Introduction to Lucy Hardman, Director at A&M Taxand

We are delighted to welcome Lucy Hardman as a Director to our A&M team in London.

Lucy has more than 10 years of UK taxation experience with a focus on advising investment funds and their executives. Prior to joining A&M, Lucy was a Senior Manager in EY’s Transaction Tax team where she managed tax reporting engagements for large private equity houses as well as providing tax advice to the fund and fund executives. 

Lucy has a masters degree from the University of Bristol and is a member of the Chartered Institute of Taxation.  Contact Lucy Hardman.

Proposed changes to basis periods for Income Tax

From April 2023, Making Tax Digital (“MTD”) for Income Tax is scheduled to be introduced and should apply to, amongst others, individuals subject to Income Tax on the profits of their trade, profession and vocation or property business where total gross income exceeds £10,000.

In advance of MTD for Income Tax, HMRC launched a consultation on 20 July 2021 - scheduled to close on 31 August 20221 - on proposed changes to basis periods for Income Tax.  

These changes could have a significant impact on asset managers and individual fund executives where:

• The asset manager is structured as a partnership, normally a United Kingdom established Limited Liability Partnership (“the Partnership”); and 
• The individual fund executives are partners - or members - of the Partnership (“the Partners”).

Under current rules (known as the ‘current year basis’ rules), the Partners are liable to Income Tax and, if applicable, National Insurance Contributions (“NIC”) on the Partnership’s profits, adjusted for tax, in the accounting period ending in the tax year – for example, the Partners would be subject to Income Tax and, if applicable, NIC on Partnership’s tax adjusted profits for the accounting period ended 31 December 2020 in tax year 06 April 2020 to 05 April 2021.   

Under the proposed changes, the ‘current year basis’ will be replaced with a new ‘tax year basis’ from tax year 2023/24 with the Partners liable to Income Tax and, if applicable, NIC on the Partnership’s tax adjusted profits in the tax year – for example, the Partners would be subject to Income Tax and, if applicable, NIC in tax year 06 April 2025 to 05 April 2026 based on an apportionment of the Partnership’s profits, adjusted for tax, in the accounting periods ended 31 December 2025 and 31 December 2026.   

In addition, there are proposals for transitional rules in tax year 06 April 2022 to 05 April 2023 where the basis period would be the current year basis period plus a transition element, starting on the following day and ending on 5 April 2023 with relief for any overlap profits either brought forward (or generated).

These proposed changes could have a significant impact on asset managers and individual Fund Executives’ working capital and cash flow with potential larger Personal Tax liabilities in tax year 06 April 2022 to 05 April 2023 along with added working in apportioning the Partnership’s profits.

HMRC Family Investment Company ("FIC") team 

In April 2019, a specialist unit was set up by HMRC to consider the tax avoidance risks associated with FICs.

FICs - typically structured as a UK incorporated and tax resident private limited company with an individual and their family members as shareholders - are increasingly being used by individual fund executives to hold co-investment and carried interest entitlements in investment funds.

HMRC have recently closed this specialist unit having found “no evidence” of a correlation between those who set up FICs and tax avoidance. 

If you would like to discuss FICs or general personal tax planning, we would be delighted to arrange a call or meeting with you to discuss further.

Second self-assessment payment on account reminder for 31 July 2021

We wanted to provide a reminder that the second self-assessment payment on account for tax year 2020/21 was due by 31 July 2021. Late payment fees and interest may be chargeable where payments are not made in time.

If not done so already, taxpayers can make payment by:

•    Debit Card by going to 'Pay-self assessment tax bill' and following the guidance, or 
•    Phone/internet banking or Cheque.

Non-Executive Director Fees in the FTSE 350 and SmallCap - Summer 2021

In the latest A&M Non-Executive Director (NED) report we look at actual fees paid and the disclosed fee policies for FTSE 350 and FTSE SmallCap companies with year ends between 1 March 2020 and 31 January 2021.

Fee differences between financial services companies and other sectors are also analysed in this report.