Autumn Statement – Fieldfisher Partners’ contribution to PLC comments article

avatar Posted on November 27th, 2015 by Andrew Prowse

Here are the Fieldfisher tax partners’ comments on Autumn Statement 2015, as published by Practical Law as part of its leading tax experts’ comments article:

Nick Beecham:

An arsenal of anti-avoidance provisions introduced in the past 9 years has resulted in Stamp Duty Land Tax (SDLT) becoming a cash cow for the government. This is particularly the case for SDLT charged on dwellings where the rates have become much higher than those applicable to commercial or mixed property.

Today, even higher rates of SDLT were announced on purchases of buy to let residential properties and second homes, to take effect from 1 April 2016. The higher rates will be 3% above the current SDLT rates. The government will consult on reliefs for corporates or funds making significant investments in residential property, possibly by reference to a test that they own more than 15 residential properties.

It remains to be seen whether or not the increase will apply to a company purchasing a dwelling for letting to a connected individual which is already subject to the penal 15% rate.

Hartley Foster:

Another Autumn Statement, another raft of measures with the aim of reducing tax avoidance: “Action against … disguised remuneration schemes and [those] who have not yet paid their fair share of tax.”, “legislation to counter 2 types of avoidance”, … . Further investment in the commitment to reduce avoidance. New measures announced to tackle tax evasion. As inevitable a mantra as “the sun rises”.

It has been suggested that one of the key proposals will be the introduction of a tax-geared penalty of 60% where the GAAR has been applied. Given that, in its 2 years of operation, there has yet to be a case referred to the GAAR panel, the rationale for this proposal may well be pour encourager les autres, not revenue raising. This measure is projected to raise £10million in 2016. In terms of closing the tax gap, that is barely even a finger-nail in the dyke.

The criminal offence of failing to prevent tax evasion will be introduced. One of the key issues to be determined here is the standard against which a corporate will be judged, if it is held to have failed to prevent an agent from committing tax evasion; will “adequate” procedures (per s.7(2), Bribery Act 2010) be the test?

Graeme Nuttall OBE:

The glass half full view of employee share plans, based on a brief para 3.24 Autumn Statement mention, is that their policy value clearly remains recognised by the UK Government and any necessary technical tweaks, e.g. to help internationally mobile option holders, will continue to be made. However, counteracting tax avoidance remains at the forefront of this Autumn Statement including reviews of salary sacrifice arrangements and contrived entrepreneurs’ relief structures together with further action on earned remuneration avoidance schemes and a new targeted anti-avoidance provision in the transactions in securities rules. Perhaps the new partial exemption for charitable trusts from the loans to participators rules keeps open the potential for an additional technical tweak to exempt loans to employee trusts from these rules. This would help maintain the current UK growth of the employee ownership business model. I’ll drink to that.

Andrew Prowse:

Aside from another slew of anti-avoidance announcements and a further assault on second homes and buy-to-lets, it was a relatively low key affair, especially on the corporate tax front – about time (it won’t last)!

“Apprenticeship” is a virtuous word and “levy” is more quaint than “tax”, but the new payroll tax is a big deal. There is a £3m pay bill threshold, but it will add 0.5% to the tax bill of many businesses from April 2017, particularly people-heavy ones – like beleaguered retailers, which already have to manage the living wage. The tax is expected to raise over £11bn over five years.

The Government aims to reduce opportunities to convert income to capital gain for tax advantage. Consultation on the company distribution rules is due this year, and amendments to the transactions in securities rules, together with a new TAAR, will be included in Finance Bill 2016. The intention may be to address specific structures, involving voluntary liquidations, but having narrowed the TiS rules, a re-widening of them is unwelcome, risking uncertainty for routine transactions.

More promisingly, the Government will consider amending the FA 2015 changes to entrepreneurs’ relief to ensure availability for certain “genuine commercial transactions”. If the changes preventing “ManCo” structures from qualifying could be made more focused, that would be good.

More generally, the digitisation of tax administration, reiterated on Wednesday, is inevitable. Will tax payment dates, other than just CGT on residential property disposals as currently announced, be accelerated towards the taxable event…?


Autumn Statement – Equity Incentives

avatar Posted on November 26th, 2015 by Mark Gearing

Given the myriad of technical changes to the legislation governing employee share plans introduced over the last couple of years, it is probably a welcome relief to advisers and businesses alike that this year’s Autumn Statement contained just one announcement in this area: some further technical changes will be introduced! Primarily these are intended to provide more consistency between rules governing the various tax-advantaged share plans and to clarify the tax treatment of internationally mobile employees holding employment-related securities and options.

