In a nutshell
Tax lawyers are a permanent feature in almost every industry, but they are most in demand (and most highly paid) when it comes to transactional and regulatory matters for corporate clients. Private client lawyers also increasingly have to be tax experts when advising high net work individuals on how to structure their wealth. Navigation of this highly analytical and complex practice area often necessitates a degree of proficiency in accountancy as well as legal adroitness.
Tax lawyers in the private sector ensure that clients structure their business deals, assets, or day-to-day operations such that they take advantage of legal breaks and loopholes in tax legislation. A public sector tax lawyer is primarily employed to provide advice and assistance regarding regulations, but also works on investigations, audits and prosecutions of tax evading organisations. Although this is predominantly an advisory practice area, on occasion matters can veer into litigation territory.
What lawyers do
- Ensure that clients take advantage of legal breaks and loopholes in tax legislation.
- Handle tax planning for clients, making sure they understand the tax ramifications of purchases.
- Address the ownership and disposal of assets, including advising on structuring corporate portfolios in the most tax-efficient way.
- Offer transactional advice when working with corporate lawyers on M&A deals, joint ventures and property portfolio acquisitions.
- Deal with investigations or litigation resulting from prosecution by Her Majesty's Revenue & Customs (HMRC, sometimes referred to as 'the Revenue'). Litigation is always conducted against or brought by the government.
- Work alongside private client lawyers on matters of private wealth.
Realities of the job
- This is an intellectually rigorous, rather cloistered area of law and is ideally suited to the more academic practitioner.
- Corporate tax lawyers are very well paid, treated with reverence by their colleagues and find intellectual stimulation in their work.
- Lawyers must not only have the ability to translate and implement complex tax legislation, but must also be able to advise on how to structure deals in a legitimate and tax-efficient way to avoid conflict with HMRC.
- If you don’t already wear specs, expect to after a couple of years of poring over all that black-letter law. The UK has more pages of tax legislation than almost any other country, and there are changes every year.
- In time extra qualifications, such as the Chartered Tax Adviser exams, will be useful.
- Don't expect to be on the side of the angels: you may end up spending your time advising big businesses on how to avoid paying tax without breaking the law.
- Read our True Picture on the Government Legal Service to find out about working at HMRC.
- In the wake of the revelations leaked in the so-called 'Panama Papers' – which saw a number of well-known companies and individuals hit the headlines for tax avoidance (which, unlike tax evasion, is legal) – there has been significant pressure to tighten international and domestic tax rules relating to offshore tax havens. In response, the UK and a cohort of other nations have agreed to implement the Common Reporting Standard. This standardises accounting practices internationally, allowing information to be shared across borders on things such as the ownership of companies and trusts. Furthermore, international summits have been held to discuss plans to improve the implementation of new regulations, and the European Parliament is continuing its investigation into money laundering, tax avoidance and tax evasion.
- As a result of the Panama leaks and previous scrutiny of tax avoidance, law firms have witnessed an increase in the number of clients paying close attention to their tax affairs in a bid to avoid public scrutiny and exposure in the press. Tax law was once the sole preserve of backroom brainboxes; it's now a big political, social and economic issue.
- A so-called 'Google tax' has been introduced to try and stop companies avoiding tax by moving profits abroad. The new 'diverted profits tax' (set at 25%) came into being on 1 April 2015 and means companies with a turnover higher than £10 million will be asked to unveil their inner structures to HMRC, so it can assess if any profits have been artificially moved around. By comparison, the corporation tax as of August 2017 was 19%.
- Having been slapped with a €2.4 billion fine for abusing its search engine dominance, Google won a legal victory in Europe when a French tribunal ruled the company had not dodged tax laws by routing sales in France through Ireland, saving them from paying back €1.12 billion in taxes. The company also hit the headlines after agreeing a £150 million back payment of taxes with HMRC, a controversially small figure for many commentators.
- Over the five years up to March 2017, prosecutions by HMRC for evasion-related offences more than doubled. At the same time a clampdown on tax avoidance saw the Revenue claw back £28.9 billion in taxes in 2016/17 – £2.73 billion more than the year before. HMRC has also stated it wishes to bring 100 prosecutions per year to wealthy individuals and corporations by 2020.
- The government's Patent Box scheme has now been fully phased in, having been introduced in 2013. The scheme offers tax relief on company profits gleaned from UK-held patents. Further tax relief incentives include video game relief, introduced in 2014.
- HMRC has pledged to clamp down on online tax avoidance by obtaining private data from millions of online transactions. Its shiny new software programme 'Connect' allows it to collect and analyse huge amounts of private data on transactions, catching suspicious activity much more quickly than previously. Data will be collected from companies such as Paypal to see whether UK citizens are gaining income online without declaring it. HMRC has also taken to social media to see if the luxurious lifestyles being Instagrammed, tweeted and splashed over Facebook match up with declared earnings. Further aiding in its clamp down are a new raft of sanctions and penalties, including a strict liability offence for managers who fail to prevent their staff or agents from facilitating tax evasion. Those caught doing so will be 'named and shamed.'
- A recurring issue is whether income tax and national insurance contributions should be merged into a single tax. This suggestion has been put forward because some businesses have struggled with the expensive process of dealing with national insurance contributions, which are paid weekly.
- The precise impact on tax law of the UK's decision to leave the EU will depend on the terms of the exit negotiated, but many important aspects of the current regulatory system hang in the balance. Although direct taxes will probably not change, many cross-border facets of the UK's VAT and corporate transactions are regulated by EU law. For example, the EU currently offers tax relief for cross-border mergers, so UK businesses may find themselves incurring greater tax costs as a result of leaving the EU. Double tax treaties will still be in place with many countries once the UK leaves the EU, but many aspects of tax legislation will be open to adaptation.