One minute with Mimi Chan, Partner at PKF Littlejohn.
What’s keeping you busy at work?
Working as a tax practitioner in the insurance industry is fascinating. Beyond UK taxes, I can also gain practical insights into the implementation of corporation tax in other jurisdictions such as the UAE and Bermuda, as well as the interactions between US tax and Pillar Two.
What advice would you give to individuals at the start of their careers?
When faced with opportunities that potentially challenge your experience – such as delivering a presentation for the first time – try to resist the instinct to say ‘no’. Instead, seek guidance and support; colleagues are often more than happy to help. Seize these opportunities as a chance to develop, rather than letting them pass you by.
Has a recent tax case caught your eye?
The November 2024 case of Syngenta Holdings Ltd v HMRC [2024] UKFTT 998 (TC) has been of interest. The FTT ruled that a loan used to fund an intra-group share acquisition lacked commercial purpose and was primarily designed for securing tax deductions on interest payments. HMRC successfully denied the interest relief under CTA 2009 ss 441 and 442.
It is crucial that transactions need to have substantive commercial purposes beyond securing tax benefits. This case provides us with an insight into the FTT’s approach in assessing commercial rationale. It shows us that:
the commercial rationale needs to be clearly articulated and/or supported with robust financial quantification within contemporaneous documentation;
documents presented todirectors to assess the investment in question need to demonstrate positive commercial intent, rather than simply reassuring the directors that it isn’t a ‘bad investment’; and
the FTT will be sceptical of materials reviewed by tax advisers which seek to downplay the tax saving and minimise the risk of disputes with HMRC. This is particularly the case if these details are misaligned with other concurrent records.
What developments are you looking out for in 2025?
It will be interesting to observe how Pillar Two developments may continue to influence the direction of UK tax legislation in the coming years and whether it has the potential to encourage simplification of domestic tax systems.
For instance, while HMRC has previously acknowledged the possibility of repealing Diverted Profits Tax (DPT) with the UK’s adoption of Pillar Two, the regime remains in effect to protect the UK tax base. We do, however, expect to see a move towards simplification in the merging of DPT and UK corporation tax as one tax following the Spring 2025 consultation for DPT, transfer pricing and permanent establishments.
In the future, will HMRC revisit their stance on DPT, leading to its complete removal? The offshore receipts in respect of intangible property rules have been abolished for income arising from 31 December 2024. It remains to be seen whether there will be similar changes to other anti-avoidance legislation, particularly where there is overlap or where Pillar Two measures more comprehensively address tax planning arrangements.
Finally, you might not know this about me but...
I enjoy planning and embarking on cycling adventures, with my most memorable trip being a UK coast-to-coast journey. This unforgettable trip began with the cherished tradition of dipping the back wheel in the Irish Sea at Whitehaven followed by scenic rides and tackling several steep hills. It concluded with hauling the fully loaded bike again to the waters, this time to dip the front wheel in the North Sea in Sunderland to celebrate the finish!
One minute with Mimi Chan, Partner at PKF Littlejohn.
What’s keeping you busy at work?
Working as a tax practitioner in the insurance industry is fascinating. Beyond UK taxes, I can also gain practical insights into the implementation of corporation tax in other jurisdictions such as the UAE and Bermuda, as well as the interactions between US tax and Pillar Two.
What advice would you give to individuals at the start of their careers?
When faced with opportunities that potentially challenge your experience – such as delivering a presentation for the first time – try to resist the instinct to say ‘no’. Instead, seek guidance and support; colleagues are often more than happy to help. Seize these opportunities as a chance to develop, rather than letting them pass you by.
Has a recent tax case caught your eye?
The November 2024 case of Syngenta Holdings Ltd v HMRC [2024] UKFTT 998 (TC) has been of interest. The FTT ruled that a loan used to fund an intra-group share acquisition lacked commercial purpose and was primarily designed for securing tax deductions on interest payments. HMRC successfully denied the interest relief under CTA 2009 ss 441 and 442.
It is crucial that transactions need to have substantive commercial purposes beyond securing tax benefits. This case provides us with an insight into the FTT’s approach in assessing commercial rationale. It shows us that:
the commercial rationale needs to be clearly articulated and/or supported with robust financial quantification within contemporaneous documentation;
documents presented todirectors to assess the investment in question need to demonstrate positive commercial intent, rather than simply reassuring the directors that it isn’t a ‘bad investment’; and
the FTT will be sceptical of materials reviewed by tax advisers which seek to downplay the tax saving and minimise the risk of disputes with HMRC. This is particularly the case if these details are misaligned with other concurrent records.
What developments are you looking out for in 2025?
It will be interesting to observe how Pillar Two developments may continue to influence the direction of UK tax legislation in the coming years and whether it has the potential to encourage simplification of domestic tax systems.
For instance, while HMRC has previously acknowledged the possibility of repealing Diverted Profits Tax (DPT) with the UK’s adoption of Pillar Two, the regime remains in effect to protect the UK tax base. We do, however, expect to see a move towards simplification in the merging of DPT and UK corporation tax as one tax following the Spring 2025 consultation for DPT, transfer pricing and permanent establishments.
In the future, will HMRC revisit their stance on DPT, leading to its complete removal? The offshore receipts in respect of intangible property rules have been abolished for income arising from 31 December 2024. It remains to be seen whether there will be similar changes to other anti-avoidance legislation, particularly where there is overlap or where Pillar Two measures more comprehensively address tax planning arrangements.
Finally, you might not know this about me but...
I enjoy planning and embarking on cycling adventures, with my most memorable trip being a UK coast-to-coast journey. This unforgettable trip began with the cherished tradition of dipping the back wheel in the Irish Sea at Whitehaven followed by scenic rides and tackling several steep hills. It concluded with hauling the fully loaded bike again to the waters, this time to dip the front wheel in the North Sea in Sunderland to celebrate the finish!
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