Perhaps more interesting (or worrying depending on your circumstances) for taxpayers and businesses is the indication that action will be taken against users of so-called “disguised remuneration” schemes who have not paid their “fair share” of tax. The government may legislate in a future Finance Bill to close down any schemes “intended to avoid tax on earned income”. Where necessary, that legislation will take effect from 25 November 2015.

We shall keep you updated on any further announcements, including any proposed changes to entrepreneurs’ relief relating to “contrived structures”. As ever with tax, the devil will be in the detail!


Autumn Statement – PLC Practitioners’ Piece

avatar Posted on November 26th, 2015 by Andrew Prowse

The Fieldfisher Tax & Structuring partners have again contributed to PLC’s expert practitioners’ piece commenting on yesterday’s Autumn Statement (due to be published by PLC tomorrow).  We will be posting our comments on the blog tomorrow. In the meantime, there are comments in the blogs below and further comments will be posted in the course of the day.

Here are links to a selection of the main publications from the Treasury:

Main Autumn Statement:

Autumn Statement Speech:

Tax and Tax Credit Rates and Thresholds for 2016-17 (HTML policy paper):

ISA qualifying investments: consultation on whether to include investment based crowdfunding: (see pdf attached)

Spending Review and Autumn Statement 2015: Key Announcements:



Penalties on tax avoidance

avatar Posted on November 25th, 2015 by Amanda Gordon-Napier-Tompkinson

In the Spending Review and Autumn Statement 2015, the Chancellor announced that the Government will introduce a punitive penalty of 60% of tax due where HM Revenue & Customs successfully applies the General Anti-Abuse Rule (“GAAR”) on an abusive tax arrangement.  In addition, the Government intends to change the procedural requirements under GAAR with the aim of attacking marketed avoidance schemes more effectively.

Read the Spending Review and Autumn Statement 2015 documents at



Autumn Budget; 30 days to pay CGT

avatar Posted on November 25th, 2015 by Penny Wotton

The Chancellor’s surprise announcement in the Autumn Budget today of the payment of CGT within 30 days of disposal of residential properties from 2019 is likely to raise concerns about the introduction of a wider programme of acceleration of tax payments as part of the new digital tax return system which the Government plans to introduce from 2019.


Withholding Tax & UK Source Interest

avatar Posted on November 23rd, 2015 by Andrew Prowse

A new case has confirmed the way in which to determine whether interest is “UK source” and so potentially subject to 20% UK withholding tax (UK WHT).

Whilst there are various provisions under which UK WHT applies, a good working assumption is that 20% UK WHT may apply where “yearly interest arising in the UK” is paid.  Whether it will actually apply will depend on who is paying the interest and who is receiving the interest, and whether any domestic law or double tax treaty exemption applies. “Yearly interest” broadly means interest under a loan with a term of a year or more (or which may continue for a year or more – eg rolling facilities). “Arising in the UK”  means that the interest must be UK source interest.  This is what the present case was about – Ardmore & Another v HMRC

There is precious little authority as to the meaning of “UK source”.  The leading case is Westminster Bank Executor and Trustee Co (Channel Islands) Ltd v National Bank of Greece SA [1971], or the Greek Bank case, for short!

In the present case, the appellants argued before the Upper Tribunal that:

  • the source of interest should properly be found by ascertaining the “nationality” or the “residence” of the relevant loan instrument
  • if that was not accepted, then the First Tier Tribunal erred in law by giving too much weight to the residence of the debtor as a criterion (and, where the loan instrument in question is subject to the laws of a foreign jurisdiction, the question of the residence of the debtor should not be a factor at all)
  • in the alternative, the source of the interest is the place where the credit is provided.

These arguments were broadly rejected by the Upper Tribunal, in a judgment that is very much “as you were”, reaffirming the principles derived from the Greek Bank case and requiring a “multi-factorial” approach to be taken.

The Tribunal concluded that the Greek Bank case, which was binding on it, decided (on the facts of the case) that: “Relevant factors were the residence of the debtor and the original guarantor, the location of the security originally provided, and the ultimate, or substantive, source of discharge of the debtor’s obligation“.  The Upper Tribunal found that “the source of the obligation must be ascertained by a multi-factorial enquiry” and “the legal situs of the debt is not a relevant factor for income tax purposes“.

