as to where the cost of these services falls should be Electronic Sales Suppression (ESS). considered. In this Call for Evidence HMRC wanted to understand more about how modern technology is being exploited for ESS and the scale Alternatives to property-based business taxes, such as the of this type of tax evasion. ESS is where businesses or individuals proposed digital services tax (DST) use technology to artificially reduce their reported sales and The difficulties being faced by many high street businesses which are corresponding tax liabilities. struggling to remain competitive, and the substantial financial burden In our response, we reaffirmed the CIOT’s support for HMRC’s that Business Rates can represent on the high street, is often the efforts to deal with tax evasion, like ESS. ESS is fraud and needs to be starting point in the current debate on fairness in relation to Business tackled appropriately. Rates. The debate focuses on a comparison between businesses that One technological solution considered in the Call for Evidence may be similar in very high-level terms (such as the broad category of was whether it would be possible to mandate ‘software or hardware a retail business selling to customers in the UK) but operate in wholly for businesses which conform to technical requirements that reduce different ways such as high street retailers that are reliant on retail the opportunity for ESS’. We said that we do not think a technological outlets versus online retailers with lower reliance on commercial solution like this would work, and that we can envisage plenty of property. It is perceived that Business Rates operate unfairly because disadvantages, among them the following: www.taxadvisermagazine.com | May 2019 39 TECHNICAL

zz Who would oversee the design of the system, and sign off Notice, draft secondary legislation for SBAs was published alongside the technical requirements (and updates to them)? We do the Spring Statement on 13 March 2019 (see tinyurl.com/y6n4k4vp). not think that HMRC have the capability and resources to This draft legislation was accompanied by a short introductory note do this. It would also be very risky for them to take on this highlighting a couple of areas where the Government has changed responsibility. its approach as a result of the earlier consultation. Areas which have zz Having a requirement to follow a suitable standard does not been changed include: necessarily mean it will always be followed. There will always zz Disuse – it is now proposed that relief will continue to be be people determined to circumvent or manipulate records or available throughout periods of disuse with no prohibition. enable others to do it. zz Demolition – it is now proposed that when a building is zz It is likely to place disproportionate costs on compliant demolished any unrelieved expenditure will be claimed as businesses, whilst not necessarily changing the behaviour of a deduction in the capital gains computation, instead of by the non-compliant. continuing to claim ‘shadow SBAs’. zz Leases – for leases of no more than 35 years’ allowances will In our view, ESS is primarily a compliance issue so rather than stay with the lessor. Allowances may transfer to the lessee requiring businesses to take on more compliance burdens, we where the lease exceeds 35 years and the amount payable as a said that we think the solution lies in tackling the behaviour that capital sum is 75% or more of the total of that capital amount leads to ESS, perhaps one strategy for dealing with the suppliers/ and the retained interest. facilitators of ESS and another for dealing with the end-users of the software; the former involving use of current legislation The draft legislation provides more information on the scope and the full force of HMRC’s existing legal powers, and the latter and operation of SBAs, in particular the evidence requirements involving more of an educative approach to increase awareness of that will have to be met to make a claim. However, some questions the issue and highlight the consequences of non-compliance. remain unanswered. For example, the legislation contains no We agree that existing legislation such as the corporate definition of the terms structure or building and it is unclear criminal offence of failing to prevent the facilitation of tax evasion whether these simply take their natural meaning, or should be (Criminal Finances Act 2017 s45) and the offence of making, interpreted in line with TCGA 1992 s 21 and s 22. The position on the adapting or supplying any article knowing it is designed to be used treatment of mixed residential and non-residential buildings also in fraud, or intending it to be used in fraud (Fraud Act 2006 s 7) remains unclear. could be used to tackle non-compliance involving Electronic Point In addition it is unclear how some aspects of the information of Sale (EPOS) systems at the level of the software developer/ that are required for a claim for the allowances will be provided in designer/distributor. practice. For example, there is a need for a written statement of We ask whether the government could explore as a further the earliest date of a written contract for the construction of the solution better regulation of the EPOS software industry, for building or structure; if expenditure is incurred in-house, there may example by setting ‘industry standards’ in software design, and not be a written contract and we would hope that this would not then targeting investigative resources on those within the industry cause the allowance statement to be disqualified. It may also be who fail to comply with those standards. difficult in practice to obtain the information required if a structure We also suggest that this initiative is looked at alongside or building is acquired from a developer. Making Tax Digital (for VAT) and the level of controls within MTD The deadline for commenting on the draft legislation was 24 compliant software. HMRC expect MTD software to reduce errors, April 2019, and copies of the CIOT and ATT submissions are available but we are aware that even the MTD compliant packages do not on their respective websites. necessarily have strong controls in them. Emma Rawson Sacha Dalton Margaret Curran [email protected] [email protected] [email protected] Costs regime in the Upper Structures and Buildings Tribunal: what’s your view? Allowances: draft legislation GENERAL FEATURE LARGE CORPORATE TAX OMB Recently representatives from the CIOT met with the President of the HMRC have released draft legislation which sheds further light Upper Tribunal (UT) to discuss our letter of 23 October 2018 regarding on the scope and operation of the new Structures and Buildings the costs regime in the UT. Allowances which came into effect in October last year. In our letter www.tax.org.uk/ref511( ) we explained there is still an It was announced at Budget 2018 that a new class of capital appetite to explore the recommendations by the Costs Review Group allowances – Structures and Buildings Allowances (SBAs) – would as they affect costs in the UT, in particular, that where the taxpayer be introduced with immediate effect. In outline, SBAs provide has succeeded at the First-tier Tribunal and the case is not complex, relief for qualifying expenditure on new non-residential structures they should be able to choose whether to be inside or outside the and buildings incurred on or after 29 October 2018 on a 2% per costs shifting regime. The judge asked us to gather examples of cases annum straight line basis. where changes to the costs shifting regime in the UT might be justified As reported in February’s Technical Newsdesk (see tinyurl. and where they might be problematic. We would like to hear from com/yynjt36w ), no detailed legislation was released at the time you about (i) any ‘real life’ examples of cases you have seen where of the Budget announcement, with the majority of the publicly you felt that the existing costs shifting regime in the UT could have available information on SBAs contained in a 13-page HMRC adversely affected the taxpayer’s decision to continue with their case Technical Notice. (this may include reported decisions, cases that you are aware of which Following an initial round of consultation on this Technical did not proceed to a hearing because of costs or other examples);

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(ii) your views on the types of cases that should merit some sort of rules when an organisation ceases to be small in an accounting period costs protection in the UT; and (iii) your views as to what that costs (or becomes small) the requirement to operate the off-payroll rules (or protection might be. Please respond to [email protected]. cease to operate them) will apply from start of the tax year following the end of that accounting period. This fluctuation in and out of the Margaret Curran new rules may be confusing. Also, for entities with an accounting [email protected] period ended on, say, 31 March there leaves very little time to decide whether they are now within the off-payroll rules and, if so, assess and notify the status of relevant engagements.

