TW Ed reviews Bloomsbury's first Tax Conference aimed at advisers to Owner-Managed Businesses.
There was a first class panel of speakers, including Peter Rayney, Pete Miller, Anne Fairpo, Jonathan Shwarz, Steven Bone and Steve Collings. Tax professionals will already recognise these as established writers and speakers, and so without further ado, some gems from the conference itself:
Loans to Participators
Peter Rayney reminded us that CTA 2010 s 455 was extended in scope by FA 2013 not just to cover loans to partnerships where any partner is also a participator, but also to Trusts (where any Trustee or Beneficiary – actual or contingent – is also a participator).
Peter concluded with the impact of the TAAR on “phoenixism” as introduced by FA 2016, and how easy it would be to interpret the legislation so as to encroach on mainstream commercial arrangements. Pete Miller added it was regrettable that HMRC had not taken the opportunity to include, in their subsequent guidance, the assurance initially given that the vast majority of commercially-driven liquidations would be unaffected by the new legislation. (Readers may recall that this early assurance was prompted by requests by the profession for some kind of clearance procedure).
Penalties for Enablers and Facilitators
Anne Fairpo managed to scare most of the audience with the new penalties for “Enablers” and “Facilitators”.
“Enabling tax avoidance” includes designing, marketing and financing avoidance arrangements which are then defeated and it will of course likely be the first of those which impinges most on tax practitioners. Anne went into some detail on whether or not a practitioner might be caught out simply by advising innocently on some aspect of a larger scheme or arrangement to which he or she were not privy. She recommended that advisors take a leaf from barristers, who habitually set out the context of a query in their correspondence. This would have the benefit of helping to define the bounds of the adviser’s appreciation of the context, and serve to demonstrate that the advisor was not knowingly involved in designing schemes.
The facilitation of tax evasion was arguably more problematic for most practitioners, since it makes Principals (directors, partners and/or members) responsible for acts of their employees, and innocence is not an excuse. However:
- An employee must be undertaking such activity while acting for the firm, rather than on their own account, and
- There is a defence if the business has reasonable prevention procedures in place, commensurate with the size of the business, such as to include a formal policy. Anne warned, however, that while there were recognisable similarities with long standing anti-bribery protocols, HMRC had already stated that a “cut and paste” approach to the new measures would not be “reasonable”, in their opinion.
Corporate Intangibles Regime / Entrepreneurs’ Relief
To conclude the conference, Pete Miller chose to focus on a couple of current consultations:
- Reforms to Corporate Intangibles, and
- Alleviating the Entrepreneurs’ Relief (ER) 5% minimum holding requirement for shareholders looking to encourage inward equity investment (and thereby at risk of diluting their own holdings)
Pete was keen to point out that the de-grouping charge for tangibles had been largely resolved in 2011 but not for intangibles and that any opportunity to encourage symmetry in approach should not be wasted. Pete also observed that the likely cost of bringing pre-2002 assets within the “new” regime would perhaps not be so prohibitive as it would almost certainly have been when the regime was first introduced, although not everyone might prefer the new treatment (for instance, if the company already stood possessed of significant capital losses that might not otherwise get used).
With regard to the proposed ER measures, Pete found the proposals to be quite “niche” but pointed out that the current rules favoured employees through EMI more than the founding director/shareholders, since any proportion of holding under EMI could qualify. (Of course, that was before EMI lost its State Aid approval!).
All in all, this was an excellent conference, with a great deal to inform OMB advisors.