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New M&A guide shows shake-up in global economic environment is forcing change

US tax policy proposals threaten many aspects of global M&A

Taxand, the global tax advisor, today releases its 2017 Global Guide to M&A Tax, providing guidance on the M&A tax climate across 37 jurisdictions and an overview of continuing and emerging trends that reflect a changing international consensus on the allocation of tax burdens and experiments in new tax policy.

The guide highlights how multilateralism has been a key trend over the last year, borne out of wider changes in the international tax landscape, such as the implementation of the OECD’s Base Erosion and Profit Shifting (BEPS) initiative.

In addition, the guide shows the potential for US tax reform to provide a further shake-up to the global M&A landscape, not least in relation to corporate inversions.

Amongst other trends, the guide identifies the following key areas where multinational businesses may see changes in the deal-making process from a tax perspective:

  • Increased focus on substance – tax authorities are demanding more substance from companies formed to invest in the stock, debt or intangibles of related parties;
  • Diminished importance of ownership relative to economic contributions in transfer pricing in intangibles – some countries are trending toward assigning income to the situs of the economic activity that gave rise to the intangibles;
  • Limitations on interest deductions – some such limitation may emerge from the tax reform process in the US;
  • Worldwide exchange of information between tax authorities – in addition to the exchange of country-by-country reporting data, information about the ultimate owners of investment entities will be subject to broader disclosure. Spurred by FATCA and other legislation, this movement has the momentum to become an international norm.

Christopher Howe, Managing Director at Alvarez and Marsal Taxand comments:

“As dealmakers and tax planners around the world face an ever-tightening fiscal net around the structure and financing of cross-border acquisitions, the era in which each country’s tax authorities kept mostly to themselves is over. An unprecedented period of international cooperation is taking its place, fuelled by universal revenue needs and implemented through new information exchange protocols and stringent national and international substantive anti-avoidance rules. 

“Like it or not, the playing field has been re-designed to switch focus from whether income will be taxed to where. 

“International M&A tax planning, whilst always challenging, has become a stiff uphill climb and an obstacle course nearly overnight. But business is not waiting for the tax profession to catch its breath. Economies move at different paces, but we can clearly see the consistent and growing demand for new investment opportunities. Deals will be done and businesses will need to learn on the job how to cope with new rules and restrictions.”


Volkswagen CEO tweets, Musk-style, on market-cap milestone



Volkswagen CEO tweets, Musk-style, on market-cap milestone 1

By Thyagaraju Adinarayan and Christoph Steitz

LONDON/FRANKFURT (Reuters) – When the market value of Germany’s Volkswagen briefly rose above the 100-billion-euro mark on Wednesday for the first time since 2015, the boss of the normally staid carmaker took to Twitter, Elon Musk-style, to crow about it.

VW shares soared as much as 6% after investment bank UBS raised its price target on the stock by 50% and said the company’s new electric vehicle platform was set to challenge Tesla’s dominance in the battery electric vehicle (BEV) market.

Herbert Diess, chief executive of VW Group, highlighted the UBS note on Twitter and shared the market capitalisation milestone.

“The market has been waiting for our #BEV-ramp-up and wanted to see some proof points,” Diess posted.

Traders reacted with comparisons to Tesla chief Elon Musk who frequently uses Twitter to talk up products developed by his companies, cryptocurrencies or other buzzing technologies.

The comparison, at least for now, must end there.

Diess sent his first tweet using the “@Herbert_Diess” handle less than two months ago and has since tweeted 51 times. While he has managed to amass almost 25,000 followers in this time, Musk can boast of 48.3 million.

“The sheer fact that he started his own account apart from the official VW account tells me, that between the lines he wants to express: We are here,” a Germany-based trader said.

Though unrelated and more a market-moving tweet, another trader highlighted instances of a probe by the U.S. Securities and Exchange Commision on Musk’s tweet in 2018 that he was considering taking Tesla private at $420 a share.


But despite recent share price gains — up 20% this year — VW’s market capitalisation is just one-sixth that of Tesla. Shares trade 7.5 times 12-month forward earnings; possibly its role in the EV transition is not fully priced.

Tesla meanwhile trades at 160 times 12-month forward earnings, levels many consider bubble-like.

On the market capitalisation gap, UBS said VW’s only takes into account its EV business out to 2025, and doesn’t price its cash flow-rich legacy business, indicating there is room for the share price to rise.

It added that VW would likely “master” the transition to close the volume gap with Tesla in 2022.

At 300 euros, UBS has the most bullish price target on VW. Analysts’ median price target on its shares was 191 euros, according to Refinitiv data.