Off payroll working in Information requirements The consultation proposes that an engager must provide direct to the private sector: HMRC a worker a determination of the worker’s status (and, if requested, the reasons for reaching that conclusion). The engager will also have consultation to provide that determination to the party they contract with (for example, an agency). The status determination (and reasons) will EMPLOYMENT TAX then have to be passed down the supply chain so that fee-payers who are further down the labour supply chain have the information they HMRC has launched a technical consultation on extending the off- need to comply with the rules. It is not, however, clear whether small payroll working rules to the private sector from April 2020, to which entities will have to notify the worker or the party they contract with the ATT and CIOT will be responding. The consultation asks for views that they are ‘small’. on the exemption for small entities, information requirements and It is also proposed to modify the rules that determine when status determination disagreements. the liability for income tax and NICs should be transferred up the HMRC has launched a technical consultation on extending the off- supply chain from the fee-payer to the agency or engager in cases payroll working rules to the private sector from April 2020. of non-compliance. Where HMRC are unable to collect a liability The consultation (which can be found at tinyurl.com/yyonpzsq) from a defaulting party the government proposes that the liability confirms the Government’s intention to extend the off-payroll rules should transfer back to the first party or agency in the chain. Where (which currently apply to public sector bodies) to the private sector HMRC cannot collect from that party it would seek payment from the from April 2020. The intention is to use the current public sector rules engager. As proposed the liability could fall back on the engager even as a starting point, but with some proposed changes, which will also if they have taken reasonable care to ensure that all parties comply then apply to the public sector. It is proposed that the rules would not with the rules. apply to small businesses in the private sector that engage with off- payroll workers, although they will continue to apply to public bodies Status determinations that are ‘small’. The consultation proposes an engager-led status disagreement The consultation asks for views and information on several process starting with the requirement for the engager to provide their subjects, including: determination to the worker – with reasons – which the worker would zz the scope of the reform and impact on non-corporate engagers; be able to appeal, and which would require the engager to revisit their zz information requirements for engagers, fee-payers and personal determination and relay their conclusion back to the worker. HMRC service companies; and would not be involved in this process. HMRC’s view is that either zz addressing status determination disagreements. workers wouldn’t take a role if they disagreed with the engagers’ determination or they would appeal at the year end to HMRC. The consultation also sets out how businesses can prepare for The consultation period closes on 28 May 2019 and both ATT these changes, and HMRC’s plans to provide education and support and CIOT will be responding. Input from members in response to the for businesses that will be in scope. questions posed in the consultation, or other aspects of the off-payroll rules that require clarification, is very welcome. Small entities exception At Budget 2018, the government announced that the smallest Matthew Brown organisations will not be affected by the extension of the rules to the [email protected] private sector. These entities will not need to determine the status of the off-payroll workers they engage, although the workers will still need to assess whether they are within IR35. The consultation proposes using the existing statutory definition Employment and Payroll within the Companies Act to determine whether a corporate client is small, that is the qualifying as ‘small’ conditions will be met by a Group update company if it satisfies two or more of the following requirements: 1. Annual Turnover – Not more than £10.2 million EMPLOYMENT TAX 2. Balance sheet total – Not more than £5.1 million 3. Number of employees – Not more than 50 A summary of the topics covered at the last Employment and Payroll Group meeting in March 2019. For non-corporate entities the consultation proposes applying ATT and CIOT representatives attended the Employment and the new rules where the entity has either 50 or more employees Payroll Group (EPG) meeting in March. This group meets quarterly or turnover exceeding £10.2 million, or both these characteristics. to discuss operational and policy issues and is a forum where HMRC has clarified that ‘employees’ will follow the Companies’ Act members can raise concerns about payroll administration and definition, which is average number of employees, but regardless employment matters. of whether full or part-time and excluding ‘IR35’ cases. This may A big focus of the March meeting was the current consultation therefore penalise those engaging more employees on a part- into the Off-payroll working rules from April 2020. (Both the ATT and time basis. CIOT will be responding to this consultation and it is discussed in more It is also proposed that for the purposes of the off-payroll working detail elsewhere in this edition.) At the meeting, HMRC highlighted www.taxadvisermagazine.com | May 2019 41 TECHNICAL

their concerns about the commerciality of the long chains of Recent meetings agencies between the end-client and the individual ultimately There have been a number of meetings at which the CIOT providing their labour. HMRC would also like to understand why and/or LITRG have been represented in recent weeks. These the same individual may, over time, be provided to the end-user have ranged from opportunities to provide input into Scottish through a series of different agencies. government on issues such as their approach to equalities in In turn, the group raised concerns about the practicality for the Scottish budget, to discussions about current issues in the end-user of carrying out due diligence on all the agencies in relation to Land and Buildings Transaction Tax and sitting on the chain between it and the worker. It was also noted that, in the recently established Devolved Taxes Legislation Working some industries, engagers are already obliged to use licenced Group to explore options for alternative legislative processes labour supply agencies and there was discussion over whether for devolved taxes legislation, particularly where tax measures that would be sufficient due diligence for HMRC’s purposes. need to be introduced quickly or where minor amendments are Concerns were also expressed about the Check Employment needed to existing primary legislation. Status for Tax (CEST) tool and ensuring that the promised LITRG was represented at a meeting of the Equality updates to CEST are produced well in advance of April 2020. Budget Advisory Group, which is convened by the Scottish Other areas discussed included: government, and has a remit to help shape the Scottish Student loans – From 6 April 2019, employers may be government’s equality and human rights approach to the required to make student loan deductions for new post- budget. The seminar-style meeting focussed on the tax and graduate loans as well as the existing Plan 1 and Plan 2 revenue aspects of the budget. A representative of the Scottish deductions. HMRC also apologised for the mix up over the new government’s tax directorate gave a presentation on tax, starter checklist for 2019-20 which now makes provision for a which considered the growth in importance of tax revenues new employee to indicate that they are due to repay a post- to the Scottish budget, the workings of the block grant and graduate loan. block grant adjustments, and the reliance of Scotland on Payrolling of benefits in kind – HMRC has been disappointed forecasts prepared by the Scottish Fiscal Commission and the by the low take-up by employers of the option to payroll Office for Budgetary Responsibility. Discussion covered the benefits in kind and have identified five areas where it is Scottish government’s approach on Scottish income tax, and considered improvements could be made to encourage more the equality impact papers published at budget time. The employers to take part. These include concerns over the quality data challenges in relation to equalities characteristics were of guidance, the inability to payroll all benefits in kind and that discussed. Class 1A still needs to be calculated at the end of the tax year. Representatives of CIOT attended a seminar on VAT HMRC is also concerned that since agents cannot apply to Assignment organised by the Scottish government. Following payroll on behalf of their clients, this may deter many smaller the Smith Commission’s recommendations and the Scotland businesses dependant on their agent from taking this option Act 2016, VAT Assignment commenced on 1 April 2019. The up. While HMRC will be looking at whether agent registration first 10 percentage points of the standard rate and the first 2.5 is possible, optimism must be tempered by the fact that percentage points of the reduced rate of Scottish VAT receipts increasing functionality comes with a cost, which means are being assigned to the Scottish government. A methodology that HMRC will need to gain approval for funding in the next has been created (by HMT, HMRC and Scottish government) in Spending Review. order to work out Scottish VAT receipts. The seminar provided Optional remuneration arrangements (OpRA) – HMRC has an opportunity for people to hear about how the model was become aware of various schemes being marketed which seek developed and why the expenditure approach was adopted. to avoid the OpRA rules and will in due course be issuing a There was also a short presentation from the Scottish Fiscal warning to employers to prevent them from being taken in Commission on forecasting the VAT assigned to Scotland. by such schemes. In the meantime, employers are warned to CIOT was represented at a meeting of the Land and be aware of the old adage ‘if it looks too good to be true, it Buildings Transaction Tax (LBTT) working group, which allows probably is’. Scottish government to meet jointly with CIOT, the Law Society Feedback and comments on employment issues are always of Scotland and ICAS. Discussions focussed on some of the welcome to [email protected] or [email protected]. current issues in relation to LBTT, in particular, concerning Past meeting minutes of the EPG can be found here: tinyurl. development sub-sale relief and section 14(1)(c), the Additional com/jpgcxdg. Dwelling Supplement and leases. In these areas legislative changes are likely to be needed in order to solve the issues; Helen Thornley Matthew Brown however, it appears that these are unlikely to occur until the [email protected] [email protected] new policy and legislative process has been developed. CIOT has been invited to sit on the Devolved Taxes Legislation Working Group, which has been established by the Scottish government, in partnership with the Scottish Scotland update: recent parliament, to take forward recommendations made by the Budget Process Review Group. In particular, the group is meetings; reminder of to explore options for alternative legislative processes for devolved taxes legislation and to examine the need for a Scottish government Finance Bill. The group will meet in parallel to the consultation on a policy framework for devolved taxes, and will report to the consultation Cabinet Secretary prior to the Scottish budget. GENERAL FEATURE PERSONAL TAX Consultation on a policy framework As noted in April’s Technical Newsdesk, the Scottish A round-up of some recent meetings with the Scottish government is undertaking a consultation on a policy government and a reminder of the open consultation on a tax framework for devolved taxes. The consultation seeks policy framework for devolved taxes. views on a new approach to the planning, management and