The Upper Tribunal noted that HMRC consider “the residence of the debtor to be the most important [factor] because this, along with the location of the debtor’s assets, will influence where the creditor will sue for payment of the interest and repayment of the loan“.  However, the Upper Tribunal took the view that residence “is only one factor, and cannot be elevated into the most important factor, whether alone or when combined with the question of the location of the debtor’s assets.  The Greek Bank case did not determine any hierarchy of materiality or weight, and none can be inferred.  The question is simply a multi-factorial one, having regard to all the circumstances and all the relevant facts“.

Whilst each case turns on its facts, the Ardmore case is a useful re-examination of the meaning of what is quite an abstract term: UK source.  The case only goes so far though, because, wherever a “multi-factorial” approach is to be adopted, especially where there are no hard and fast rules as to the weight to be allocated to each factor, there will be areas of grey, and it pays as a borrower to check the UK WHT position of your debt in advance of entering into it.  It would be a nasty surprise to find that you should have been operating 20% UK WHT, not least where there is a contractual obligation on the loan to the effect that you have to “gross-up” payments to the lender where such WHT applies.  Watch out for the WHT analysis on any loans you enter into, whether all within the UK or not and whether arm’s length or not, and remember that UK WHT is the obligation of the person paying the interest, not the person receiving it.


Employee ownership provides a winning combination of better business performance and happier staff

avatar Posted on September 28th, 2015 by Graeme Nuttall OBE

Employee ownership works in all sectors and sizes of business, and throughout the business life-cycle. The MoralDNA of Employee-Owned Companies helps us understand how this business model succeeds across such diverse situations – it is driven by a distinctive ethical dimension.

Previous research in this series showed higher ethical scores from managers in organisations where they are likely to be owners, such as in co-ops and partnerships. This new research, the first to focus on employee trust owned companies, provides further evidence that how a business is owned and governed impacts positively on the ethics of those who work in it, and this has real commercial significance. There is a link between higher ethical scores and better business performance. Managers with higher MoralDNA scores on the ethics of care and reason rate their organisations highly for financial performance.

This earlier research raised important questions for me. What would a survey of managers in employee-owned companies reveal? More importantly how would employee owners respond?

I am grateful to all involved in answering these questions. The research shows significantly higher scores in the values of fairness, trust, excellence, humility and courage in employee-owned companies, with no significant differences between seniority levels. When asked, employee owners agreed it is the way their company is owned and governed that drives their commitment and the performance of their business. These responses from employee owners send a strong signal to other businesses that want to develop and sustain good employee engagement and achieve aims such as attracting and retaining committed staff, encouraging long term decision making, managing risk, promoting customer satisfaction and achieving innovation.

Consider adopting the employee ownership business model.

Graeme Nuttall OBE, Partner, Fieldfisher LLP and, as the Government’s independent adviser, author of Sharing Success: The Nuttall Review of Employee Ownership

First published in The MoralDNA of Employee-Owned Companies (CMI, 25 September 2015)


2015 UK Employee Ownership Award nominations open

avatar Posted on September 4th, 2015 by Graeme Nuttall OBE

It is time to submit nominations for the 2015 UK Employee Ownership Awards. Entries are free and made online. You may nominate any employee owned company including your own, or an employee owner, even yourself, for an award. Do you know an inspiring employee who deserves to be recognised as Employee Owner of the Year? Has your business delivered the product or service Innovation of the Year? If your company is new to employee ownership (since August 2012) can you claim the Rising Star award? If yours is a well-established employee owned company then why not put forward your claim to be the Employee Owned Business of the Year? And who will receive this year’s Philip Baxendale Fellowship Award?

The deadline is 5pm Monday 14 September 2015. Some previous award winners are mentioned below along with the citations for each award to encourage you to make nominations for this year’s awards.

Employee Owner of the Year
“This Award is to celebrate an individual, irrespective of their seniority and whether they operate on the front line of the business or not, who has done the most to promote and develop employee ownership inside an employee owned organisation”

In a new employee owned company, has one particular employee owner been inspirational in making employee ownership succeed? In an established company is it time to recognise one individual’s commitment to EO? A previous Winner was Des Fitzgerald, the newly retired Head of Retail Operations, Waitrose, for his “inspirational role” in “leading by example”.

Innovation of the Year
“This Innovation Award is for the most compelling example of innovation within an employee owned organisation. The innovation must be currently enhancing the services and/or products of the business and the outcomes the business achieves”

Mark Steeple of Gripple Automation was the Winner in 2014 (when the award was an Employee Innovation Award). Mark Steeple, who had been at Gripple for 11 years and started as an apprentice trained engineer, had asked the question: “Why don’t we make our own machines?” As a hallmark of employee-ownership, Gripple invited Mark to submit a paper to the Board, the idea was signed off and a new business was born.

