One minute with Ceinwen Rees, partner at Macfarlanes.
What’s keeping you busy at work?
I work a lot with investment managers. Together with a steady diet of fund-structuring I have been very busy recently helping a number of managers develop team incentive arrangements using a combination of co-investment rights and carried interest. This private funds reward work is incredibly interesting; the law in this area has changed dramatically over the past few years meaning that I am having to apply very technical legislation to complex arrangements without any precedent to fall back on. Often the clients I am dealing with have a vested interest in my conclusions and are not tax experts. For me, this is perfect work: applying highly technical rules to complex commercial arrangements and having to explain it all in about three bullet points (or a diagram).
If you could make one change to a tax law or practice, what would it be?
I would make it all pause for a year. One of the appeals about tax for me has always been that it is constantly changing, so there’s no opportunity to get bored. That said, the current pace and extent of change is huge with domestic, EU and OECD changes coming thick and fast. I think one of the biggest challenges faced by any tax practitioner is keeping up, and I’m sure I am not alone in having a ‘guilt list’ of things I need to read up on. Right now the political environment runs against this, but I would like to give us all a fighting chance by pressing pause for (at least) a year.
What do you know now that you wish you’d known at the start of your career?
That no matter how experienced I get, I will never feel like I know enough. I’m not sure that this knowledge would actually have changed anything for me, but it might have saved me some uncomfortable moments of self-doubt.
Are there any new rules that are causing a problem?
Trying to figure out how credit funds should finance investments made through Luxembourg holding platforms has causing me some headaches this past year because Luxembourg has implemented the ATAD I corporate interest restriction rules without issuing any guidance on how the rules apply. A particularly tricky area has been how to treat gains made on discounted debt; whether such gains amount to ‘interest or interest equivalent’ is a hotly debated topic in Luxembourg. The answer matters because under the rules, interest deductibility is restricted if there is an excess of interest expense over interest income. If gains made on discounted debt are ‘interest or interest equivalent’, it is possible to extract such profits using interest payments (the tried and tested route in Luxembourg). If not, profits need to be extracted using an instrument that is deductible for Luxembourg tax purposes, but that is not treated as an interest expense and therefore not caught by the rules. So much of what I do involves Luxembourg that I go there at least every other month to keep up to date on developments and market trends.
What should we look out for in the next few months?
The disguised investment management fee rules and carry legislation came into effect in 2015. Since then we’ve had technical guidance and draft legislation. HMRC has, apparently, rewritten the guidance and has indicated that it will be published in the next few months. Given how heavily the industry has relied on the draft guidance in applying the rules, it will be very interesting to see what the revised guidance says. I imagine that I won’t be alone in looking back through all my past advice when the new guidance comes in!
Finally, you might not know this about me but…
I read voraciously and normally get through about 60 (fiction) books a year. When I’m not curled up with a book, I love getting muddy outside riding my BMX bike or playing with my dog, a Rhodesian Ridgeback called Jemima Puddle Pup (named via a complex family voting system).
One minute with Ceinwen Rees, partner at Macfarlanes.
What’s keeping you busy at work?
I work a lot with investment managers. Together with a steady diet of fund-structuring I have been very busy recently helping a number of managers develop team incentive arrangements using a combination of co-investment rights and carried interest. This private funds reward work is incredibly interesting; the law in this area has changed dramatically over the past few years meaning that I am having to apply very technical legislation to complex arrangements without any precedent to fall back on. Often the clients I am dealing with have a vested interest in my conclusions and are not tax experts. For me, this is perfect work: applying highly technical rules to complex commercial arrangements and having to explain it all in about three bullet points (or a diagram).
If you could make one change to a tax law or practice, what would it be?
I would make it all pause for a year. One of the appeals about tax for me has always been that it is constantly changing, so there’s no opportunity to get bored. That said, the current pace and extent of change is huge with domestic, EU and OECD changes coming thick and fast. I think one of the biggest challenges faced by any tax practitioner is keeping up, and I’m sure I am not alone in having a ‘guilt list’ of things I need to read up on. Right now the political environment runs against this, but I would like to give us all a fighting chance by pressing pause for (at least) a year.
What do you know now that you wish you’d known at the start of your career?
That no matter how experienced I get, I will never feel like I know enough. I’m not sure that this knowledge would actually have changed anything for me, but it might have saved me some uncomfortable moments of self-doubt.
Are there any new rules that are causing a problem?
Trying to figure out how credit funds should finance investments made through Luxembourg holding platforms has causing me some headaches this past year because Luxembourg has implemented the ATAD I corporate interest restriction rules without issuing any guidance on how the rules apply. A particularly tricky area has been how to treat gains made on discounted debt; whether such gains amount to ‘interest or interest equivalent’ is a hotly debated topic in Luxembourg. The answer matters because under the rules, interest deductibility is restricted if there is an excess of interest expense over interest income. If gains made on discounted debt are ‘interest or interest equivalent’, it is possible to extract such profits using interest payments (the tried and tested route in Luxembourg). If not, profits need to be extracted using an instrument that is deductible for Luxembourg tax purposes, but that is not treated as an interest expense and therefore not caught by the rules. So much of what I do involves Luxembourg that I go there at least every other month to keep up to date on developments and market trends.
What should we look out for in the next few months?
The disguised investment management fee rules and carry legislation came into effect in 2015. Since then we’ve had technical guidance and draft legislation. HMRC has, apparently, rewritten the guidance and has indicated that it will be published in the next few months. Given how heavily the industry has relied on the draft guidance in applying the rules, it will be very interesting to see what the revised guidance says. I imagine that I won’t be alone in looking back through all my past advice when the new guidance comes in!
Finally, you might not know this about me but…
I read voraciously and normally get through about 60 (fiction) books a year. When I’m not curled up with a book, I love getting muddy outside riding my BMX bike or playing with my dog, a Rhodesian Ridgeback called Jemima Puddle Pup (named via a complex family voting system).