42 May 2019 | www.taxadvisermagazine.com TECHNICAL

implementation of fully devolved taxes in Scotland; it proposes with information that is relevant to their situation. Some a new legislative and policy cycle, and considers matters standard guidance could therefore be sent to consumers such as the Scottish government’s approach to engaging with at the point they choose one of the above, based around stakeholders. their choice. More information is available on the CIOT website: www. For example, if someone selects option 4, it would be tax.org.uk/ref544. The closing date for submissions is 6 June, worth pointing out to them that, depending on their other so if you have any comments we would welcome them by the income, taking their whole pension savings out within five middle of May. years could be inefficient in tax terms. Similarly, their choice might have an impact on state benefits entitlement. Joanne Walker The point of this would not be to give people advice [email protected] or even to cover all possibilities, but to get people to think about the tax and state benefits consequences of their pension choices. Even if it only serves to plant the seed in their mind that there are potential consequences, so that Financial Conduct Authority next time they come to make a pension choice they might continues work on think about tax and state benefits, it would be worth doing. Kelly Sizer protecting pensions [email protected]

PERSONAL TAX GENERAL FEATURE

LITRG comments on the FCA’s latest Retirement Outcomes Anti-Money Laundering Review consultation. Pensions freedom has given pension savers choice over what Guidance: Meeting AML they do with their retirement savings. The Financial Conduct Authority has been addressing some of the difficulties that requirements on practice freedom has created for pension savers – that is, the difficulty of making people fully aware of their options and the impact of the choices they make; or indeed that failure to make a choice documentation and can leave them worse off (for example because their fund is invested in cash by default). client money As summarised in October’s Technical Newsdesk (tinyurl. GENERAL FEATURE com/y2czwa52), the Low Incomes Tax Reform Group has previously commented on the FCA’s consultations in this area. The Professional Standards team have been working on LITRG’s latest response (tinyurl.com/y37hvp8m) to the FCA’s guidance requested by members in small practices so most recent paper, CP 19/05, highlights two key issues relating they can meet the requirement to have written practice to the tax consequences of pension decisions. wide risk assessments and policies and procedures and First, in LITRG’s experience, it is essential for people to be guidance. In addition some members hold client money or provided with clear guidance, in a consistent format and at assist clients with payments from their bank accounts so the right time. It is therefore welcome that the FCA intends to the AML FAQ have been updated. mandate both the use of standard wording and the timing of As we approach the deadline for renewal of the AML information being provided. supervision scheme members are reminded that there is LITRG’s second point relates to getting tax guidance to a considerable amount of guidance available on how to consumers. The consultation paper proposes that pension comply with the requirements of the Money Laundering providers should have to offer non-advised savers certain Regulations on the CIOT website (tinyurl.com/y8kz3ggm) investment ‘pathways’ so that their investments meet their and the ATT website (tinyurl.com/y74tg2an). objectives. The individual would have to choose one of the In response to requests from members we have drawn following options: up guidance and pro forma documents in relation to: zz Option 1: I have no plans to touch my money in the zz Written practice wide risk assessments next 5 years zz Written policies and procedures zz Option 2: I plan to use my money to set up a guaranteed income (annuity) within the next 5 years These are designed for small firms (such as sole zz Option 3: I plan to start taking my money as a long-term practitioners) and can be accessed on the CIOT website income within the next 5 years (tinyurl.com/y2f67hx2) and the ATT website (tinyurl.com/ zz Option 4: I plan to take out all my money within the y3blrgmd). next 5 years The CIOT and ATT have been working on an FAQ for members in relation to handling client money. This FAQ is set out on the following page and will be included in the The individual’s pensions investments would then be AML FAQ on the CIOT website (tinyurl.com/y54kygy2) and tailored to suit the selected objective. the ATT website (tinyurl.com/y7dsh6b9). LITRG’s response suggests that in terms of offering tax and If you have any queries relating to AML compliance or state benefits guidance, knowing which of the above boxes client money do contact the Professional Standards Team at a person has ticked is a good opportunity to give them some [email protected] or [email protected]. broad guidance about what they might need to think about as a result. Jane Mellor Our experience is that people are far more likely to engage [email protected] www.taxadvisermagazine.com | May 2019 43 TECHNICAL

WHAT ADDITIONAL SAFEGUARDS SHOULD I PUT IN PLACE IF I HANDLE CLIENT MONEY?

