One minute with Simon Whitehead, founding partner at Joseph Hage Aaronson.
What’s in your in-tray?
Dominating the top few inches is the new super tax introduced by FA 2 2015 s 38. It imposes a ring fenced 45% corporation tax on interest income upon the restitution of unlawfully levied tax. The design is novel, delaying the creation of an assessment into the future but, when it does arise, dating the charge back to the accounting period in which the interest was paid and recognized in P&L. It has generated a lot of concern for those who have been pursuing the recovery of excessively charged tax for many years. The questionable lawfulness of a tax beyond the normal operation of the corporation tax system which retrieves in substantial part the adequate indemnity required by EU law, has already spawned two judicial review claims and a series of other applications.
What’s the big development to look out for in 2016?
Personally I will be interested to see how the law on fiscal state aid develops over the next year. The Commission has now started to issue decisions but on what appear to be developing grounds.
Our long running dividend taxation claims are also now in the Court of Appeal on what may be the last run through. By the end of the year it will be interesting to see how close they will be to completion.
Given HMRC’s high success rate in avoidance cases before the courts and tribunals, is tax planning dead?
The use of group relief is tax planning. Making a contribution to a pension or ISA is tax planning. I’ve not seen anything to suggest that minimising a tax liability is anything other than the proper function of tax professionals. The recent cases you are referring to did not fail because the reduction of tax arose from tax planning but precisely because it didn’t; it arose, for example, from artificial transactional structures designed to create the impression of a trade where none existed.
If you could make one change to UK tax law or practice, what would it be?
That’s easy: the reduction in legislation unnecessarily introduced without consultation or even notice. Despite pronouncements of their best intentions not to do it, the last four governments have all succumbed to the temptation. It inevitably creates litigation to redress its, sometimes unintentional, effects.
What sets Joseph Hage Aaronson apart from other firms?
Three things. We follow neither the traditional solicitors’ firm nor barristers’ chambers models. We have tried to adopt the best qualities of both, bringing together an experienced group of outstanding lawyers across a variety of disciplines: not just barristers and solicitors but also forensic accountants and financial and other analysts as well.
This leads to the second feature: we are all about team work. On any case we bring a joint approach involving the clients closely. We are convinced that this collegiate approach produces the best ideas and results.
Thirdly, we concentrate on complex litigation and arbitration. We leave the non-contentious advisory work to others. Your readers will probably know us for our very large tax cases. However most of the firm’s work is now in international commercial cases and a broader range of EU cases involving sanctions, state aid and more general infringements across Europe. We are now 60 strong, with four QCs in the partnership, which means we can handle the most difficult cases from inside and outside the UK.
Which recent tax cases have caught your eye and why?
It’s not a tax case but I can see it having a very significant impact on tax practice. Last year the Supreme Court decision in Pham v Sec of State for the Home Department [2015] UKSC 19 recalibrated the law dramatically on the grounds by which administrative decisions, including those therefore of HMRC, could be challenged. It would seem that the ‘virtually unattainable test’ of irrationality from Wednesbury has been reinterpreted to emphasise the assessment of reasonableness. Significantly, the judgments of the Supreme Court describe that assessment as producing an outcome not far from the proportionality requirement of EU law. Where HMRC is called upon to exercise a discretion or make a judgement or any form of decision, it appears that gone are the days where that decision could only be challenged if it was shown to be irrational. Now consideration might be given to whether the decision went no further than was necessary to attain its objective. Take for example those decisions to assess to tax transfers made into pension funds which were at the time not known to be non-compliant. A proportionality test might require HMRC to tax only those transfers which were made for a tax avoidance motive and disregard those where the transfer was made for good financial reasons.
Aside from your immediate colleagues, whom in tax do you most admire?
I am one of the many introduced to tax by the late Peter Cussons. I owe my career to him more than any other.
Finally, you might not know this about me but …
I’m Australian and I cure meat in my garage. Those are not necessarily related.
