A NOTEPAD ON COMPANY AND FINANCIAL LAW, NEWS AND REGULATION
HM Treasury has today published its promised consultation on making AIM company shares eligible for ISAs. The effect of the proposed changes is that High Growth Segment company shares, when and if there are any, will also be eligible for ISAs.
The Treasury press release is here and the consultation document is here.
The key proposed change (see paragraph 3.3 of the consultation document) is that:
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On 14 February 2013 the European Commission announced the details of the financial transaction tax (FTT) that it proposes is adopted by the enhanced cooperation procedure.
The Commission’s press release is here; a set of Q&As is here; and the proposal itself is here. The FTT will be raised on an “issuance principle”, so will apply to shares of companies incorporated in the nine participating EU countries if those shares are traded on London, irrespective of the fact that the UK is not participating in (and opposes) the FTT.
Summary from the NYT here.
Next steps (from the Q&As): “Today’s proposal foresees the FTT for the 11 Member States entering into effect on 1 January 2014. Obviously, it depends on the Council reaching agreement on the proposal in time to respect this proposed implementation date. The European Parliament and the European Economic and Social Committee and National Parliaments will also be consulted, and national transposition would then be needed.”
First use of enhanced cooperation procedure in area of taxation. Council of the European Union press release, 22 January 2013:
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BIS has today published its response to the consultation which it launched on 18 October 2012 on its proposed new “employee owner status”, under which employees would sacrifice some employee rights in exchange for CGT-advantaged shares in their employer. We covered the consultation launch in this post.
The consultation response is here.
From the executive summary of the consultation response:
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Website here. Excerpt:
“The Seed Enterprise Investment Scheme, also known as SEIS, aims to encourage investment in small and early stage companies by reducing the risk to investors of investing in these types of companies. The Government introduced the SEIS as a way to promote new enterprise and boost economic growth in the UK.
The objective of this site is to provide investors and entrepreneurs with information about the SEIS and other forms of investment. You can learn about how the SEIS works, who qualifies to make SEIS investments and which companies can access SEIS money.”
More on the SEIS here.
Anthony Hilton in the Evening Standard on why allowing companies to offset debt interest against tax should be stopped.
The European Commission today gave 10 EU member states the green light to go ahead with the introduction of a financial transactions tax through the enhanced cooperation procedure. The countries are Germany, France, Austria, Belgium, Portugal, Slovenia, Greece, Italy, Span and Slovakia.
The Commission’s press release is here and a set of Q&As are here.
From the FT’s zeitgeist-ridden editorial today:
“While much of Barack Obama’s rhetoric against private equity has the flavour of electoral pantomime, he is on firmer ground when he seeks to change the basis on which carried interest is taxed. There can be no justification for it being treated on the same basis as capital gains, rather than as income.
True, technically speaking, these profits are capital gains in that they arise from a capital investment. But as they are mainly gains on others’ capital, which private equity partners only receive by virtue of the jobs that they do, this is to all intents and purposes a payment for their services. As such, it should be taxed as income.”
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Xavier Rolet, Chief Executive of the London Stock Exchange, on why smaller growth companies “”not a mortgage, but equity funding”, and on the reforms needed to encourage equity investment in those companies:
“There…remain important structural reasons that are holding back private investors from funding our growth companies. Arguably the most significant is the tax treatment of equity: taxed at purchase, dividend and sale, in addition to the corporation tax paid on company profits, equities are treated aggressively while debt is often tax-deductible. Reducing tax on capital gains made from direct and indirect investment in smaller companies would also help boost liquidity by attracting more investors. And, a targeted abolition of stamp duty for Aim and PLUS-quoted shares would be a particularly low-cost and effective measure to promote growth.”
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HMRC announced yesterday that it is launching a new taskforce “to tackle tax dodgers – including one targeting the legal profession in London”. In HMRC’s words:
“Taskforces are specialist teams that undertake intensive bursts of activity in specific high risk trade sectors and locations in the UK. The teams will visit traders to examine their records and carry out other investigations.”
Maybe the revolution is finally coming.
David Gauke, Exchequer Secretary to the Treasury, this morning used a speech at Policy Exchange to announce a consultation on:
“proposals to crack down further on those that seek to push abusive tax avoidance schemes and make it easier for taxpayers to identify such schemes when they are on the end of a hard sell by a dodgy promoter”.
On what avoidance is
The Exchequer gave the following examples:
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This note discusses developments since the European Commission’s autumn 2011 proposal for a financial transaction tax, and this note looks at the historical background to the “Tobin tax”.
See also: French trading tax lacks details, say banks – Financial Times
The European Parliament has today adopted the Commission’s proposal for a financial transaction tax, and widened its scope. The Parliament’s press release is here and the text adopted is here (shows changes made by the Parliament to the Commission’s proposal). The Parliament’s vote is advisory at this stage and the Council can ignore or adopt the Parliament’s amendments. The timetable for the FTT remains:
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The European Commission published seven explanatory notes on 4 May 2012 that provide analysis and clarification on how the proposed EU financial transactions tax would work in practice. The notes and related webpage are here.
Mr Swain wanted to sell his business, by share sale, to an MBO team. He instructed Mills & Reeve (M&R) to act. In their engagement letter, M&R made clear that it was not providing personal tax advice to Mr Swain…
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Reasons for change summarised by ICSA here.