Client accounts Guidance on the requirements when handling client money in general are set out in section 7.6 of Professional Rules and Practice Guidelines which are available on Professional Standards pages of both the CIOT and ATT websites. You must be alert to the potential money laundering risks associated with handling client money and should make sure you know the source of the funds, the reason why the client’s money is being processed through your client account and consider carefully whether there might be money laundering implications if the client wants money paid to a third party.

Client’s own bank account If you have access to a client’s own bank account it is essential to have a very clear written agreement with your client on the management of their money. Your authority to access the account should be given in writing to the bank by the client and acknowledged by the bank. Where for example, you are asked to make payments for the client or are a counter signatory on the cheque book you should take care to make sure all payments made are legitimate and that your services are not facilitating money laundering by the client. Where applicable, make sure there is an authorisation process for payments of your own fees to ensure that there is no accusation from the client of unauthorised payments or inappropriate use of client money. Many online accounts now include fraud protection warnings when payments are being made and set up. Members must always be vigilant to ensure that payments are only made to genuine bank accounts and in relation to valid amounts due by their clients.

Recent submissions Further information Date sent CIOT Draft guidance in relation to the provisions in Finance Act 2019 for chargeable gains www.tax.org.uk/ref530 14/03/2019 accruing to non-residents: supplementary comments Electronic sales suppression: a call for evidence www.tax.org.uk/ref524 19/03/2019 Treasury Committee: The impact of Business Rates on business inquiry www.tax.org.uk/ref534 01/04/2019 LITRG Financial Conduct Authority: Retirement Outcomes Review www.litrg.org.uk/ref352 27/03/2019

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44 May 2019 | www.taxadvisermagazine.com CIOT COMMITTEE

CIOT COMMITTEE

Be part of the CIOT diversity, transparency and inclusion committee

Tina Riches, as Chair of this new committ ee, is putti ng a call out for volunteers to be part of constantly improving the organisati on for all members

ood news! The CIOT is forming a PROFILE new committee to develop and oversee the implementation of Name Tina Riches G Position an appropriate strategy on diversity, Acti ve volunteer, though reti red from practi ce transparency and inclusion across Company CIOT the organisation. The committee will Email ti [email protected] establish how inclusive we are at present Tel 07799 068 056 P r o ﬁ l e Having been CIOT Technical Director and Smith & Williamson and look to bring forward ways in which Nati onal Tax Partner, Tina is now reti red from practi ce and volunteers we can ensure that the CIOT benefits for TaxAid and CIOT. However, this is not about her – it’s about you! all our members, helping to protect the future of the body. We intend to work with ATT on this initiative. We plan to launch an online survey UK, Ray McCann, our current President, As chairman (chairwoman or chair?) later this year to look at the experiences who has really helped get the ball rolling of that new committee I will be taking and percepti ons of members, whether on improving diversity and me, plus a forward the shared ambition of ensuring volunteers or staff , students and of other representati ve from the CIOT’s HR team. that anyone in the CIOT, members, staff and identi fy any changes that need to But we would like this to become a more students and staff, should have, and feel be made. We hope that you will respond diverse group from across the CIOT. they have, the opportunity to progress and input to the process. Please read the adverti sement below through the organisation to the best of The fi rst step is to form a committ ee. and consider applying to join us to help the their ability, regardless of their gender, We are setti ng up a small core group CIOT evolve. I really look forward to working race or other attributes. including Reshma Johar from Crowe with a number of you going forward.

JOIN THE CIOT DIVERSITY, TRANSPARENCY AND INCLUSION COMMITTEE Ideally you should be a CIOT member, student or member of staff or interact regularly with the CIOT, with a passion for equality and a desire to work with a diverse group of people to reach a consensus on any recommendati ons for change. If you are interested in applying to join the committ ee, or seek more informati on, please get in touch with Tina Riches at ti na@richestax. co.uk by 31 May 2019. We have a maximum number of places, but will welcome a wide variety of people. Please include in your applicati on: zz a note of why you are interested in joining the committ ee and how you could help zz a short work biography or a link to your LinkedIn profi le, if detailed zz your contact details; membership or student number zz opti onal: a note of your ethnicity, gender, physical ability, age range, religion and sexual orientati on.

Committ ee meeti ngs will include a facility to dial or Skype in. www.taxadvisermagazine.com | May 2019 45 BRIEFINGS

CIOT/ATT Harrow and North London Branch: 30th anniversary reception and dinner at the House of Lords

Committ ee with guests. Left to Right Jolyon Maugham QC, Marc Selby, Tracy Easman, Harry Ross, Lord Popat, Divya Malde, Ahmed Jeewajee, Ray McCann, Alan Hooper and Viral Haria

Jolyon Maugham QC: Harry Ross (Branch Chair) speaking in Welcome by Lord Popat of Harrow Brexit – what next? the grandeur of Peers Dining Room

EVENT mark throughout its history furnishings of the Commons. Popat and a concluding address Our branch celebrated its look down on the visitors. As it In neither chamber are there by Jolyon Maugham QC, who 30 th Anniversary at the House was not unti l 1918 that women enough seats to accommodate is the founder and director of of Lords which was kindly were given the right to vote, it all the persons who are enti tled the Good Law Project, through sponsored by Lord Popat might not be so surprising that to att end. which he played a key role in of Harrow. the only statue of a woman The celebrati ons started bringing to Court a number of The event commenced we saw was that of Margaret with a recepti on in the Peers’ legal challenges to the Brexit with a conducted tour of the Thatcher. Guest Room Bar. process. Other talks included an Houses of Parliament. We were The tour took us into both We were then escorted to address by the current President taken through the magnifi cent debati ng chambers - Red for the Peers’ Dining Room. The of the CIOT, Ray McCann, who Palace of Westminster which the House of Lords and Green room is a beauti ful panelled told us that Harrow and North dates back to 1016, 50 years for the House of Commons. We room with rich furnishings and London is one of the most before William the Conqueror. were told that the sovereign historic painti ngs. Att enti ve, vibrant branches in the country. The walls of most of the has her own throne in the white-gloved staff served The branch welcomes all corridors are decorated with House of Lords. The décor was us with dinner and House of readers to att end its programme huge murals portraying events, most luxurious and opulent. Lords wine. Speeches were of events, details of which are many of which seem brutal Sumptuous gold shimmered thoughtf ully interspersed available on the Insti tute’s and in today’s eyes. Statues of around the chamber. This was between courses, with a Associati on’s websites. people who have made their a contrast to the modest green welcome speech from Lord Marti n Levin

