One minute with Stephen Goldstraw, partner at Penningtons Manches Cooper.
What’s keeping you busy at work?
Capital reduction demergers. There are plenty of moving parts to the tax treatment of these, particularly if you are trying to partition the group under separate ownership. If you think you can dispense with one of the steps, you are probably missing something.
If you could make one change to tax, what would it be?
I am not the first to say this but the reduction of employers’ NICs would be my answer. This is an easy tax to raise because it doesn’t lose many votes, which also makes it an unlikely tax to cut. But it is a 13.8% charge simply for employing someone, which does not arise if they are engaged doing similar work on a self-employed basis. Employees don’t gain much more from the social security system than the self-employed do. Given that the cases suggest (to me anyway) that the distinction between employment and self-employment is to a large extent illusory, such a huge differential is difficult to justify.
What do you know now that you wish you’d known at the start of your career?
I began computer programming for fun around 1974, using punch cards which were sent to the large computer at Keele University, with the results being received a week later. If you made a programming error, it would take a week to become aware of this, and a further week to correct it. I failed to appreciate at the time that this was a possible career, and instead entered the law.
Are there any new rules that are causing a particular problem?
The anti-phoenixing legislation is not that new – it was introduced in 2016 – but to my knowledge there are no cases on it and it is usually impossible to work out whether you are within it. There are uncertainties around whether a taxpayer is still involved in carrying on a similar activity, and the legislation can only apply when ‘it is reasonable to assume’ that income tax avoidance is one of the main purposes of the winding up. So a taxpayer has to decide not whether one of their main purposes is to avoid income tax, but whether someone else might reasonably assume it is. Taxpayers deserve more certainty of tax treatment than this legislation offers them.
Has a recent tax case caught your eye?
The Court of Appeal decision in Brown and another v HMRC [2024] EWCA Civ 92 is unremarkable. The court held that a sub-sale scheme to avoid SDLT did not work, which nowadays comes as no surprise. But I did notice that the transactions were entered into in 2007. HMRC determined that SDLT was due in 2011. The FTT ruled that the scheme did not work in 2021. The Upper Tribunal agreed in 2022. And the Court of Appeal agreed in February. It took 17 years in total to determine this issue – is this really the best the legal system can do?
What should we look out for this year?
Well, there’s an election coming and as always it will be difficult to entirely ignore it. Politicians seem convinced that changing the capital allowance regime can improve the economy, so I assume there will be a raft of such changes regardless of the result. Obviously, the introduction of VAT on private school fees is also possible. Away from the election I am constantly surprised that SDLT has not been introduced on the purchase of a UK property-rich company. Likewise, following the recent consultation, I am surprised that the rule that mixed commercial and residential properties bear SDLT wholly at the commercial rates has still not been removed.
Finally, you might not know this about me but…
I dabble with digital audio workstation (DAW) software to produce music. Recently I have been experimenting with creating AI voices using an open source GitHub app. Though there are possible legal issues with AI voices, I tend to avoid these by not sharing any of the results.
One minute with Stephen Goldstraw, partner at Penningtons Manches Cooper.
What’s keeping you busy at work?
Capital reduction demergers. There are plenty of moving parts to the tax treatment of these, particularly if you are trying to partition the group under separate ownership. If you think you can dispense with one of the steps, you are probably missing something.
If you could make one change to tax, what would it be?
I am not the first to say this but the reduction of employers’ NICs would be my answer. This is an easy tax to raise because it doesn’t lose many votes, which also makes it an unlikely tax to cut. But it is a 13.8% charge simply for employing someone, which does not arise if they are engaged doing similar work on a self-employed basis. Employees don’t gain much more from the social security system than the self-employed do. Given that the cases suggest (to me anyway) that the distinction between employment and self-employment is to a large extent illusory, such a huge differential is difficult to justify.
What do you know now that you wish you’d known at the start of your career?
I began computer programming for fun around 1974, using punch cards which were sent to the large computer at Keele University, with the results being received a week later. If you made a programming error, it would take a week to become aware of this, and a further week to correct it. I failed to appreciate at the time that this was a possible career, and instead entered the law.
Are there any new rules that are causing a particular problem?
The anti-phoenixing legislation is not that new – it was introduced in 2016 – but to my knowledge there are no cases on it and it is usually impossible to work out whether you are within it. There are uncertainties around whether a taxpayer is still involved in carrying on a similar activity, and the legislation can only apply when ‘it is reasonable to assume’ that income tax avoidance is one of the main purposes of the winding up. So a taxpayer has to decide not whether one of their main purposes is to avoid income tax, but whether someone else might reasonably assume it is. Taxpayers deserve more certainty of tax treatment than this legislation offers them.
Has a recent tax case caught your eye?
The Court of Appeal decision in Brown and another v HMRC [2024] EWCA Civ 92 is unremarkable. The court held that a sub-sale scheme to avoid SDLT did not work, which nowadays comes as no surprise. But I did notice that the transactions were entered into in 2007. HMRC determined that SDLT was due in 2011. The FTT ruled that the scheme did not work in 2021. The Upper Tribunal agreed in 2022. And the Court of Appeal agreed in February. It took 17 years in total to determine this issue – is this really the best the legal system can do?
What should we look out for this year?
Well, there’s an election coming and as always it will be difficult to entirely ignore it. Politicians seem convinced that changing the capital allowance regime can improve the economy, so I assume there will be a raft of such changes regardless of the result. Obviously, the introduction of VAT on private school fees is also possible. Away from the election I am constantly surprised that SDLT has not been introduced on the purchase of a UK property-rich company. Likewise, following the recent consultation, I am surprised that the rule that mixed commercial and residential properties bear SDLT wholly at the commercial rates has still not been removed.
Finally, you might not know this about me but…
I dabble with digital audio workstation (DAW) software to produce music. Recently I have been experimenting with creating AI voices using an open source GitHub app. Though there are possible legal issues with AI voices, I tend to avoid these by not sharing any of the results.
