Tax

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 worth individuals on how to structure their wealth. Navigation of this highly analytical and complex practice area often necessitates a degree of proficiency in mathematics and an interest in accountancy.

Tax lawyers in the private sector ensure that clients structure their business deals, assets, or day-to-day operations in such a way 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.

Tax

What lawyers do

  • Ensure that clients take advantage of legal breaks and loopholes permitted by tax legislation.
  • Handle tax planning for clients, making sure they understand the financial 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'). This 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, and potential penalties imposed by, 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 new changes implemented 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 la

Current issues

October 2023

  • Following its departure from the EU, the UK can now set its tax policy as it sees fit, though this is still subject to OECD (Organisation for Economic Co-operation and Development) commitments, as well as the new UK-EU Trade and Cooperation Agreement.  

  • UK corporation tax increased in April 2023 to 25% for companies with profits over £250,000 in an attempt to stabilise the economy since September’s Growth Plan disrupted the markets.  

  • As of this year until April 2028, Chancellor Jeremy Hunt extended the freeze on the income tax personal allowance at £12,750 (PA) and the higher rate thresholds (HRT) of income tax. As wages align with inflation, many people may find themselves paying tax on a larger proportion of their earnings, with predictions being that 2.6 million people will end up paying a higher tax rate. The Office for Budget Responsibility predicts that the combined tax measures will increase receipts to £29.3 billion, the equivalent to 1 whole percent of the UK’s GDP in 2027/28! 

  • Calls have intensified for increased transparency surrounding tax havens and corporations avoiding paying tax in the UK. The Finance Act 2021 provided HMRC with a range of new powers to act against and penalise those who promote or market tax avoidance schemes. This year, the government held a consultation about tougher punishments. It proposed that failure to comply with the Promotors of Tax Avoidance Schemes (POTAs) Stop Notice should result in a criminal offence, and the ability to expediate the disqualification of directors of companies involved. Estimates suggest that the tax gap from marketed tax avoidance sold primarily to individuals has fallen to £0.4 billion in 2020/21 from £1.5 billion in 05/06.

  • The government intends to replace the Digital Service Tax (DTS) with the OECD’s global tax reform, Pillar One model, from 2024. The model will address the issues of corporate tax havens and profit shifting globally. Pillar One focuses on nexus and profit allocation challenges, and Pillar Two focuses on global minimum tax rules, with the agreed minimum of 15% on profits in all countries. 

  • The OECD’s global tax system is still in its infancy. No country has implemented the arrangement, but it is part of an agreement signed by 138 countries. As of July, 138 countries have agreed to enforce the OCED treaty in 2025 rather than 2024 as details are worked out. The uncertainty the US had towards the DTS disproportionately affecting American companies has reared its head with the OECD arrangement, with concerns over  the Pillar 2 agreement. This event is currently unfolding so whether the US adopts Pillar 2 and the implications of this, is yet to be seen! 

  • From April 2022, large businesses were required to notify the HMRC of uncertain tax positions.  

  • The UK joined other regions in responding to the increase in energy prices caused by Russia’s invasion of Ukraine. The temporary cut of the Fuel Duty introduced in 2022 by the Chancellor-turned-PM Rishi Sunak has been extended for 2023/24. The measure intends to continue support of households and businesses at a time of high oil prices but shall end in March 2024, as part of the government’s commitment to fiscal responsibility and ensuring confidence in the UK’s national finances.

  • In June, the Court of Appeal (CA) ruled on the Royal Bank of Canada (RBC) v HMRC over interpretation of the UK-Canada Double Tax Duty (DTD) as to whether payments from an oil field in the UK Continental Shelf were taxable. The RBC lent money to Sulpetro (to fund exploration), which went insolvent, transferring the rights to receive royalties to the RBC, which wrote off the debt and used payments as debt recoveries. HMRC argued that the payments received were taxable. Yet, under consideration English and French versions of Article 6 (of the DTD), the CA ruled that the RBC could not be taxed, as had no right to work in the relevant oil fields. This case is significant as it relates to bilateral tax treaties, where the foreign language text is used equally to inform the ruling!