A clear explanation of the new SEIS from Mills & Reeve.
Here. Unsurprisingly, the peers are opposed to the proposed FTT.
Not much of interest for Corporate lawyers in this Budget, but here is HM Treasury’s useful and concise executive summary of the key measures
“Banking privacy is dead…The US government is the assailant, and FATCA is the murder weapon” – IRS reporting requirements for foreign financial institutions and U.S. taxpayers holding financial assets outside the United States
HM Treasury announces retrospective legislation to close “highly abusive” schemes
Transcript of David Cameron and Lord Young’s meeting with entrepreneurs and advisers
French president announces unilateral action on financial transactions tax
Insurance broker relocates incorporation from Delaware to England to provide greater access to emerging markets and to Lloyd’s of London
Aon Corporation announced last week that it is to move its corporate headquarters from Chicago to London and will change its jurisdiction of incorporation from Delaware to England. In doing so, Aon becomes the first S&P 500 company to be domiciled in the United Kingdom. Aon’s press release about the move is here.
The move, which is subject to shareholder approval,will be effected by each Aon stockholder receiving one Class A Ordinary Share (US$ denominated) in a newly formed English public limited company in exchange for each share of common stock of Aon the stockholder holds. That UK holding company is expected to be listed on the NYSE and to report earnings and other financial statements in accordance with Securities and Exchange Commission regulations.
Aon’s stated reason is that the re-domicile will provide:
“…greater access to emerging markets and takes better advantage of the strategic proximity to Lloyd’s and the London market as one of the key international hubs of insurance and risk brokerage.”
The UK government’s decision to reform the controlled foreign companies regime (see an informative note from PwC here) may also have influenced Aon’s decision to move to London.
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New York Times Dealbook article on the benefits of incorporating abroad in an age of globalisation
This article from the NYT Dealbook is a useful overview of the advantages of incorporating outside the US for companies that in fact conduct the majority of their business in the US. The analysis focuses on the recently-floated Michael Kors Holdings, which derives 95% of its revenue in North America, but which is incorporated in the British Virgin Islands, thus sidestepping “higher taxes and substantial regulation in the United States”, with its corporate headquarters in Hong Kong.
The articles also highlights that:
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HM Treasury sets out draft SEIS legislation in the Finance Act 2012
We reported last week on the Chancellor’s announcement in his Autumn Statement of a new tax-advantaged scheme to encourage investment in start-up business, to be called the “Seed Enterprise Investment Scheme” (the SEIS). HM Treasury has today published the draft Finance Bill 2012 containing details of the SEIS and its operation. The SEIS will, in the Treasury’s description:
“- apply to smaller companies, those with 25 or fewer employees and assets of up to £200,000, which are carrying on or preparing to carry on a new business;
- give income tax relief worth 50 per cent of the amount invested to individual investors with a stake of less than 30 per cent in such companies, including directors who invest in their companies;
- apply to subscriptions for shares, using the same definition of eligible shares as EIS (which it is proposed will be widened in Finance Bill 2012);
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SEIS will give tax relief of 50% for angel investors in start-up companies
The Chancellor today announced in the Autumn Statement that a new scheme to encourage investment in start-up companies will be introduced. The “Seed Enterprise Investment Scheme”(SEIS) will provide tax relief of 50% for individuals who invest in shares in qualifying companies, with an annual investment limit for individuals of £100,000 and a cumulative investment limit for companies of £150,000.
There will also be a capital gains tax holiday for investments made into the new scheme. This will provide a capital gains tax exemption on gains realised on disposal of an asset in 2012-13 and invested through the SEIS in the same year.
What type of company will be a “qualifying company”? There is no further information in the Autumn Statement, but there are – perhaps – some clues in the consultation paper that the Treasury published on 6 July 2011 on the proposed introduction of the SEIS. That consultation paper suggested that the proposed scheme (then called “BASIS”) would apply to pre-trading companies, attempted to define a “business angel”, and also suggested that any investment would have to be principally in the form of equity or quasi-equity. See our post of 6 July 2011 for more details.
This Financial Times article has accountants Blick Rothenburg describing the level of the SEIS tax relief as “astonishing”.
UPDATE 6 December 2011: The draft Finance Bill 2012 has now been published by HM Treasury, setting out the details of the SEIS and how it will operate – see this post.
The Enterprise Investment Scheme and Venture Capital Trusts
The Autumn Statement also confirmed that:
“The Government will also simplify the EIS by relaxing the connected person rules and the definition of shares that qualify for relief. The Government will tighten the focus of the schemes by introducing a new test to exclude companies set up for the purpose of accessing relief, exclude acquisition of shares in another company and exclude investment in Feed-in-Tariffs businesses. In addition to these changes that were consulted on, the Government will remove the £1 million investment limit per company for VCTs to reduce the administrative burdens of the scheme.”
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“Tobin tax” strongly opposed by the UK financial services industry
Biggest tax review for 30 years published
Where the US leads…
HM Treasury document also contains proposals to simplify and refocus the Enterprise Investment Scheme and Venture Capital Trusts
UPDATE 29 November 2011 and 6 December 2011: The Chancellor has now confirmed the launch of this tax-advantaged scheme for angel investors, which will be called the Seed Enterprise Investment Scheme (SEIS), not BASIS - see this post - and the details of the SEIS in this post.