One minute with Simon Whitehead, founding partner at Joseph Hage Aaronson.
What’s in your in-tray?
Dominating the top few inches is the new super tax introduced by FA 2 2015 s 38. It imposes a ring fenced 45% corporation tax on interest income upon the restitution of unlawfully levied tax. The design is novel, delaying the creation of an assessment into the future but, when it does arise, dating the charge back to the accounting period in which the interest was paid and recognized in P&L. It has generated a lot of concern for those who have been pursuing the recovery of excessively charged tax for many years. The questionable lawfulness of a tax beyond the normal operation of the corporation tax system which retrieves in substantial part the adequate indemnity required by EU law, has already spawned two judicial review claims and a series of other applications.
What’s the big development to look out for in 2016?
Personally I will be interested to see how the law on fiscal state aid develops over the next year. The Commission has now started to issue decisions but on what appear to be developing grounds.
Our long running dividend taxation claims are also now in the Court of Appeal on what may be the last run through. By the end of the year it will be interesting to see how close they will be to completion.
Given HMRC’s high success rate in avoidance cases before the courts and tribunals, is tax planning dead?
The use of group relief is tax planning. Making a contribution to a pension or ISA is tax planning. I’ve not seen anything to suggest that minimising a tax liability is anything other than the proper function of tax professionals. The recent cases you are referring to did not fail because the reduction of tax arose from tax planning but precisely because it didn’t; it arose, for example, from artificial transactional structures designed to create the impression of a trade where none existed.
If you could make one change to UK tax law or practice, what would it be?
That’s easy: the reduction in legislation unnecessarily introduced without consultation or even notice. Despite pronouncements of their best intentions not to do it, the last four governments have all succumbed to the temptation. It inevitably creates litigation to redress its, sometimes unintentional, effects.
What sets Joseph Hage Aaronson apart from other firms?
Three things. We follow neither the traditional solicitors’ firm nor barristers’ chambers models. We have tried to adopt the best qualities of both, bringing together an experienced group of outstanding lawyers across a variety of disciplines: not just barristers and solicitors but also forensic accountants and financial and other analysts as well.
This leads to the second feature: we are all about team work. On any case we bring a joint approach involving the clients closely. We are convinced that this collegiate approach produces the best ideas and results.
Thirdly, we concentrate on complex litigation and arbitration. We leave the non-contentious advisory work to others. Your readers will probably know us for our very large tax cases. However most of the firm’s work is now in international commercial cases and a broader range of EU cases involving sanctions, state aid and more general infringements across Europe. We are now 60 strong, with four QCs in the partnership, which means we can handle the most difficult cases from inside and outside the UK.
Which recent tax cases have caught your eye and why?
It’s not a tax case but I can see it having a very significant impact on tax practice. Last year the Supreme Court decision in Pham v Sec of State for the Home Department [2015] UKSC 19 recalibrated the law dramatically on the grounds by which administrative decisions, including those therefore of HMRC, could be challenged. It would seem that the ‘virtually unattainable test’ of irrationality from Wednesbury has been reinterpreted to emphasise the assessment of reasonableness. Significantly, the judgments of the Supreme Court describe that assessment as producing an outcome not far from the proportionality requirement of EU law. Where HMRC is called upon to exercise a discretion or make a judgement or any form of decision, it appears that gone are the days where that decision could only be challenged if it was shown to be irrational. Now consideration might be given to whether the decision went no further than was necessary to attain its objective. Take for example those decisions to assess to tax transfers made into pension funds which were at the time not known to be non-compliant. A proportionality test might require HMRC to tax only those transfers which were made for a tax avoidance motive and disregard those where the transfer was made for good financial reasons.
Aside from your immediate colleagues, whom in tax do you most admire?
I am one of the many introduced to tax by the late Peter Cussons. I owe my career to him more than any other.
Finally, you might not know this about me but …
I’m Australian and I cure meat in my garage. Those are not necessarily related.
