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Correspondence from Taxation readers on excessive complexity in tax and multiple contracts in share buybacks.
Excessive complexity in tax
I am in agreement with Andrew Hubbard’s editorial ‘Never-ending spiral of complexity’ (Taxation, 18 March 2021) on the excessive complexity of tax. I take a simple view. If HMRC makes something so complex that it is both ambiguous and incomprehensible then as far as I am concerned it does not exist and I will ignore it. It is the only way to retain sanity in the mad world of HMRC.
This is the context for my thoughts on Andrew’s comment on the hypothetical HMRC officer in Ball Europe Ltd (TC8010) in the same issue (page 6). As HMRC makes the rules and theoretically ignorance of the law is no defence I do not think that hypothetical HMRC officers should be allowed any latitude in knowledge of the law. They should be assumed to have full knowledge of all tax law as a default position. The only thing they could be excused for not knowing is the facts of a particular case, especially if they have been partially hidden by an agent.
The same goes for accounting into which HMRC began to interfere several years ago. As an accountant (rather than a tax expert), I think that HMRC knows very little about accounting and should keep out of territory which is not theirs. I am not prepared to allow HMRC to tell me how to do accounting.
To me the best laws, taxes and regulations are those which are simple, clear and general and which allow law courts to decide their application in specific circumstances. Human activity is so complex that no two situations are ever the same and professional judgment must always be applied and respected. The Theft Act 1968 is a case in point – why do you need complex definitions of theft when it is obvious to the man in the street what it is.
Keep up the good work.
Dr Malcolm Stebles, Stebles Accountancy Ltd.
Multiple completion contracts in share buybacks
I read with interest the comments on the Readers’ forum: ‘Share buyback’ (18 March 2021, tinyurl.com/8xzv86fx).
We have for many years sought and obtained HMRC clearance applications in relation to such proposed transactions, specifically incorporating the suggested seller acknowledgements, as set out in the ‘Closer look’ section of that same issue of Taxation.
Having obtained HMRC clearance then, in conjunction with various solicitors as appointed by each client, the transactions have been implemented.
We recently sought and obtained HMRC clearance for another such transaction. However in then approaching our client’s solicitor, a very reputable firm, a Counsel opinion-backed rebuttal came back confirming that they could not advise the client to proceed as this was in contravention to CA 2006, s 691(2).
In particular it was not considered legally possible to split beneficial and legal interest in a share for this specific purpose and hence be separately transferred as set out. Indeed Counsel went further to acknowledge that the type of transactions contemplated have been carried out for many years but that potentially these were not legally done.
As Sara Cohen pointed out in her article ‘Multiple attraction’ (Taxation, 13 October 2011, tinyurl.com/4x3f3b9h) structuring multiple completion contracts can cause issues. However the expectation there was that HMRC would not approve. Here HMRC remains very happy but the legal advice is such contracts are not effective. I wonder whether other readers have come across instances where legal opinion has indicated multiple completion contacts are not compliant with the Companies Act.
Russell Eisen, Elman Wall.
