Market Update 

At the end of 2020, the European market has been provided much desired certainty as a trade deal was agreed between the UK and the EU.

As we move into 2021, we look to the UK and the EU’s future relationship and the COVID-19 vaccination rollout across the world.

In addition to the above, the UK government is seeking input on issues across both tax and regulation as part of its review of the UK funds regime.

The overarching objective of the review is to identify options which will make the UK a more attractive location to set up, manage and administer funds, and which will support a wider range of more efficient investments better suited to investors’ needs. Further detail on this objective is set out below.

When considering proposals, the UK government is clear that any tax reforms will be compatible with its robust approach on avoidance and evasion, and with the UK’s international commitments. They will also ensure the UK can effectively exercise taxing rights over UK source income. Similarly, any changes to regulation will support the UK’s commitment to upholding the highest standards of regulation and appropriate supervisory oversight and investor protection. The government recognises that the UK’s robust regulatory regime and its commitment to upholding these standards are key strengths across financial services, including funds. This call for input closes on 20 April 2021.

A&M Taxand Strengthens its Real Estate Practice with Senior Hire

We are delighted to announce A&M Taxand has strengthened its Financial Investors Group with the appointment of Kersten Muller, who joins as a Managing Director from Grant Thornton. Mr. Muller will lead A&M Taxand’s Real Estate team in the UK, bolstering the business’ expertise at a time of significant change for the sector.

Mr. Muller, who will be based in London, is a recognised industry leader and brings more than 20 years of experience, specialising in tax-efficient structuring for UK, European, and global real estate transactions on both the buy and sell-side, in addition to real estate funds and investment vehicles. Prior to joining A&M Taxand, Mr. Muller was a Partner at Grant Thornton in London where he was Head of Real Estate, and grew the team considerably over an eight-year period. Previously, he spent 13 years with Deloitte in their Real Estate team.

Ernesto Perez, Managing Director and Global Practice Leader for A&M Taxand, said: “I’m delighted to welcome Kersten to the A&M Taxand team as we continue to expand our global practice. He is an important hire as we look to strengthen our real estate and investment fund capabilities both in the UK and the US.”

Marvin Rust, Managing Director and Head of A&M Taxand UK, said: “With his deep sector expertise, Kersten is a significant hire for A&M Taxand. His knowledge will be invaluable as we continue to strengthen the proposition we offer to clients within the financial investors community. The pandemic has already brought about seismic changes to how people use and finance property - and will continue to do so into the future. Now more than ever there is a need for sound and strategic support for investors at all stages of a transaction – something our team is well-placed to provide.”

Commenting on his decision to join A&M Taxand, Mr. Muller said: “From an increase in M&A activity, to changes to taxation and government policy, there are an increasing number of challenges and opportunities ahead for investors. A&M Taxand’s holistic approach which brings together different specialisms from all areas of real estate for the benefit of investors is truly distinctive, setting it apart from the wider market. I am looking forward to working with the team and further growing this established practice, free from the audit conflicts that hamper other firms.”

Announcing our new A&M Taxand Managing Directors

It is with great excitement that we announce A&M Taxand’s newly promoted Managing Directors Hiral Bhatt and Louise Jenkins.

Hiral Bhatt, who leads our M&A Infrastructure team, brings 12 years of experience in tax with primary areas of concentration in infrastructure and private equity transaction tax. Mr. Bhatt has worked with clients across a range of industries, including core infrastructure, telecommunications, energy, retail and industrials.

Major transactions that he has led in recent years include the due diligence, structuring and completion of work for the acquisition of / investment in Hivory (EUR 2.5bn, 2018); Q-Park (EUR 3bn, 2017); Telxius Telecom S.A (EUR 1.3bn, 2017) and Calvin Capital (GBP 800m, 2017) by KKR Infrastructure.

Louise Jenkins brings over 20 years of Tax experience to her role as head of the Reward and Employment team at A&M Taxand in the UK.

Ms. Jenkins has worked with a wide variety of clients across all sectors ranging from FTSE 250, AIM, international groups, start-ups, private equity-backed companies and privately owned managed businesses. She has extensive experience of all types of equity incentive plans – both in the U.K. and internationally including both HMRC approved plans (CSOP, EMI, SAYE and SIP) and unapproved plans (growth shares, jointly owned arrangements, unapproved options etc.).

Disguised Investment Management Fees and Carried Interest Rules in the UK - Updated guidance 

On 13 October 2020, HMRC published its long-awaited updated guidance on the application of Disguised Investment Management Fees (“DIMF”) and Carried Interest rules. We have reviewed the updates made since October 2016 and have considered the potential impact for clients.

The original guidance to these rules was set out in HMRC’s Technical Note ‘Investment Managers: Disguised Fee Income’ dated 29 March 2015 and a later draft revised version was circulated in October 2016. However, no further guidance had been released until 13 October 2020. While the updated guidance broadly remains the same as the previous guidance, we note substantive changes in relation to the following:

• Broadening of the definition of what is considered to be a ‘management fee’;
• Limiting the meaning of ‘Condition 1 - performance of investment management services’; and
• Inclusion of additional examples in relation to DIMF, carried interest and co-investment.

We also note additional changes to carried interest rules in the guidance.

To review our full report into the updated guidance on DIMF and carried interest rules, please follow the link here.

IA Publishes Annual Review of the Principles of Remuneration

The IA has written to FTSE 350 Remuneration Committee Chairs to summarise the outcome of its annual review of its Principles of Remuneration. This year the review has taken place against a backdrop of the ongoing pandemic and, at the same time as updating its Principles, the IA has also issued updated guidance on shareholder expectations during the COVID-19 pandemic.

To review our full report on the updated IA guidance on shareholder expectations during the COVID-19 Pandemic, please follow the link here.

FTSE SmallCap: Executive Remuneration Trends 2020

2020 has been an extraordinary year. Most companies have, in some way, had their performance affected by COVID-19 and the resulting recession. At the same time, a majority of FTSE SmallCap companies have held a triennial binding shareholder vote on their remuneration policies and we are now beginning to see how SmallCap companies responded initially to the pandemic.

A&M’s first annual analysis of the FTSE SmallCap executive pay, undertaken by our Executive Compensation experts, and based on Annual Reports published during the first half of 2020, provides a clear overview of how executive pay is moving.

To review our full report into FTSE small-cap Executive rumination please follow the link here. 

If you have any questions about the content covered in this newsletter, please contact one of our tax experts.