Rising Star of the Year
“This Award is to recognise the success of an organisation that has become employee owned no more than three years prior to September 2015. It is to celebrate a business that is already, in its early life, becoming an effective company with a very strong culture of employee ownership.”

In 2014 the Winner was Mary Knowles Homecare Partnership Limited a start-up with employee ownership (this is a link to a YouTube interview with its founder Dan Knowles).

Employee Owned Business of the Year
“This Award, for well established employee owned businesses, focuses on brilliant performance in the sector. It is an Award that recognises the best all round performance of an employee owned company during the year to September 2015. The key criteria for this Award are outstanding achievements relating to services and/or products plus overall performance. Nominations for this Award are sought from all employee owned organisations very much including those delivering public services”

In 2014 the Winner was Circle Holdings plc (Circle Partnership) which  is an employee co-owned partnership with a social mission to make healthcare better for patients and forms the largest partnership of healthcare professionals in Europe.

The UK employee ownership sector awards were introduced nine years ago by Baxendale. Previously called the Philip Baxendale Awards, the UK Employee Ownership Awards are now managed by the Employee Ownership Association (EOA). Baxendale’s involvement continues as the sponsor for this year’s Awards which will be presented at the Gala Dinner on the first evening of the EOA Annual Conference on 23rd November at the Hilton Birmingham Metropole Hotel. The legacy of Philip Baxendale continues to be recognised through the Philip Baxendale Fellowship Award.

Philip Baxendale Fellowship Award
“This Award seeks nominations proposing a single individual who has in the past made or is currently making an outstanding contribution to the growth of employee ownership in the UK. The winner of this Award will be someone who has an indisputable commitment to employee ownership and whose influence and impact within the sector is clear and widely recognised”

Please note that previous winners of the Philip Baxendale Award have been: Stephen May, Graeme Nuttall, Margaret Elliot and Fred Bowden Snr. Therefore please do avoid nominations for any of these.

Nominations procedure
The process is simple. Please go to the nominations page on the EOA web site:

(a) Tell the EOA who you are
(b) Tell the EOA who you are nominating
(c) Tell the EOA which categor/ies you are nominating in
(d) Tell the EOA why you think you/they deserve the Award
(e) Submit your application online by the required deadline: 5pm Monday 14 September 2015



Summer Budget 2015 – PLC Coverage – Tax Practitioners’ Expert View

avatar Posted on July 13th, 2015 by Andrew Prowse

The Fieldfisher Tax & Structuring Group once again contributed to PLC’s Tax Practitioners’ piece on Budget 2015.  Here are our contributions:

Hartley Foster

On the contentious tax front, a quiet budget. Although whether the increase in the differential of rates between Corporation Tax and Diverted Profits Tax will act as a motivating factor for challenges to the latter remains to be seen.

The controversial “direct recovery of debts” measure, which enables HMRC to secure payment of tax debts directly from bank accounts, will be introduced and will have effect on and after the date of Royal Assent of Finance (No 2) Act 2015. Draft secondary legislation will be published alongside. HMRC estimate that the measure will be applied to around 11,000 cases per year, and that approximately 200 objections will be generated each year. Although some of the concerns that were raised during the consultation process have been addressed (such as by introducing a right to appeal to the County Court and seeking to protect “innocent” joint account holders, by ensuring that joint accounts always have a lower priority than other accounts), an undesirable consequence of the measure – that it has the potential to make HMRC a de facto preferential creditor – remains.

Graeme Nuttall, OBE

The nascent Nuttall Review share buy-back regime received a setback in the Summer Budget 2015, with the news that the dividend tax credit regime would be replaced from April 2016. Changes to the Companies Act 2006 (from 30 April 2013 and amended on 6 April 2015) deregulated share buy-backs, especially when pursuant to employees’ share schemes, and permitted treasury shares in private companies. The idea was to open up an alternative form of internal market to support private company employee share plans, one that did not require an employee trust to warehouse shares. Although HM Revenue & Customs published helpful guidance in 2013, unfortunately no accompanying changes were made to tax law or published practice to ameliorate the usual income tax treatment of share buy-back proceeds. But at least purchases from basic rate tax paying employees benefited from the dividend tax credit, such that no income tax was payable. This Summer Budget 2015 change adds a 7.5% tax charge when buying back shares that are subject to income tax treatment, subject to the new tax-free dividend allowance of £5,000 a year. From April 2016 the Government will set the dividend tax rates at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers (instead of 25% of the net dividend) and 38.1% for additional rate taxpayers (instead of 30.6% of the net dividend). In contrast, capital gains tax generally applies when an employee trust buys shares from employees, and income tax is not charged in some circumstances on the buy-back of employee shareholder shares. The Government will consult in Autumn 2015 on the rules for company distributions. There is therefore a timely opportunity to lobby for changes to remove this new tax cost, or perhaps secure a usually more favourable capital gains tax treatment instead?

