One minute with Paul Davison, tax partner, Freshfields Bruckhaus Deringer
What’s keeping you busy at work?
An interesting range of things. On the transactional side, restructuring work is on the up, both for UK groups (retail in particular) and for non-UK groups looking to access the flexible English court scheme of arrangement procedure. And we continue to see plenty of contentious work, including the fallout from the European Commission’s final decision in their CFC state aid investigation – which is likely to be complex, multi-faceted and long-running.
If you could make one change to tax law, what would it be?
I would do away with the ‘stamp’ in stamp duty. The UK wants to be seen as a leader in fintech, and yet HMRC’s guidance requires a ‘business critical’ justification for any request to stamp documents on a same-day basis. (This is not a new, nor an original request: the OTS called for digitisation in 2017.)
What do you know now that you wish you’d known at the start of your career?
In an environment of ever-proliferating statutory regimes, guidance and case law, even the most experienced and eminent of us is operating to a greater or lesser extent in a state of managed ignorance. The skill for the adviser is in knowing where your gaps are. And the art is in filling them in without anyone noticing as you go along.
Are there any new rules that are causing a problem?
They may not qualify as ‘new’ any more (three years seems like a long time in tax), but I continue to find the FA 2016 anti-hybrid mismatches rules a particular bugbear. If you take the UK’s characteristic penchant for excessively elaborated statutory drafting, use it to write a regime targeting tax mismatches in a wide and varied range of different scenarios, and then deliberately (and with OECD BEPS action plan endorsement) leave out any tax avoidance purpose filter, perhaps it is no great surprise that the results are highly unsatisfactory. But it comes to something when HMRC writes over 400 pages of guidance on nearly 50 pages of legislation (and meanwhile ATAD covers the ground in a single page of operative rules).
Is there a recent tax case that has caught your eye?
The First-tier Tribunal decision in Oxford Instruments [2019] UKFTT 254 is interesting, and potentially concerning for those taxpayers who might have relied on HMRC clearance given on one set of anti-avoidance rules (the former anti-arbitrage regime) for practical comfort that their structures would not be challenged under another (the unallowable purposes rules). The decision is well-reasoned, as one would expect from Tony Beare, and the view taken on the facts seems quite hard to dispute. It is a salutary reminder not to take anything for granted when undertaking tax planning: always do your technical analysis, and think carefully about how your facts will look when judged with the benefit of hindsight (and when tested against the particular question that the relevant legislation poses).
What should we look out for later this year?
Internationally, the big question is what might come of the OECD consultation on taxing the digital economy. The answer may yet be ‘not much’, given the need for a critical mass of international consensus on what could be fundamental changes to decades-old profit allocation and nexus concepts. But in common (I suspect) with many others, back in 2013 I did not expect the BEPS action plan project to transform the international tax landscape in the way it already has. So I am certainly not writing this latest phase of the process off.
Finally, you might not know this about me but…
I’m a keen cook, and a regular runner. The former indulges a fondness for cake; the latter works hard to offset the inevitable effects.
One minute with Paul Davison, tax partner, Freshfields Bruckhaus Deringer
What’s keeping you busy at work?
An interesting range of things. On the transactional side, restructuring work is on the up, both for UK groups (retail in particular) and for non-UK groups looking to access the flexible English court scheme of arrangement procedure. And we continue to see plenty of contentious work, including the fallout from the European Commission’s final decision in their CFC state aid investigation – which is likely to be complex, multi-faceted and long-running.
If you could make one change to tax law, what would it be?
I would do away with the ‘stamp’ in stamp duty. The UK wants to be seen as a leader in fintech, and yet HMRC’s guidance requires a ‘business critical’ justification for any request to stamp documents on a same-day basis. (This is not a new, nor an original request: the OTS called for digitisation in 2017.)
What do you know now that you wish you’d known at the start of your career?
In an environment of ever-proliferating statutory regimes, guidance and case law, even the most experienced and eminent of us is operating to a greater or lesser extent in a state of managed ignorance. The skill for the adviser is in knowing where your gaps are. And the art is in filling them in without anyone noticing as you go along.
Are there any new rules that are causing a problem?
They may not qualify as ‘new’ any more (three years seems like a long time in tax), but I continue to find the FA 2016 anti-hybrid mismatches rules a particular bugbear. If you take the UK’s characteristic penchant for excessively elaborated statutory drafting, use it to write a regime targeting tax mismatches in a wide and varied range of different scenarios, and then deliberately (and with OECD BEPS action plan endorsement) leave out any tax avoidance purpose filter, perhaps it is no great surprise that the results are highly unsatisfactory. But it comes to something when HMRC writes over 400 pages of guidance on nearly 50 pages of legislation (and meanwhile ATAD covers the ground in a single page of operative rules).
Is there a recent tax case that has caught your eye?
The First-tier Tribunal decision in Oxford Instruments [2019] UKFTT 254 is interesting, and potentially concerning for those taxpayers who might have relied on HMRC clearance given on one set of anti-avoidance rules (the former anti-arbitrage regime) for practical comfort that their structures would not be challenged under another (the unallowable purposes rules). The decision is well-reasoned, as one would expect from Tony Beare, and the view taken on the facts seems quite hard to dispute. It is a salutary reminder not to take anything for granted when undertaking tax planning: always do your technical analysis, and think carefully about how your facts will look when judged with the benefit of hindsight (and when tested against the particular question that the relevant legislation poses).
What should we look out for later this year?
Internationally, the big question is what might come of the OECD consultation on taxing the digital economy. The answer may yet be ‘not much’, given the need for a critical mass of international consensus on what could be fundamental changes to decades-old profit allocation and nexus concepts. But in common (I suspect) with many others, back in 2013 I did not expect the BEPS action plan project to transform the international tax landscape in the way it already has. So I am certainly not writing this latest phase of the process off.
Finally, you might not know this about me but…
I’m a keen cook, and a regular runner. The former indulges a fondness for cake; the latter works hard to offset the inevitable effects.
