On Balance Autumn/Winter 2015

16 On Balance Weighing the issues of commercial law
TAXING
TIMES
Every transaction has tax implications,
whether it’s a new supply agreement, an
IP licence, a lease, an acquisition, disposal,
refinancing, restructuring or Initial Public
Offering. Haydn Rogan explains how
understanding and planning for these
implications can mitigate transaction risk.
Despite repeated calls for simplification, the UK tax system
has become increasingly complex.
The volume of tax legislation has expanded rapidly over the
last decade and the UK now has one of the longest tax codes
in the world.
The UK now has one of the longest
tax codes in the world.
This inevitably increases the risks for both the taxpayer and
their advisers given the need to navigate through and interpret
the legislation in order to ensure compliance with all the
relevant requirements. For the most part, the tax function has
therefore been delegated to internal or external tax specialists.
Recent events, precipitated by the practices of some of the
larger multinational companies, have served to shine a spotlight
on the tax function and more particularly the question of tax
avoidance which has, of late, received unprecedented levels of
attention in both media and political circles.
Whilst it is fair to say that reality can sometimes be
overshadowed by perception, there is no doubt that tax is now
firmly a boardroom issue and needs to be considered within
the wider context of social responsibility and reputation.
To that end, from a risk management perspective, it is
important to take tax advice from a reputable tax adviser and,
whilst a cliché, in terms of tax if something looks too good to
be true then it almost invariably is.
Any transaction that does not have a proper commercial
underpinning, or which is designed to create a tax deduction
or loss with no corresponding taxable receipt or profit for the
counterparty, is likely to attract scrutiny and be subject to a
range of anti avoidance provisions designed to prevent such
asymmetries within the tax system.
That is not to say, however, that managing tax risk is just
about tax planning arrangements. It is about putting in place
appropriate procedures, maintaining accurate and complete
books and records and completing and submitting tax returns
in a timely manner.
Any commercial contract (be it a lease, sale and purchase
agreement, employment contract or any customer or supplier
contract) will invariably contain provisions that set out, or
deal with, the parties’ respective tax responsibilities and it
is important to ensure these provisions correctly reflect the
tax procedures and the proper allocation of risk between the
parties. Tax input should therefore be sought, as appropriate,
on all commercial contracts and involving your tax advisers
as soon as possible (and before any terms are agreed) can
quite literally pay substantial dividends and save costs
down the line.
Haydn Rogan, Partner
0161 214 0517
haydn.rogan@weightmans.com
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