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.
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.
Read our True Picture on the Government Legal Profession to find out about working at HMRC.
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 law.
- 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. The UK and a cohort of other nations are implementing the Common Reporting Standard to standardise accounting practices internationally, allowing information on things such as the ownership of companies and trusts to be shared across borders.
- Perhaps the most talked about examples of tax avoidance are those by the mega-profitable international tech giants. Having a patchwork of domestic tax regimes results in a situation where multi-national companies can slip through the net. For example, despite reporting a record-breaking quarterly profit of $2.5 billion, Amazon managed to halve its corporation tax bill in the UK. National governments have therefore looked to international organisations for a more global solution: in March 2018, the EU set out its planned 'digital tax,' designed to right these wrongs. Specifically, this new measure aims to skim off 3% from digital advertising revenues, subscriber fees, and the proceeds of selling users' data.
- The UK has its own solution too, dubbed the 'Google' tax, which aims to stop companies avoiding tax by moving profits abroad. The '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.
- Not one to be left out, Amazon also has a tax named after it. Ahead of the 2018 Autumn budget Chancellor Phillip Hammond considered bringing in an 'Amazon tax,' a retail tax which would apply to online businesses with the aim of aiding high-street retailers to compete.
- Over the five years up to March 2017, prosecutions by HMRC for evasion-related offences more than doubled. HMRC has stated it wishes to bring 100 prosecutions per year to wealthy individuals and corporations by 2020. More recently it has moved to bring in tougher penalties on those who do not declare their offshore assets. It also brought in 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.'
- The world of sport saw an interesting tax-related case recently, as Rangers football club battled with HMRC. Rangers had paid £47 million to a mixture of players, managers and directors using EBTs (Employee Benefit Trusts). Those trusts would pay employees via tax-free loans – HMRC wasn't having any of it, and maintained that the loans were still taxable earnings. The Supreme Court agreed with HMRC.
- Theresa May has made it clear: tax rises are needed. Despite it being a Conservative election pledge that tax would not rise, the needs of the NHS have trumped those priorities, and the Prime Minister has now promised a £20 billion increase in spending on the health service. The taxpayer will contribute to that spending increase.
- 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. Any forthcoming changes to direct tax could only be indirectly linked to Brexit, but 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 and enters the transition period, but many aspects of tax legislation will be open to adaptation.
- Entrepreneurs relief, a tax break given to the owners of small businesses who sell their company (or part of it) and would normally pay capital gains tax, has come in for recent criticism. The relief has cost roughly £22 billion over the past decade, according to The Resolution Foundation, who criticise the fact that it disproportionately benefits wealthy individuals.
- 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 businesses have struggled with the expensive process of dealing with national insurance contributions, which are paid weekly.