One minute with Bezhan Salehy, a tax policy specialist at Macfarlanes LLP.
What’s keeping you busy at work?
My job at Macfarlanes involves a mixture of policy and general tax advisory work.
In policy, the Spring Budget has generated more work than I have might have expected a week beforehand! The unexpected announcement of reforms to the non-dom regime is a fundamental restructuring of that part of the tax system.
On the advisory side, I’m spending a lot of time answering questions about Pillar Two – not only about the general application of the rules, but also increasingly in a transactional context and in relation to investment funds.
If you could make one change to tax...
The UK’s current corporation tax rules governing management expenses for companies with investment business have their origins in legislation enacted in 1915 and were last reformed in 2004. I don’t think they’re particularly well-designed for the modern world of global multinationals, and would change them in two ways.
First, I’d replace the current vague definition of ‘expenses of management’ with a more clearly defined term that is more user-friendly for both taxpayers and HMRC. The new definition could align more closely with the concept of ‘shareholder activities’ as defined in the OECD Transfer Pricing Guidelines.
Second, I’d look at whether, given the UK now has a largely territorial corporate tax system, the deductible expenses should be limited to those that relate to taxable UK activities (and not exempt foreign activities).
What do you know now that you wish you’d known at the start of your career?
When I was a large business tax inspector, to me tax was about particular arrangements entered into by individual businesses. When I became a policy official in HMRC head office I saw it was really about the design and integrity of legislative regimes. Then, when I moved to the Treasury, I saw it was really about politics – both domestic and between different countries (or blocs of countries) competing to defend their interests. All of those perspectives are useful, but I think it’s hard to overstate how political tax is, and the extent to which that shapes tax policy proposals, including seemingly technical ones.
Has a recent tax case caught your eye?
Over the past year or two several cases, including JTI Acquisitions and Blackrock, have dealt with the application of the loan relationship unallowable purpose rule. The tribunals have had to grapple with tricky issues including how to identify purpose, and how to attribute loan relationship debits between multiple purposes. These sorts of cases consume considerable HMRC and taxpayer resources and demonstrate the difficulty of applying a purpose-based test in the context of intra-group lending. From a policy perspective, I think it is debatable whether the unallowable purpose rule is still needed given the UK now has a mechanical corporate interest restriction.
Are there any books on tax that you’d recommend?
Banking on Failure, by Richard Collier, is well worth a read. It analyses the role of banks in the tax system and raises some fundamental policy questions that I imagine many tax practitioners, like me, won’t have thought about.
What should we look out for later this year?
Elections! The next UK general election is expected in the late Autumn, with the balance between tax and spending set to be a key issue. Whichever party wins will probably face a difficult fiscal picture, but as the Opposition the Labour Party is likely to receive increasing scrutiny around whether their spending plans are achievable without tax rises.
The US is also going to the polls in November, and the outcome of that election is likely to affect Washington’s stance on international tax initiatives such as Pillar One.
You might not know this about me but...
I spend a lot of my holidays travelling abroad to watch cricket. A highlight was appearing on TV during the recent World Cup in India – the cameraman seemed to like my West Indies shirt!
One minute with Bezhan Salehy, a tax policy specialist at Macfarlanes LLP.
What’s keeping you busy at work?
My job at Macfarlanes involves a mixture of policy and general tax advisory work.
In policy, the Spring Budget has generated more work than I have might have expected a week beforehand! The unexpected announcement of reforms to the non-dom regime is a fundamental restructuring of that part of the tax system.
On the advisory side, I’m spending a lot of time answering questions about Pillar Two – not only about the general application of the rules, but also increasingly in a transactional context and in relation to investment funds.
If you could make one change to tax...
The UK’s current corporation tax rules governing management expenses for companies with investment business have their origins in legislation enacted in 1915 and were last reformed in 2004. I don’t think they’re particularly well-designed for the modern world of global multinationals, and would change them in two ways.
First, I’d replace the current vague definition of ‘expenses of management’ with a more clearly defined term that is more user-friendly for both taxpayers and HMRC. The new definition could align more closely with the concept of ‘shareholder activities’ as defined in the OECD Transfer Pricing Guidelines.
Second, I’d look at whether, given the UK now has a largely territorial corporate tax system, the deductible expenses should be limited to those that relate to taxable UK activities (and not exempt foreign activities).
What do you know now that you wish you’d known at the start of your career?
When I was a large business tax inspector, to me tax was about particular arrangements entered into by individual businesses. When I became a policy official in HMRC head office I saw it was really about the design and integrity of legislative regimes. Then, when I moved to the Treasury, I saw it was really about politics – both domestic and between different countries (or blocs of countries) competing to defend their interests. All of those perspectives are useful, but I think it’s hard to overstate how political tax is, and the extent to which that shapes tax policy proposals, including seemingly technical ones.
Has a recent tax case caught your eye?
Over the past year or two several cases, including JTI Acquisitions and Blackrock, have dealt with the application of the loan relationship unallowable purpose rule. The tribunals have had to grapple with tricky issues including how to identify purpose, and how to attribute loan relationship debits between multiple purposes. These sorts of cases consume considerable HMRC and taxpayer resources and demonstrate the difficulty of applying a purpose-based test in the context of intra-group lending. From a policy perspective, I think it is debatable whether the unallowable purpose rule is still needed given the UK now has a mechanical corporate interest restriction.
Are there any books on tax that you’d recommend?
Banking on Failure, by Richard Collier, is well worth a read. It analyses the role of banks in the tax system and raises some fundamental policy questions that I imagine many tax practitioners, like me, won’t have thought about.
What should we look out for later this year?
Elections! The next UK general election is expected in the late Autumn, with the balance between tax and spending set to be a key issue. Whichever party wins will probably face a difficult fiscal picture, but as the Opposition the Labour Party is likely to receive increasing scrutiny around whether their spending plans are achievable without tax rises.
The US is also going to the polls in November, and the outcome of that election is likely to affect Washington’s stance on international tax initiatives such as Pillar One.
You might not know this about me but...
I spend a lot of my holidays travelling abroad to watch cricket. A highlight was appearing on TV during the recent World Cup in India – the cameraman seemed to like my West Indies shirt!
