One minute with... Becky Rees, partner at Parisi Tax.
What’s keeping you busy at work?
One of the reasons I love life at Parisi Tax is the hugely varied nature of the work and the wide range of interesting clients. At the moment, jobs I am working on include, advising on the structure of a new business venture for a well-known athlete, advising a company on a pre-sale group re-organisation, advising a gym business on its EIS funding and advising a US buyer on the purchaser of a UK target and the subsequent hive-up of the target business. This is in addition to some complex growth share arrangements, several EIS investments, numerous EMI options and more than a handful of corporate transactions.
If you could make one change to a tax law or practice, what would it be?
It wouldn’t just be one change I am afraid! I would be tempted to start from scratch with the SEIS and EIS legislation. SEIS and EIS are powerful tax reliefs which really achieve their aim of helping companies to raise finance that would not otherwise be available to them. We have seen the huge benefits that they bring to companies at the smaller end of the market and the innovation and growth which results from the finance raised. However, we have also seen countless examples of where SEIS/EIS relief has gone wrong and the consequences can be very expensive and stressful for the parties concerned. Young companies trying to save money often skimp on proper advice but the SEIS and EIS legislation is horribly complex, so it is very easy to fall foul inadvertently of one of the many potential pitfalls. The legislation is difficult to apply and inflexible and so small mistakes can result in the complete failure of SEIS or EIS. If I had the chance I would try to simplify the rules and factor in the concept of materiality.
Is there a recent announcement which has caught your eye (and why)?
HMRC’s ERS Bulletin 31 (March 2019) explains HMRC’s current position on mistakes made when notifying EMI options. We see these all the time on corporate transactions. Small mistakes are made by the target company’s advisers in relation to the EMI compliance requirements which only come to light as part of the due diligence process in respect of the company’s sale. These mistakes can cause huge problems on a deal and end up taking vast amounts of time to try and sort them out within the timescales of the deal. HMRC’s latest guidance is unlikely to make this any easier.
HMRC’s view is that if a mistake is discovered within nine months of grant it can be amended by applying for a reasonable excuse code from HMRC. However, if the mistake is discovered after that nine-month period, then it is HMRC’s view that it cannot be corrected, regardless of whether or not the error is considered significant. Such errors should be disclosed to HMRC so that it can determine whether or not the error was material and led to the option failing to meet the EMI requirements.
We would argue that most minor failings should not lead to a breach of the EMI requirements but each case will need to be looked at and if acting for the buyer it is likely that a more cautious approach will be taken. The message to all companies with EMI options is to check and check again that everything has been done properly in relation to them so that any problems can be sorted out well in advance of a sale. If an issue is only spotted as part of the buyer’s due diligence process, it is much more difficult and expensive to try and resolve it during the sale process.
Finally, you might not know this about me….
In between Parisi Tax and being a mum to a six-year old and an eight-year old (which admittedly doesn’t leave very much time!), I am an aspiring yogi. Yoga provides me with a welcome oasis of calm in an otherwise very busy week. If I am honest, whilst I love the stretching and the balancing, my favourite part is the sleep (sorry, meditation!) at the end of each class.
One minute with... Becky Rees, partner at Parisi Tax.
What’s keeping you busy at work?
One of the reasons I love life at Parisi Tax is the hugely varied nature of the work and the wide range of interesting clients. At the moment, jobs I am working on include, advising on the structure of a new business venture for a well-known athlete, advising a company on a pre-sale group re-organisation, advising a gym business on its EIS funding and advising a US buyer on the purchaser of a UK target and the subsequent hive-up of the target business. This is in addition to some complex growth share arrangements, several EIS investments, numerous EMI options and more than a handful of corporate transactions.
If you could make one change to a tax law or practice, what would it be?
It wouldn’t just be one change I am afraid! I would be tempted to start from scratch with the SEIS and EIS legislation. SEIS and EIS are powerful tax reliefs which really achieve their aim of helping companies to raise finance that would not otherwise be available to them. We have seen the huge benefits that they bring to companies at the smaller end of the market and the innovation and growth which results from the finance raised. However, we have also seen countless examples of where SEIS/EIS relief has gone wrong and the consequences can be very expensive and stressful for the parties concerned. Young companies trying to save money often skimp on proper advice but the SEIS and EIS legislation is horribly complex, so it is very easy to fall foul inadvertently of one of the many potential pitfalls. The legislation is difficult to apply and inflexible and so small mistakes can result in the complete failure of SEIS or EIS. If I had the chance I would try to simplify the rules and factor in the concept of materiality.
Is there a recent announcement which has caught your eye (and why)?
HMRC’s ERS Bulletin 31 (March 2019) explains HMRC’s current position on mistakes made when notifying EMI options. We see these all the time on corporate transactions. Small mistakes are made by the target company’s advisers in relation to the EMI compliance requirements which only come to light as part of the due diligence process in respect of the company’s sale. These mistakes can cause huge problems on a deal and end up taking vast amounts of time to try and sort them out within the timescales of the deal. HMRC’s latest guidance is unlikely to make this any easier.
HMRC’s view is that if a mistake is discovered within nine months of grant it can be amended by applying for a reasonable excuse code from HMRC. However, if the mistake is discovered after that nine-month period, then it is HMRC’s view that it cannot be corrected, regardless of whether or not the error is considered significant. Such errors should be disclosed to HMRC so that it can determine whether or not the error was material and led to the option failing to meet the EMI requirements.
We would argue that most minor failings should not lead to a breach of the EMI requirements but each case will need to be looked at and if acting for the buyer it is likely that a more cautious approach will be taken. The message to all companies with EMI options is to check and check again that everything has been done properly in relation to them so that any problems can be sorted out well in advance of a sale. If an issue is only spotted as part of the buyer’s due diligence process, it is much more difficult and expensive to try and resolve it during the sale process.
Finally, you might not know this about me….
In between Parisi Tax and being a mum to a six-year old and an eight-year old (which admittedly doesn’t leave very much time!), I am an aspiring yogi. Yoga provides me with a welcome oasis of calm in an otherwise very busy week. If I am honest, whilst I love the stretching and the balancing, my favourite part is the sleep (sorry, meditation!) at the end of each class.
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