46 May 2019 | www.taxadvisermagazine.com BRIEFINGS

CIOT Devolution evolution EVENT ICAS combining forces to The next 20 years of encourage debate around devolution will see a Scotland’s devolved consolidation of Scotland’s tax powers. tax powers and the need for Last October, the bodies Westminster and Holyrood to collaborated under the work together to ensure the banner of the Scottish Taxes health of the tax system. Policy Forum, chaired by That was one of the Jim Robertson, chair of the headlines to emerge from ADIT Academic Board (and a the second joint CIOT/ICAS member of CIOT and ICAS) to ‘Big Tax Debate’, which took produce the paper Devolving place at Edinburgh’s Principal Taxes across the UK: Learning George Hotel at the start of from the Scottish Experience. March and attracted close to With 2019 marking 20 100 guests. years since the creation of Chaired by the presenter the Scottish Parliament, of the Scottish Television the increasing prominence current affairs programme of the devolved taxes in (Back row, L-R) Sean Cockburn (CIOT Scotland Hub Chair), Tom Arthur MSP, Scotland Tonight, Rona framing the public debate Adam Tomkins MSP, Robin McAlpine. (Front row, L-R) Katrine Bussey, Rona Dougall, the debate featured could not be ignored. Tax, Dougal, Charlotte Barbour (Director of Taxation, ICAS), Michelle Mullen the following panellists: argued Robin McAlpine, was (Executive Director of Standards, ICAS) zz Katrine Bussey – one of society’s greatest Political Editor of Press achievements. offering from the Scottish in the coming decades. A Association Scotland Katrine Bussey noted Government through the move away from demands zz Robin McAlpine – Director that the media had a role provision of universal benefits for more tax powers and a of the Common Weal to play in drawing attention including tuition fees and consolidation of existing powers think-tank to this debate and holding prescription charges acted as was predicted, with local zz Tom Arthur MSP – SNP MSP politicians to account for their a counterbalance to this claim. government anticipated as the for Renfrewshire South and aspirations for the tax system. A majority of the audience next frontier of fiscal debate. a member of the Scottish Another area of debate shared Adam Tomkins’ Further and wider changes to Parliament’s Finance and considered was the potential concerns, with 63 per cent the tax system may come, but Constitution Committee for tax motivated behavioural responding to a live poll on this shouldn’t happen until the zz Adam Tomkins MSP – changes as a result of the evening to say that they powers that have recently been Conservative MSP for increasing tax divergence thought tax divergence would devolved have had a chance Glasgow and deputy between Scotland and act as a long-term disincentive to bed in. convener of the Finance and the rest of the UK. Adam for people seeking to move to Further details on the Constitution Committee Tomkins voiced concern Scotland. debate can be found on the CIOT that divergence would stifle The event concluded with website: www.tax.org.uk/media- The event is the latest economic growth but Tom thoughts on the evolution of centre/blog/media-and-politics/ example of CIOT and Arthur said the wider social Scotland’s tax raising powers devolution-evolution.

CIOT Chartered Institute of Taxation Notice of Annual General Meeting AGM 2019. Access to the AGM Notice, a hard copy of the proxy Report and Statutory Accounts The Annual General Meeting Annual Report and Statutory form, please email: is also available on the Institute‘s of Members of the Chartered Accounts and information customerservices@ website, www.tax.org.uk. Institute of Taxation will be held regarding those standing for electoralreform.co.uk or Please note that hard copies on Tuesday 21 May 2019 at election to Council was provided telephone: 0208 889 9203 and of the proxy voting form are 16.45 in the Smeaton Room, One through links in an email sent a form will be sent to you with no longer sent to all members Great George St, Westminster, to Institute members by ERS in a reply paid envelope. The form with Tax Adviser. Members London SW1P 3AA. April. The ERS proxy voting site must be received by ERS before have until Sunday 19 May 2019 Electoral Reform Services is also be accessible via a link in Sunday 19 May 2019. to vote online. Of course we (ERS) have been appointed as that email. A copy of the proxy form, welcome your attendance in scrutineers for the CIOT AGM If you prefer to receive the AGM Notice and Annual person to vote. www.taxadvisermagazine.com | May 2019 47 BRIEFINGS

CIOT CTA Examination Structure Refresher Session: 10 important changes to the CTA examinations that you need to know

EVENT revised-cta-ex a m i n a ti o n Rosalind Baxter, Insti tute To make sure you are aware Secretary and Director of of the key changes, we’ve Educati on and Andy Brodrick, condensed them into our top 10: Educati on Development zz Confi rmati on of Eligibility – Manager hosted a CIOT employer no longer required focused event concentrati ng on zz Credit against the changes to the CTA examinati on, Applicati on and Interacti on at our new offi ces in Westminster paper – no longer available. on 15 March. This paper is now a It was great to see so mandatory paper within the many familiar faces att end qualifi cati on (except if on the the event and to see such ACA CTA Joint Programme) acti ve parti cipati on in our Q & zz Exempti on from sitti ng A session. the Awareness paper, Following on from the work now possible if certain CTA Examinati on Structure Refresher Session of the CTA Examinati on Review qualifi cati ons held Sub-Committ ee, who devised zz Applicati on and Interacti on the new structure which was – renamed and revised as fi rst launched in November Applicati on and Professional 2017, many of the changes Skills (APS) are eff ecti ve from this May’s zz Advisory – renamed zz Direct and Indirect tax opportunity to thank those of examinati on session. Advanced Technical routes merged you who att ended and provided From the introducti on zz Introducti on of a Principles zz Indirect tax papers us with feedback on the day. of a new Computer Based of Accounti ng Computer syllabi updated ‘A super engaging session, Examinati on (CBE) to updates Based Examinati on zz Advanced Technical where the presenters clearly around the new Applicati on and (CBE) – exempti ons are corporate tax papers ACT explained the changes to the Professional skills examinati on, available for this (Advanced Corporati on Tax) APS and the introducti on of the CIOT is introducing a number zz Period for which credits and TOMC (Taxati on of Major the new Accounti ng CBE. It of important changes to the CTA for the CTA writt en exams Corporates) amalgamated provided a great opportunity examinati ons from this May. passed are valid for (from May 2018) to ask questi ons, network and www.tax.org.uk/ increased from fi ve to seven gain further insight into this new students-and-qualifi cati ons/ sitti ngs (from May 2018) We would like to take this chapter of the CTA qualifi cati on.’

CIOT CIOT Lay Public Interest Observers

COUNCIL Council on the public interest The Chartered Institute of regarding the Institute’s Taxation has announced activities and will support the the appointment of Jane Institute’s adherence to its Brothwood and Quinton charitable responsibilities. Quayle as new Lay Public Jane is Head of the Interest Observers of the Adjudicator’s Office for HMRC Institute’s Council. and the Valuation Office They took on their new Agency (VOA). responsibilities from March Quinton is a former and replaced Sam Younger, British Ambassador and a who stepped down after former Public Interest Council four years in the role. As Lay member of the Institute Observers Jane and Quinton of Chartered Accountants will advise the Institute’s of Scotland. Jane Brothwood Quinton Quayle

48 May 2019 | www.taxadvisermagazine.com BRIEFINGS

ATT

The celebrations included a screening of a 30th anniversary video

Presentations were made to the ATT Founder Members by the ATT President Left to right: Malcolm Gammie QC, Roy Jennings and Tony Ring Tracy Easman welcomed over 140 guests to the ATT President’s Reception ATT President’s 30th anniversary reception

