One minute with Sarah Gabbai, tax counsel at McDermott Will & Emery.
What’s keeping you busy at work?
My practice spans a broad range of UK corporate tax areas, from business reorganizations to international tax structuring to employee incentives to VAT. I am currently working on some business restructurings for major multinational clients, all of which are aimed at achieving various non-UK tax objectives, be it US foreign tax credit optimisation, utilising foreign tax attributes or moving operations to another country.
Historically, my main focus has been the usual UK corporate tax lawyering around M&A, private equity and finance transactions. Although I still do that type of work on a fairly regular basis, I am seeing more activity in the general UK corporate tax advisory space these days, particularly around employee incentives and post-acquisition business integrations. I also regularly work with our US tax teams on IP integration and supply chain planning, which tends to involve discussions around transfer pricing, diverted profits tax (DPT) and permanent establishment (PE) risks, as well as IP-specific tax rules.
If you could make one change to tax, what would it be?
That’s an easy one for me: I would resolve the loan charge debacle once and for all! The loan charge has clearly failed to achieve its objective of stopping the widespread proliferation of aggressive tax avoidance schemes involving some form of disguised remuneration. To say that it has created more problems than it has solved is a huge understatement. I think it is fair to say that disguised remuneration schemes and the use of non-compliant umbrella companies have now become endemic in the UK freelance and temporary labour markets.
What do you know now that you wish you’d known at the start of your career?
The importance of having an effective network. The best networks often come from people whom you have worked with before and who can provide good referral sources. I would have really appreciated more opportunities to work with in-house tax and legal teams at an earlier level in my career.
Are there any new rules that are causing a particular problem?
Although the UK seems to be ahead of other OECD countries in having already published draft rules implementing Pillar Two, I do wonder whether the amount of projected revenue (£2.2bn a year by 2027/28) justifies the enormous complexity of the rules themselves, as well as the additional administrative burden and associated costs that will inevitably be required of in-scope multinationals. The sheer thought of in-house tax teams having to put together suitable data collection mechanisms for calculating the group’s jurisdictional GLoBE ETR makes my head spin!
The new draft rules also beg the question as to whether the new 15% domestic minimum tax would effectively nullify the benefit of R&D reliefs and other UK reliefs that give rise to significant permanent differences. I can also see the finance company (partial) exemption (FC(P)E) under the UK’s CFC regime potentially being threatened by the new 15% multinational top-up tax, since the FC(P)E is a ‘CFC tax’ that is allocated to the CFC for GLoBE ETR purposes.
What issues have clients been raising recently?
Unsurprisingly, we are seeing MNE clients looking to future-proof against Pillar Two top-up taxes. We often find ourselves helping our MNE clients plan around their existing structures to avoid it becoming an issue in the first place.
We are also seeing some investment manager clients make use of the new qualifying asset holding company regime for their investment platforms. Insofar as there can be said to be any ‘Brexit dividends’, this would be it.
You might not know this about me but...
I was a violinist in a previous life, but I stopped in my late twenties because of work commitments. I’m also doing my very best to raise awareness of autism and other neurodivergent conditions as part of our firm’s D&I initiatives.
One minute with Sarah Gabbai, tax counsel at McDermott Will & Emery.
What’s keeping you busy at work?
My practice spans a broad range of UK corporate tax areas, from business reorganizations to international tax structuring to employee incentives to VAT. I am currently working on some business restructurings for major multinational clients, all of which are aimed at achieving various non-UK tax objectives, be it US foreign tax credit optimisation, utilising foreign tax attributes or moving operations to another country.
Historically, my main focus has been the usual UK corporate tax lawyering around M&A, private equity and finance transactions. Although I still do that type of work on a fairly regular basis, I am seeing more activity in the general UK corporate tax advisory space these days, particularly around employee incentives and post-acquisition business integrations. I also regularly work with our US tax teams on IP integration and supply chain planning, which tends to involve discussions around transfer pricing, diverted profits tax (DPT) and permanent establishment (PE) risks, as well as IP-specific tax rules.
If you could make one change to tax, what would it be?
That’s an easy one for me: I would resolve the loan charge debacle once and for all! The loan charge has clearly failed to achieve its objective of stopping the widespread proliferation of aggressive tax avoidance schemes involving some form of disguised remuneration. To say that it has created more problems than it has solved is a huge understatement. I think it is fair to say that disguised remuneration schemes and the use of non-compliant umbrella companies have now become endemic in the UK freelance and temporary labour markets.
What do you know now that you wish you’d known at the start of your career?
The importance of having an effective network. The best networks often come from people whom you have worked with before and who can provide good referral sources. I would have really appreciated more opportunities to work with in-house tax and legal teams at an earlier level in my career.
Are there any new rules that are causing a particular problem?
Although the UK seems to be ahead of other OECD countries in having already published draft rules implementing Pillar Two, I do wonder whether the amount of projected revenue (£2.2bn a year by 2027/28) justifies the enormous complexity of the rules themselves, as well as the additional administrative burden and associated costs that will inevitably be required of in-scope multinationals. The sheer thought of in-house tax teams having to put together suitable data collection mechanisms for calculating the group’s jurisdictional GLoBE ETR makes my head spin!
The new draft rules also beg the question as to whether the new 15% domestic minimum tax would effectively nullify the benefit of R&D reliefs and other UK reliefs that give rise to significant permanent differences. I can also see the finance company (partial) exemption (FC(P)E) under the UK’s CFC regime potentially being threatened by the new 15% multinational top-up tax, since the FC(P)E is a ‘CFC tax’ that is allocated to the CFC for GLoBE ETR purposes.
What issues have clients been raising recently?
Unsurprisingly, we are seeing MNE clients looking to future-proof against Pillar Two top-up taxes. We often find ourselves helping our MNE clients plan around their existing structures to avoid it becoming an issue in the first place.
We are also seeing some investment manager clients make use of the new qualifying asset holding company regime for their investment platforms. Insofar as there can be said to be any ‘Brexit dividends’, this would be it.
You might not know this about me but...
I was a violinist in a previous life, but I stopped in my late twenties because of work commitments. I’m also doing my very best to raise awareness of autism and other neurodivergent conditions as part of our firm’s D&I initiatives.
