One minute with Gideon Sanitt, Partner at Macfarlanes.
What’s keeping you busy at work?
We have several hearings falling at the same time, including one in the Supreme Court and others in the FTT. They cover the full range of technical tax points, complex factual matters and HMRC practice. Fortunately, we have a great team, with plenty of expertise to keep on top of it all.
If you could make one change to tax, what would it be?
When new tax rules are introduced, they are frequently the product of consultations with industry bodies and interested parties. Those rules may be accompanied by technical notes when they are put to Parliament. It is then common for businesses to engage with HMRC, during routine compliance checks, to discuss how those rules are applied.
There is, however, increasingly a disconnect between the process above and the extent to which it carries any weight when a dispute arises. It is often the case that these practical points can only be raised as part of a judicial review and only in the High Court. This is an expensive and complex process for all involved and the hurdle to succeeding is high.
A clearer basis for enforcing how rules are applied in practice would be beneficial; for example, a system of clearances or enforceable guidance, with the tribunal having jurisdiction to scrutinise these issues when they arise. With some exceptions, it is not really how we have done things in the UK and it would likely require more funding for HMRC and a different mind-set, but undermining confidence in how the tax system is operated would be significantly more damaging.
What do you know now that you wish you’d known at the start of your career?
This is something that I could have learnt at the start of my career but didn’t. As a newly qualified tax associate, I remember attending an all-parties tax meeting on a sizeable deal. The discussion was impenetrable to me, but I was surprised that the tax partner on our side – a very senior individual in our tax practice – was uncharacteristically quiet. After a while, however, he put up his hand and announced that he didn’t have a clue what everyone was talking about and could someone please explain it to him. It quickly became clear that no-one really understood what the issues were but hadn’t wanted to let on.
It still took me many years to develop the courage that if you don’t understand something, you should say so. There is no point in trying to piece things together afterwards and much of the time you will find that no-one else understands the issues either.
Has a recent change in HMRC practice impacted your work?
One of the reasons for my hobby horse about how tax rules are applied in practice concerns the salaried member rules. These rules introduce three conditions that are intended to identify whether a member of an LLP should be treated as a member for tax purposes or as an employee. How these conditions are applied has been subject to changes, whether as a result of changes to HMRC guidance or even as a result of the court taking a view that is contrary to HMRC’s own position (in the recent BlueCrest case). This is causing a significant amount of uncertainty in the industry, not just holding up tax filings over many years, but how firms fundamentally arrange themselves.
Finally, you might not know this about me but...
I have three teenage sons, which means that food is, if you will excuse the pun, an all-consuming topic of conversation in our household. Over the years, I have fancied myself as a bit of chef, although that has backfired somewhat in raising expectations (a lesson to be learned in business more generally). They may favour quantity, but I have excellent recipes for such varied dishes as cured salmon, Lancashire hotpot and French macarons. Don’t ask me to cater though, I have my hands full already.
One minute with Gideon Sanitt, Partner at Macfarlanes.
What’s keeping you busy at work?
We have several hearings falling at the same time, including one in the Supreme Court and others in the FTT. They cover the full range of technical tax points, complex factual matters and HMRC practice. Fortunately, we have a great team, with plenty of expertise to keep on top of it all.
If you could make one change to tax, what would it be?
When new tax rules are introduced, they are frequently the product of consultations with industry bodies and interested parties. Those rules may be accompanied by technical notes when they are put to Parliament. It is then common for businesses to engage with HMRC, during routine compliance checks, to discuss how those rules are applied.
There is, however, increasingly a disconnect between the process above and the extent to which it carries any weight when a dispute arises. It is often the case that these practical points can only be raised as part of a judicial review and only in the High Court. This is an expensive and complex process for all involved and the hurdle to succeeding is high.
A clearer basis for enforcing how rules are applied in practice would be beneficial; for example, a system of clearances or enforceable guidance, with the tribunal having jurisdiction to scrutinise these issues when they arise. With some exceptions, it is not really how we have done things in the UK and it would likely require more funding for HMRC and a different mind-set, but undermining confidence in how the tax system is operated would be significantly more damaging.
What do you know now that you wish you’d known at the start of your career?
This is something that I could have learnt at the start of my career but didn’t. As a newly qualified tax associate, I remember attending an all-parties tax meeting on a sizeable deal. The discussion was impenetrable to me, but I was surprised that the tax partner on our side – a very senior individual in our tax practice – was uncharacteristically quiet. After a while, however, he put up his hand and announced that he didn’t have a clue what everyone was talking about and could someone please explain it to him. It quickly became clear that no-one really understood what the issues were but hadn’t wanted to let on.
It still took me many years to develop the courage that if you don’t understand something, you should say so. There is no point in trying to piece things together afterwards and much of the time you will find that no-one else understands the issues either.
Has a recent change in HMRC practice impacted your work?
One of the reasons for my hobby horse about how tax rules are applied in practice concerns the salaried member rules. These rules introduce three conditions that are intended to identify whether a member of an LLP should be treated as a member for tax purposes or as an employee. How these conditions are applied has been subject to changes, whether as a result of changes to HMRC guidance or even as a result of the court taking a view that is contrary to HMRC’s own position (in the recent BlueCrest case). This is causing a significant amount of uncertainty in the industry, not just holding up tax filings over many years, but how firms fundamentally arrange themselves.
Finally, you might not know this about me but...
I have three teenage sons, which means that food is, if you will excuse the pun, an all-consuming topic of conversation in our household. Over the years, I have fancied myself as a bit of chef, although that has backfired somewhat in raising expectations (a lesson to be learned in business more generally). They may favour quantity, but I have excellent recipes for such varied dishes as cured salmon, Lancashire hotpot and French macarons. Don’t ask me to cater though, I have my hands full already.