EVENT of ATT members and students set up the Association in 1989. actors who shared entertaining On Thursday 4 April 2019 and other stakeholders. Three of the members were in stories throughout the evening. ATT President, Tracy Easman, The reception provided an attendance and were presented Guests were given the hosted a reception at the opportunity to say thank you with certificates and awards of opportunity to explore the entire London Transport Museum in to the many volunteers who appreciation for their dedication museum and learn about the conjunction with the ATT’s 30 th have given their time to assist to the Association. story of London and its transport Anniversary. the Association in its activities The celebrations also system over the last 200 years, More than 140 guests throughout the past 30 years. included a screening of a 30 th highlighting the powerful link attended the evening including Tracy shared a special anniversary video featuring ATT between transport and the representatives from other thank you to the ATT’s seven staff, sharing a timeline of tax growth of London’s culture and professional bodies, employers founder members who helped facts, a photobooth and three society since 1800. www.taxadvisermagazine.com | May 2019 49 BRIEFINGS

CIOT/ATT Journal of The Chartered Insti tute of Taxati on and The Associati on of Taxati on Technicians Women in tax: Scottish Branch Arti llery House, 30 Monck Street, London SW1P 2AP. tel: 020 7340 0550 The CIOT is a registered charity – No. EVENT taxati on of married men 1037771; The ATT is a registered In March, ATT Technical offi cer and women, and strongly charity – No. 803480 Helen Thornley spoke at the objected to the way that EDITORIAL Scotti sh branch of the Women married women were Editor-in-chief Bill Dodwell in Tax network on the topic of classed with ‘lunati cs, Publisher Jonathan Scriven No Vote, No Tax!–the Women’s Editor Emma Reitano ‘ infants, idiots and the [email protected] Tax Resistance League from insane’ by the Taxes Acts tel: 020 7400 4653 1909 to 1918’. It was a well- of the day. Web editor Sophia Bell att ended talk, kindly hosted by A previous talk to the [email protected] Johnston Carmichael at their London branch of Women ADVERTISING & MARKETING Edinburgh Offi ces. in Tax was recorded and Adverti sing Sales Jimmy Jobson The League were part can be found on the ATT adverti [email protected] of the women’s suff rage website at ti nyurl.com/ Commercial Marketi ng Director movement and campaigned novotenotax. Sanjeeta Patel for the vote by resisti ng their Helen will be speaking PRODUCTION taxes. As a result, their goods on her other topic of Producti on Assistant Nigel Hope were seized by the authoriti es research, early women Design & Technology Manager Elliott and sold at public aucti ons. pioneers in accountancy Tompkins Designer Jo Jamieson Some resisters were even sent at Accountex on 2 May to prison. Helen highlighted with a talk entitled ‘The Oﬃ ces LexisNexis, Quadrant House, one of Scotti sh members of the Two Ethels: How the The Quadrant, Sutt on, Surrey SM2 5AS. tel: 020 8686 9141 League, Dr Grace Cadell, who accountancy profession UK print subscripti on rate 2019: was a noted suff ragett e and responded to the admission Ayres Purdie – the League’s £103.00 for 12 issues surgeon as well as a tax resister. of women’. 2019 marks tax adviser and first woman Europe print subscripti on rate 2019: When she refused to pay her the centenary of the Sex to join any professional £136.00 for 12 issues O/S print subscripti on rate 2019: taxes in 1912, her furniture was Disqualification (Removal) accountancy body in 1909 £136.00 for 12 issues seized and publically aucti oned Act 1919, which finally – and Ethel Watts, the first at the Mercat Cross on the opened up the professions women to join the ICAEW For Tax Adviser magazine subscripti on queries contact 0330 161 1234. Royal Mile in Edinburgh. to women. Helen will be after being permitted to train or email The League also looking at the careers and as a Chartered Accountant [email protected] campaigned for the separate campaigning work of Ethel following the 1919 Act. For any queries regarding late deliveries/non-receipt please direct to Derek Waters, ADIT Magazine Distributi on Administrator Derek Waters [tel] 020 7400 2898 [email protected] ADIT Conference and Reprints: Any arti cle or issue may be purchased. Details available from [email protected] Graduation Ceremony planned © 2019 Chartered Insti tute of Taxati on (CIOT). MEMBERS subjects pertinent to ADIT along with their friends and Printed by Stones Ashford Ltd, This September will see audiences, likely to include families. This prestigious Ashford, Kent. two new events take place, international capital taxation, event will celebrate the This product comes from sustainable catering to ADIT holders comparative experiences achievements of the attending forest sources. Reproducti on, copying and international tax of GAAR across different graduates and award or extracti ng by any means of the professionals. countries, and the taxation of winners, in the company whole or part of this publicati on must not be undertaken without the On Friday 13 September, the digital economy, delivered of the CIOT President and writt en permission of the publishers. the CIOT will hold its first by a panel of experts from representatives from the ADIT This publicati on is intended to be dedicated ADIT Conference around the world. Academic Board. a general guide and cannot be a substi tute for professional advice. in central London. The Delegates will also The ADIT Conference and Neither the authors nor the publisher Conference will provide have the opportunity to Graduation Ceremony will accept any responsibility for loss the perfect opportunity for network with fellow ADIT round off a notable week occasioned to any person acti ng or refraining from acti ng as a result of ADIT students, International professionals, and will qualify for the ADIT community, material contained in this publicati on. Tax Affiliates and new ADIT for CPD credits. following IFA London 2019 graduates to engage with The Conference will be which will take place from ISSN NO: 1472-4502 topical, global tax issues in followed that evening by the 8-12 September and will the company of leading voices inaugural ADIT Graduation feature a Tax Education Zone from the international tax Ceremony, to which recent led by the CIOT, showcasing community. ADIT graduates and winners of the variety and depth of The agenda will feature the ADIT awards from around international tax education discussion of a range of the world will be welcomed in the UK.

