One minute with Jenny Doak, partner at Weil, Gotshal & Manges
What’s keeping you busy at work?
It’s impossible not to mention the Covid-19 crisis in this context. We are continuing to see some M&A transactions soldier on, but there has already been an uptick in restructuring work. Some practical issues that have emerged from office closures and travel restrictions include managing tax residence risks and stamp duty processes. Fortunately HMRC generally seems to be taking a pragmatic approach.
What's the best piece of advice you've received?
People worry about the risk of taking an action but often discount the risk of not acting. I think that is valuable to remember, whether in a career progression context or giving advice. Don’t ‘sit on the fence’.
Are there any new rules that are causing a particular problem?
Increasingly rules require UK tax professionals to understand the ‘bigger picture’ beyond the immediate transaction on which they are advising. The anti-hybrid rules (introduced back in 2016) are an obvious example of this, where we are required to understand features of other tax regimes at various different levels of the structure. Similar issues also come up applying the DAC 6 regime. How widely are the ‘arrangements’ to be cast – across multiple levels and jurisdictions? And is the intermediary expected (or assumed) to understand the tax law and transfer pricing regime in each jurisdiction?
Have clients changed their approach to tax risk over the years?
Clients can look for comfort through opinions from their advisers, but in grey areas may consider seeking clearance from HMRC. In my experience, HMRC has been increasingly cautious to provide a ‘clean’ clearance. One interesting development that we have seen in light of that uncertainty is companies exploring insurance to offload risk (not just in a warranty and indemnity context, but also for identified tax risks outside a transactional scenario).
What issues have you recently encountered on M&A transactions?
One common issue is the trend for ‘source’ jurisdictions to impose taxes on indirect transfers (i.e. where there is an indirect change in ownership of a company). One case hit the headlines over a decade ago when the Indian tax authorities sought to impose capital gains tax on the 2007 Hutchison-Vodafone deal. We, of course, have our own indirect transfer taxes here in the UK (on indirect disposals of North Sea interests and, more recently, on real estate).
Such taxes have become increasingly common and have evolved over the years. Whether they are triggered, and the point at which they are, is often unclear. These present difficult issues in negotiations; even where a risk allocation is agreed, provisions regarding reporting and conduct of the transaction are often hotly contested.
What should we look out for in 2020?
2020 was already shaping up to be an interesting year with Brexit on the horizon and the new majority government, but the path will undoubtedly be reshaped by the Covid-19 crisis.
Coronavirus aside, one item which caught my attention in the Budget was the review of the UK funds regime, including the consultation on ‘asset holding companies’. The consultation strikes a markedly different tone than we have become used to, indicating a real willingness to remove barriers to establishing asset holding companies in the UK. Some interesting ideas are floated, including extending the securitisation and REIT regimes, reforming the SSE and adapting the withholding tax and hybrid rules. It remains to be seen whether anything will materialise following the consultation.
And finally, you might not know this about me but...
A few years ago, I embraced running and have participated in a couple of London marathons. It has multiple benefits and has been a useful distraction during the ‘lockdown’!
One minute with Jenny Doak, partner at Weil, Gotshal & Manges
What’s keeping you busy at work?
It’s impossible not to mention the Covid-19 crisis in this context. We are continuing to see some M&A transactions soldier on, but there has already been an uptick in restructuring work. Some practical issues that have emerged from office closures and travel restrictions include managing tax residence risks and stamp duty processes. Fortunately HMRC generally seems to be taking a pragmatic approach.
What's the best piece of advice you've received?
People worry about the risk of taking an action but often discount the risk of not acting. I think that is valuable to remember, whether in a career progression context or giving advice. Don’t ‘sit on the fence’.
Are there any new rules that are causing a particular problem?
Increasingly rules require UK tax professionals to understand the ‘bigger picture’ beyond the immediate transaction on which they are advising. The anti-hybrid rules (introduced back in 2016) are an obvious example of this, where we are required to understand features of other tax regimes at various different levels of the structure. Similar issues also come up applying the DAC 6 regime. How widely are the ‘arrangements’ to be cast – across multiple levels and jurisdictions? And is the intermediary expected (or assumed) to understand the tax law and transfer pricing regime in each jurisdiction?
Have clients changed their approach to tax risk over the years?
Clients can look for comfort through opinions from their advisers, but in grey areas may consider seeking clearance from HMRC. In my experience, HMRC has been increasingly cautious to provide a ‘clean’ clearance. One interesting development that we have seen in light of that uncertainty is companies exploring insurance to offload risk (not just in a warranty and indemnity context, but also for identified tax risks outside a transactional scenario).
What issues have you recently encountered on M&A transactions?
One common issue is the trend for ‘source’ jurisdictions to impose taxes on indirect transfers (i.e. where there is an indirect change in ownership of a company). One case hit the headlines over a decade ago when the Indian tax authorities sought to impose capital gains tax on the 2007 Hutchison-Vodafone deal. We, of course, have our own indirect transfer taxes here in the UK (on indirect disposals of North Sea interests and, more recently, on real estate).
Such taxes have become increasingly common and have evolved over the years. Whether they are triggered, and the point at which they are, is often unclear. These present difficult issues in negotiations; even where a risk allocation is agreed, provisions regarding reporting and conduct of the transaction are often hotly contested.
What should we look out for in 2020?
2020 was already shaping up to be an interesting year with Brexit on the horizon and the new majority government, but the path will undoubtedly be reshaped by the Covid-19 crisis.
Coronavirus aside, one item which caught my attention in the Budget was the review of the UK funds regime, including the consultation on ‘asset holding companies’. The consultation strikes a markedly different tone than we have become used to, indicating a real willingness to remove barriers to establishing asset holding companies in the UK. Some interesting ideas are floated, including extending the securitisation and REIT regimes, reforming the SSE and adapting the withholding tax and hybrid rules. It remains to be seen whether anything will materialise following the consultation.
And finally, you might not know this about me but...
A few years ago, I embraced running and have participated in a couple of London marathons. It has multiple benefits and has been a useful distraction during the ‘lockdown’!
