Tax

From a corporate point of view the UK is practically a tax haven. We have one of the best set of double tax treaty networks, a common law system that is known, understood and trusted around the world and, crucially, we have an incredibly low rate of corporation tax (soon to be as low as 17%). More importantly are the details behind the rates - we have the substantial shareholding exemption to reduce the tax companies pay on buying and selling shares in other companies, we rarely charge withholding tax and the patent box should in theory discourage companies from holding their patent assets outside the UK.

Unfortunately, since 2009 the UK tax code has been the largest in the world being for example 62 times longer than the Hong Kong equivalent. The reason for this is that successive governments try to encourage or discourage certain behaviours, which are perceived at the time as being worthy or unworthy. It is this system of nudging behaviour that causes the problem of the complexity of the UK tax code.

What we do

We follow the mantra of Albert Einstein who not only likened life to the constant forward motion of bicycles, but also believed that if you can’t explain something simply, you don’t understand it well enough. From time to time we will give here an example of such simplicity of understanding.

Enterprise Investment Scheme ("EIS")

This is an amazingly generous scheme dealing with investment by individuals into small UK trading companies. Essentially the investors can get 30% of their investment back from HMRC. This reduces the true cost to £70 for every £100 invested. Even better on sale, the capital gains tax (CGT) is reduced to zero. Or if, unfortunately, the company goes into administration, the investors can offset their loss against their income for that year saving income tax. There is an even more generous younger sister to EIS called Seed EIS for brand new companies which gives an upfront 50% tax relief rather than 30% for EIS.

HMRC jealously guards these reliefs and has included over a hundred conditions which almost seem designed to catch out the unwary.

The two most important conditions are:

(a) the company must be undertaking a qualifying trade and there are, for example, traps for companies which have a high royalty income stream; and

(b) the investor cannot be connected to the company before the investment. More than a 30% holding in the company can be fatal. Bizarrely siblings are NOT considered connected to each other which is a good thing so four siblings can own 25% of a company each and all four can benefit from EIS relief.

The relief is clawed back if the shares are sold or certain other conditions are breached in the first three years.

It's an easy relief to claim with just a few simple forms. HMRC offer an advance assurance process, which can help companies and their advisers navigate through some of the traps, but it is by no means straightforward so help is necessary. The end result is definitely worth the effort.

Detailed elements of our services

We specialise in the field of commercial tax generally, arising on all commercial and corporate transactions, advising on all aspects of corporation tax, income tax, NIC, capital allowances, CGT, VAT, stamp duty and stamp duty land tax. We regularly advise on the tax aspects of all types of commercial agreements, and merger and acquisitions focussing on tax minimisation and the allocation of risk.

Recent property-related work includes advising as to different types of joint venture vehicle be they tax transparent or otherwise, SDLT and VAT structuring, and inward property investment.