50 May 2019 | www.taxadvisermagazine.com BRIEFINGS

BRIDGE THE GAP Carnwath views our departure from the CJEU with mixed feelings: admiration for the Bridge the Gap: an Evening with achievements of the court, but with a sense that the national frequently had to grapple with jurisdictions are able to cope Lord Carnwath difficult issues of European law, for themselves. such as the Halifax principle There followed a lively CHARITY of the European Union. His of abuse. The involvement of discussion, chaired by John Alison Lovejoy reports retirement in a year’s time Europe in issues of direct tax, Whiting. The conclusion On 5 March, Gray’s Inn was will shortly follow our leaving. starting with the Hoechst case was that many principles of awash with tax lawyers and other Lord Carnwath explained in 2001, led to a succession European Law had ‘taken root’. supporters of the tax charities in that in the 1970s he started of cross-border cases of Our attitude to avoidance the tax community, who were his career in Planning and increasing complexity in the has changed over the years gathered together in Gray’s Inn Local Government Chambers, Supreme Court. with the ‘tax gap’ closing. to meet Lord Carnwath, who where he worked as junior to Lord Carnwath has general However, there will always is currently a Justice in the Geoffrey Rippon QC, who had admiration for the work of the be an avoidance industry of Supreme Court. returned to Chambers in 1974, European court, but within some sort or another, however Steve Edge welcomed the having, as a member for the that a feeling quite apart low the ‘success rate’ and guests, thanked the programme Heath government, negotiated from Brexit, that we would unfortunately evasion is now sponsors and the Bridge the our entry to the Common need to review the reference increased. Gap team and introduced Market and EU. Getting up to procedure, to update the CILFIT Lord Carnwath also Lord Carnwath. speed with EU law was a steep criteria for references. There commended the work of the Lord Carnwath spoke learning curve. have also been cases where two tax charities, TaxAid and about the European court His first involvement with problems have been caused by Tax Help for Older People. and its links to UK tax law. tax law came in 1980 with difficulties of communication He has seen at first hand the He explained the parallels his appointment as Revenue between courts with different important work they do with between his story and the Junior. That coincided with the legal traditions – for example vulnerable people who have story of the UK’s involvement early cases following Ramsay, the Loyalty Management, serious tax problems. with Europe. He came into including Furness v Dawson. and Littlewoods cases in the Penny Hamilton thanked law about 50 years ago, just As a judge of the High Court Supreme Court. Lord Carnwath and the evening before the UK became part dealing with VAT cases he Consequently, Lord closed with a drinks reception.

May Day, May Day – Time is running out Renew your AML registration by 31 May 2019

Are you supervised by CIOT or ATT for AML?

It is a legal requirement for members in practice to be supervised for AML. Practising without supervision, for example by being late in renewing, means you will be acting contrary to the law. Failure to submit by 31 May 2019 and comply with all the Money Laundering Regulations requirements will result in referral to the Taxation Disciplinary Board (TDB). We will also be carrying out random checks to ensure information on the form is correct.

You should have already received a pre renewal notice which was issued in April and you will now have a link to the online renewal form.

If you have any queries get in touch now. We’re here and happy to help. www.taxadvisermagazine.com | May 2019 51 Branch events MAY-JUNE 2019 Where do you get your CPD?

Does your firm provide your CPD needs? Have you tried a local Branch event before? Would you like the opportunity to meet with CTAs, ATTs and other professionals in your local network? Why not go along to a local Branch event? Below we have listed branch events taking place up to 15 June 2019. However, please visit your local branch website as there may be some events which have been planned since this list was sent to print.

Birmingham & W Midlands North East England Thursday 16 May Thursday 16 May EOTS and share scheme OMBs William Franklin Paul Howard 18.15-20.15 14.00-17.00

Cumbria & SW Scotland Northern Ireland Thursday 16 May Wednesday 12 June Recent tax cases OMB planning opportunities Giles Mooney Pete Miller 14.00-17.00 17.15-19.15

East Anglia Shefﬁeld Tuesday 11 June Wednesday 5 June Partnership taxation International tax issues for Paul Howard businesses 14.00-17.00 Anne Fairpo 14.00-17.00 Essex Tuesday 21 May South London & Surrey IHT/CGT update Monday 3 June Paul Howard HNWIs: tax planning 18.00-20.00 Andrew McKenzie-Smart Guildford Harrow & North London 18.30-20.00 Thursday 16 May Share schemes Wednesday 12 June David Pett HMRC enquiries 18.45-20.15 Jeremy Johnson Croydon Thursday 6 June 18.30-20.00 Stamp duty Sean Randell South Wales 18.45-20.15 Tuesday 21 May Corporation tax update Thursday 13 June Pete Miller Tax treaties in the MLI and 15.00-17.30 Brexit era Jonathan Schwarz Sussex 18.45-20.15 Thursday 16 May Employer compliance London 18.30-20.00 Monday 20 May Indirect Tax Meeting: Thames Valley Financial services and general Monday 20 May VAT update Finance Bill update 18.00-19.00 Robert Jamieson Oxford Tuesday 21 May 18.30-19.30 Corporate tax conference Heather Self 09.30-17.00

Mid-Anglia Wednesday 5 June OMB day Peter Rayney and Rebecca Benneyworth 10.00-17.00

52 May 2019 | www.taxadvisermagazine.com MAGNETIC NORTH GUIDING YOU TO THE BEST TAX JOBS IN THE NORTH OF ENGLAND PART TIME GROUP TAX MANAGER TAX PARTNERS MANCHESTER / CHESHIRE FTE £75,000 to £80,000 MANCHESTER / CHESHIRE / LANCS. £Excellent You will be an experienced Tax Manager capable of leading and managing the group’s tax Our client is one of the fastest growing national practices. To service a sustained and operations and supporting the FD. You will have day-to-day responsibility for all aspects of tax increasing demand for tax advice from its SME client-base, and to keep delivering its compliance for Corporation Tax and VAT and will be the main support for any projects from growth plans, it is seeking tax partners in several of its local offices to enhance its a tax perspective (especially re planning for property transactions and group restructuring tax advisory capabilities. Both existing partners and aspirational ambitious self-starters activities). Ideally 3 days pw, based in M’cr and / or Cheshire office. REF: R2964 ready to make the step up will be considered. REF: M2938 MIXED TAX CONSULTANT TAX MANAGER/SENIOR MANAGER SHEFFIELD £40,000 to £50,000 doe LEEDS Circa £60,000 Our client, an independent firm in Sheffield is looking to recruit a mixed tax consultant who To succeed in this role, you need to have a something a little different - a passion to drive the is keen to take responsibility for an eclectic portfolio of UK clients. In this predominantly business forward and the confidence to play an influential role. This varied, broadly based role compliance-based role, you will become a trusted advisor to your clients by providing a encompasses M&A tax advice, international tax, as well as private client and corporate tax for first-class professional service. entrepreneurs. Creativity and ambition are rewarded at this firm who have a very clear market REF: S2963 focus and offer a great modern working environment. REF: S2958 CORPORATE TAX ASSOCIATE VAT ACCOUNTANT LIVERPOOL To £35,000 WILMSLOW, CHESHIRE £circa £40,000 Recently CTA qualified and looking to take your career to the next level? This is a great You will oversee the compliance processes, including preparation / review of VAT returns for opportunity if you want to work with a portfolio of some of the region’s high-profile around 20 VAT registrations across the group. There is also a significant amount of project corporate tax clients in a friendly and supportive team with excellent training and benefits based advisory work. This is a growing global group and as such a super opportunity that provided including flexible working. will suit a hands-on person keen for a new challenge in a fast-paced environment. REF: A2962 REF: R2941 TAX ASSISTANT EXPAT TAX AM / MGR. BRADFORD £25,000 + study support MANCHESTER / REMOTE To £50,000 plus bens Personal tax compliance specialist required to join an established team. This role reports to the This Big 4 firm, who are major players in the global mobility market, are looking to recruit Tax Manager who will provide an overview and guidance. It is essential that you can produce Assistant Managers and Managers with strong expatriate tax compliance skills. These new accurate compliance work including calculations of tax liabilities for a high volume of personal roles will primarily involve reviewing expatriate tax returns prepared by junior team tax clients. Study support is available; however, we are equally keen to hear from those qualified members. Flexible working, including part time and remote working and an excellent package by experience (who are perhaps not looking for progression). Free parking. REF: S2957 add to the attraction of this fantastic opportunity. REF: A2735

