One minute with Dominic Robertson, Partner at Slaughter and May.
What’s keeping you busy at work?
Pillar Two. Partnership taxation (especially the salaried members rules). Tax disputes in the UK and elsewhere, especially on transfer pricing and double tax relief. Pensions tax issues from using DB surplus (a nice problem to have after years of advising on pension deficits). And several M&A transactions, of course.
If you could make one change to a tax law or practice, what would it be?
I would repeal Diverted Profits Tax (DPT). DPT achieved its political purpose long ago, in helping the Conservatives win re-election in 2015. (You might therefore argue that DPT thus facilitated Brexit, and thereby did more harm to the UK economy than any other tax measure since the 1770s, but I’ll leave this debate to the historians!) Although DPT still plays a valuable role in incentivising companies to settle transfer pricing disputes, this could be achieved more simply by allowing HMRC to levy tax-geared penalties, and require advance payment of tax, if a business litigates a transfer pricing dispute where the two counterparties have very different effective tax rates.
What do you know now that you wish you’d known at the start of your career?
The best advice I’ve received is to ensure that you really understand the commercial drivers for a transaction before diving into the technical details, and that you should keep the commercial position in mind throughout. You can see this in many tax disputes: for example, in some (but not all) of the unallowable purpose cases, the taxpayers and their advisers seemed to miss that they were entering into loans only for the purpose of generating interest deductions. In transactions, similarly, many advisers default to negotiating each point separately, and want to win every point because ‘it’s market’ (it usually isn’t), when they could add more value by figuring out which points really matter to their client, and by crafting a package solution which (ideally) gives each party what matters to them.
Has a recent tax case caught your eye?
The Court of Appeal judgment in Scottish Power, for two reasons. First, most large businesses will face regulatory investigations, where the costs of resolving these can be substantial, and tax authorities often have an aversion to giving any tax relief for the costs associated with the investigation. At the previous stage in the case, the Upper Tribunal held that the ban on tax relief for penalties extended not just to penalties themselves, but to any payments made as part of a ‘package’ deal which included penalties, or even to any payments made ‘under the threat of penalty’. The Court of Appeal has now gone to the opposite end of the spectrum, holding that the prohibition applies only to penalties themselves, and not to any payments made in lieu of a penalty. This is a big win for taxpayers (unless it’s overturned by the Supreme Court), but it doesn’t mean that taxpayers automatically get relief for other costs arising from a regulatory investigation. They should expect to be challenged on ‘wholly and exclusively’ grounds, and on whether the cost was within the scope of the company’s trade (based on McLaren). Secondly, Scottish Power is an unusual example of a judge deciding a tax case on constitutional grounds. Oversimplifying Falk LJ’s judgment, the taxpayer won because (a) judges shouldn’t make new tax law, (b) the ban on tax relief for penalties is itself a judge-made law, but was now well-established, so the court couldn’t overturn it, but equally (c) the court should not extend the judge-made rule beyond the bare minimum required by the earlier cases.
Finally, you might not know this about me but…
I’m even happier in the mountains than I am reading the Yellow Books (a high bar). I will shortly be heading to the Himalaya for the first time on a partner sabbatical. That said, when I climbed Kilimanjaro, one of our associates commented that the most impressive thing was that I survived five days without being able to read my emails.
One minute with Dominic Robertson, Partner at Slaughter and May.
What’s keeping you busy at work?
Pillar Two. Partnership taxation (especially the salaried members rules). Tax disputes in the UK and elsewhere, especially on transfer pricing and double tax relief. Pensions tax issues from using DB surplus (a nice problem to have after years of advising on pension deficits). And several M&A transactions, of course.
If you could make one change to a tax law or practice, what would it be?
I would repeal Diverted Profits Tax (DPT). DPT achieved its political purpose long ago, in helping the Conservatives win re-election in 2015. (You might therefore argue that DPT thus facilitated Brexit, and thereby did more harm to the UK economy than any other tax measure since the 1770s, but I’ll leave this debate to the historians!) Although DPT still plays a valuable role in incentivising companies to settle transfer pricing disputes, this could be achieved more simply by allowing HMRC to levy tax-geared penalties, and require advance payment of tax, if a business litigates a transfer pricing dispute where the two counterparties have very different effective tax rates.
What do you know now that you wish you’d known at the start of your career?
The best advice I’ve received is to ensure that you really understand the commercial drivers for a transaction before diving into the technical details, and that you should keep the commercial position in mind throughout. You can see this in many tax disputes: for example, in some (but not all) of the unallowable purpose cases, the taxpayers and their advisers seemed to miss that they were entering into loans only for the purpose of generating interest deductions. In transactions, similarly, many advisers default to negotiating each point separately, and want to win every point because ‘it’s market’ (it usually isn’t), when they could add more value by figuring out which points really matter to their client, and by crafting a package solution which (ideally) gives each party what matters to them.
Has a recent tax case caught your eye?
The Court of Appeal judgment in Scottish Power, for two reasons. First, most large businesses will face regulatory investigations, where the costs of resolving these can be substantial, and tax authorities often have an aversion to giving any tax relief for the costs associated with the investigation. At the previous stage in the case, the Upper Tribunal held that the ban on tax relief for penalties extended not just to penalties themselves, but to any payments made as part of a ‘package’ deal which included penalties, or even to any payments made ‘under the threat of penalty’. The Court of Appeal has now gone to the opposite end of the spectrum, holding that the prohibition applies only to penalties themselves, and not to any payments made in lieu of a penalty. This is a big win for taxpayers (unless it’s overturned by the Supreme Court), but it doesn’t mean that taxpayers automatically get relief for other costs arising from a regulatory investigation. They should expect to be challenged on ‘wholly and exclusively’ grounds, and on whether the cost was within the scope of the company’s trade (based on McLaren). Secondly, Scottish Power is an unusual example of a judge deciding a tax case on constitutional grounds. Oversimplifying Falk LJ’s judgment, the taxpayer won because (a) judges shouldn’t make new tax law, (b) the ban on tax relief for penalties is itself a judge-made law, but was now well-established, so the court couldn’t overturn it, but equally (c) the court should not extend the judge-made rule beyond the bare minimum required by the earlier cases.
Finally, you might not know this about me but…
I’m even happier in the mountains than I am reading the Yellow Books (a high bar). I will shortly be heading to the Himalaya for the first time on a partner sabbatical. That said, when I climbed Kilimanjaro, one of our associates commented that the most impressive thing was that I survived five days without being able to read my emails.