Andrew Prowse

We have to move Britain from a low wage, high tax, high welfare society to a higher wage, lower tax, lower welfare economy“. Stirring stuff…although I had to re-check the “lower tax” bit once I’d read all of the announcements. Like all Osborne Budgets, it pays to let the dust settle. An apparent gift with one hand is often removed with the other. For businesses, the further reduction in corporation tax to 19% in 2017 and 18% in 2020 is appealing. Britain’s headline rate is right down there with Switzerland, Hong Kong and Ireland. However, that tax will now have to be paid earlier and, for some UK-based businesses, the tax cut will be absorbed by the cost of implementing the living wage. Also to weigh against the CT cut, especially for entrepreneurs, is the dividend tax hike – so much for the gimmick of the new income tax lock! Grossing-up under the tax credit system will go and markedly higher tax rates of up to 38.1% will apply to the extent dividend income exceeds £5,000. It may encourage more to retire by selling their companies rather than holding for dividend income. There will be implications for buy-backs and other arrangements. There will be consultation on dividend tax reform in the autumn. Finally, try as I could, I couldn’t spot the repeal of the DPT regime (although the decrease in the CT rate makes it more punitive still). So, “lower tax“? Well, yes and no.


Summer Budget 2015 – Tax Advantaged Venture Capital Schemes – Changes Afoot

avatar Posted on July 13th, 2015 by Andrew Prowse

The Summer Budget announcements of further changes to the rules on EIS, SEIS and VCT tax-advantaged investments have highlighted the ongoing complexity of these schemes and the need to tread carefully, both for companies when raising funds or individuals seeking to invest through them. Seeking appropriate advice continues to be crucial to avoiding the continually evolving number of potential pitfalls.

After two rounds of consultation, the Government has now released its response setting out the changes to the EIS, SEIS and VCTs scheme rules which it proposes to make in Finance (No.2) Bill this year.

Following various earlier – and mainly expansionary – changes to the schemes, the starting point of the initial consultation (Tax-advantaged venture capital schemes: ensuring continued support for small and growing businesses) back in July 2014 originally involved a mixture of aims, which included ensuring that the schemes still fall within EU State aid rules, keeping the rules targeted, expanding the schemes to allow platform investments in SMEs and the use of convertible loan notes, and considering an alternative principled approach aimed at limiting the need for future rule changes.

The resulting changes now being introduced are, in the main, the more restrictive proposals aimed at making the schemes more targeted – reflected in the fact that the expected exchequer impact is now revenue increasing, rather than decreasing – although HM Treasury estimates that over 90% of companies which qualified under the old rules will still be eligible under the new ones.

The restrictions announced at Summer Budget are more stringent than those contemplated at Budget 2015, for example –

  • The time limit on company eligibility to raise their first SEIS/EIS/VCT funding will now be 7 years (or 10 for “knowledge intensive companies”), and
  • The lifetime cap on amounts raised will now be £12m (or £20m for “knowledge intensive companies”).

And the previously announced new requirement that the investments are for the purpose of growth and development is also still being introduced (HMRC guidance is expected on this shortly), as is the investor independence requirement.

However, the changes do also include the removal of the requirement for 70% of SEIS funds to have been spent before money can be raised under the EIS or VCT rules, and the doubling  of the employee limit for “knowledge intensive companies”.

One particular point to watch is that the various measures come into force on different dates; for example, whilst the lifting of the SEIS funds 70% requirement takes effect for investments from 6 April 2015, the restrictions announced at Summer Budget will take effect from Royal Assent (provided State aid approval is obtained). Presumably also in light of the need for State aid approvals, revised draft legislation wasn’t published.

Whilst the Government was initially aiming to find a solution which alleviated the need for ongoing changes to the rules, its principles-based suggestions were not, it seems, particularly appealing to the consultation respondents on the basis that they could introduce uncertainty. Likewise, the convertible loan notes proposal has not been taken forward. However, a new stakeholder forum is being introduced for ongoing formal engagement between stakeholders, HMRC and HMT – this could well lead to more changes to the rules in due course.

The full range of the recent government tax-advantaged venture capital schemes consultation documents is also available online at