Tel: 0333 939 0190 Web: www.taxrecruit.co.uk Mike Longman FCA CTA: [email protected]; Ian Riley ACA: [email protected]; Alison Riordan: [email protected]; Sally Wright: [email protected] MEET YOUR ADVISERS

GEORGIANA HEAD ALISON TAIT Personal Tax Senior M&A Assistant Manager or Manager Director Director Sheffield – to £30,000 + benefits Leeds – to £50,000 + benefits Tel: 0113 280 6766 Tel: 0113 280 6764 Highly regarded independent firm seeks an ATT/AAT/CTA Working in this growing team, you will support the management Mob: 07957 842 402 Mob: 07971627 304 qualified personal tax senior to manage a portfolio of circa team in providing tax structuring and due diligence advice 200 clients. You will undertake the personal tax compliance on a broad range of transactions to clients of all sizes and [email protected] [email protected] work, maintain and develop client relationships, identify tax from a variety of industry sectors. The advice given and work planning opportunities, liaise with the client and HMRC and undertaken will cover both UK and international transactions. assist junior team members. You must have experience You will liaise regularly with solicitors, HMRC and your of managing a portfolio of personal tax clients and have a clients. You should be ACA/CTA qualified, with a corporate professional manner when dealing with clients. Study support tax background and an appetite to specialise in M&A work. Personal Tax Senior Assistant Managers available. Opportunity for advisory work. Call Alison Ref: 2814 Call Alison Ref: 2548 Manchester – £excellent Harrogate – £excellent Great role for a personal tax senior to join a large independent Great roles for recently qualified (ACA, ICAS or CTA) tax Corporate Tax Manager – Sheffield Corporate Tax Manager firm which is growing rapidly. In this role, you will deal with an professionals to join a rapidly growing, extremely successful interesting portfolio of cases ranging from barristers to HNW practice in Harrogate. Our client is looking for both personal £excellent + car allowance + benefits Lancaster – to £55,000 + benefits individuals, entrepreneurs and their families. Would consider tax and corporate tax specialists. You will become involved in a You will manage this independent firm’s corporate tax offering. This is a fantastic opportunity to join a highly regarded firm of someone who has an accounts background but who would wide range of compliance and advisory work. Plenty of scope This includes providing technical input, reviewing the complex accountants. Reporting to the Tax Director, you will be responsible like to specialise in personal tax. If you are ATT qualified, for progression and a great mentoring programme make these corporation tax computations, dealing with R&D and patent box for managing the corporate tax compliance, undertaking tax there is study support for CTA available. Would also consider great roles for candidates looking to develop their career in tax. tax claims, capital allowances work, assisting with corporate planning work and developing the juniors in the team. Clients someone more experienced who is looking for flexible or part Would also consider someone more experienced who is looking restructuring and other tax planning matters and dealing with are mainly entrepreneurial companies and SMEs, and you will time working. Call Georgiana Ref: 2816 for a 4 day week. Lovely location too. Call Georgiana Ref: 2711 HMRC enquiries. You should be ACA/CTA qualified and have be advising them on a broad range of issues including exit and experience of corporation tax R&D work. A great opportunity for succession planning, corporate reorganisations and shareholder someone who is looking to step up to be a manager, or is currently planning. You should be CTA/ACA qualified, with a minimum of Interim Tax Manager – Chesterfield Global Mobility an assistant manager and wanting to progress. Call Alison Ref: 2815 5 years’ corporate tax experience. Call Alison Ref: 2817 £50,000 to £65,000 + bonus FTE Manchester – £excellent Household name business in south Yorkshire seeks a computer A great opportunity for an expatriate tax/global mobility specialist Personal Tax Manager – Newcastle upon Tyne savvy corporate tax specialist to join their in-house tax team for to move in to an advisory role. Based in a large firm in central To £50,000 + benefits incl. flexible working a 12 to 14 month contract to cover a maternity leave. Ideally, you Manchester you will deal with a wide range of advisory projects This is an interesting role where you will be the compliance lead will have a relevant professional qualification e.g. ACA, ICAS or helping businesses to manage the tax of their global expatriate for a portfolio of technically complex high net worth clients. You CTA. In this role, you will deal with a mix of tax accounting, tax populations. Would consider someone who is currently more will also be involved with complex advisory projects that have compliance and will assist more senior staff with project work. compliance focused. Would consider someone relocating from an impact upon the compliance affairs of your clients. You will Some experience of property issues an advantage. Would London or another area. Would also consider part-time or flexible be responsible for managing a team, building close relationships consider a mix of days from the office and home working or working. Really interesting work with plenty of scope for personal with other offices, reviewing tax returns and resolving queries. part time or flexible working. Call Georgiana Ref: 2780 and professional development. Call Georgiana Ref: 2805 You should be ACA/CTA/STEP/ACCA qualified, with proven personal tax experience. Flexible working can be offered, including homeworking and part time hours. Call Alison Ref: 2810 VAT Senior or Assistant Manager Tax Partners Sheffield or Leeds – £28,000 to £38,000 Manchester and Stockport – £excellent Private Client Advisory Manager Accountancy firm seeks a Tax Senior or Assistant Manager to Excellent opportunities at partner level – our client is looking Manchester – To £50,000 + benefits join their team in either Leeds or Sheffield. You may currently for two tax partner hires. One role based in Stockport and one work for HMRC and be looking for a move into practice, or you in central Manchester. In each case, they seek an experienced This large firm in the Spinningfields area is looking for a private may work for another accountancy firm or in industry. Whatever qualified tax professional. It is likely that you will have a broad client tax manager to undertake a predominantly advisory based your professional background, you will need a sound academic ranging tax background and sound experience of dealing role. You will be responsible for managing and working on a background. In this broad ranging role, you will deal with clients with owner managers and their businesses. In these roles, the variety of project based work including exit planning, transactions, such as owner managed businesses, not for profit and public successful candidates will help manage an established tax capital taxes and tax efficient dividend planning. You will also sector groups and large corporates. You will be part of a team, team and will be actively involved in business development. assist in the more complex areas of compliance. You should be and there is scope for study support for CTA. Full or part time This firm is part of a wider network, and as a result has ACA/CTA/STEP qualified, with experience of working on advisory working considered. Call Georgiana Ref: 2790 excellent resources. Call Georgiana Ref: 2807 assignments and managing juniors. Call Alison Ref: 2747

www.georgianaheadrecruitment.com YOUR TAXATION RECRUITMENT SPECIALISTS MEET YOUR ADVISERS

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