Preferred shares, which are listed in Germany’s benchmark DAX index, hit January 2018 highs on Wednesday, while ordinary shares rose as much as 5.6% to their highest since July 2015, two months before the diesel scandal broke.

VW closed 4.7% higher at 185.18 euros per share on the day, taking its market value to 99 billion euros.

Volkswagen CEO tweets, Musk-style, on market-cap milestone 2

Tesla vs VW

(Reporting by Thyagaraju Adinarayan in London and Christoph Seitz in Frankfurt; Editing by Sujata Rao and Jonathan Oatis)


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UK offers ‘super deduction’ to temper 25% corporation tax hike



UK offers 'super deduction' to temper 25% corporation tax hike 3

LONDON (Reuters) – Britain will raise corporation tax to 25% from 19% from 2023 to help pay for the cost of the COVID crisis but tempered the tax rise with a “super deduction” to spur investment, finance minister Rishi Sunak said on Wednesday.

“The government is providing businesses with over 100 billion pounds of support to get through this pandemic so it is fair and necessary to ask them to contribute to our recovery,” Sunak told parliament.

“Even after this change, the United Kingdom will still have the lowest corporation tax rate in the G7,” Sunak said.

Sunak said he would encourage businesses to invest their cash reserves with a so-called “super deduction” to reduce their tax bill by 130% of the cost.

He said that under existing rules, a construction firm buying 10 million pounds of new equipment could reduce their taxable income in the year they invest by 2.6 million pounds but with the “super deduction” they could reduce it by 13 million pounds.

“We’ve never tried this before in our country,” Sunak said.

Sunak quoted the Office for Budget Responsibility as saying it would boost investment by 10%; around 20 billion higher per year.

“It makes our tax regime for business investment truly world-leading, lifting us from 30th in the OECD, to 1st,” he said.

“This will be the biggest business tax cut in modern British history.”

The United Kingdom introduced corporation tax at a rate of 40% in 1965. It rose to a high of 52% in the 1970s.

In the 1980s, the main rate was cut to 35% under Margaret Thatcher, then during the 1990s from 35% to 30% and eventually to 20%.

The rate was cut to 19% from 2017 and was supposed to be reduced further to 18% and then 17% but has been held at 19%.

Sunak said small businesses with profits of less than 50,000 pounds a year would be charged only 19% – so around 70% of businesses would be unaffected.

He also said the government would taper in the tax on profits above 50,000 pounds so that only businesses with profits of 250,000 pounds or more – around 10% of companies – would be taxed at the full 25% rate.

(Reporting by Guy Faulconbridge, editing by Estelle Shirbon)

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Acting as an attorney during Covid-19: Duties, safeguards and dealing with disputes



Acting as an attorney during Covid-19: Duties, safeguards and dealing with disputes 4

By Philip Collins, Partner at Winckworth Sherwood

For many elderly and vulnerable people, March 2021 will mark one year since they began heeding the government’s advice to stay at home. For the fit and healthy amongst us, last summer and autumn provided a welcome break from lockdown, but for those who were shielding, didn’t have a reason or didn’t feel safe to leave their homes, it has been a long twelve months of isolation from friends, neighbours and in many cases family.  This extended period of isolation has also caused many practical problems as people have had to rely on neighbours, paid helpers and sometimes strangers who have stepped forward or been called upon to help with shopping, paying bills, collecting prescriptions and other day-to-day tasks.

Whilst this has led to new friendships and community connections for many, there is concern that this reliance on others has led to a growing number of cases of both overt and more subtle forms of financial abuse.

What is financial abuse

Financial abuse can take many forms but ranges from deliberate financial scams such as phishing and doorstep crime to more minor and unintended abuse such as an unscrupulous “helper” using an elderly person’s bank card to pay for their own shopping whilst buying essential supplies for the card’s owner.  As the more vulnerable in society are not going to the bank or a cashpoint on a regular basis, it can be a long time before they notice that their account has been used or they may not notice at all.

The scale of Covid-related financial abuse is not yet, and may never be, fully known but there is anecdotal evidence that such scams and schemes are increasing.  In particular at Winckworth Sherwood we have begun to receive troubling reports from family members of large sums of money having been taken from their loved ones’ bank accounts, that relatives have been coerced into signing important legal documents and even that they have changed their Wills in favour of individuals that they have only recently met.

Using a Lasting Power of Attorney to prevent financial abus

For those concerned that a loved one may be at risk of financial abuse, we strongly recommend putting Lasting Powers of Attorney (“LPAs”) in place, and in particular an LPA for Property and Financial Affairs.  This LPA allows the person making the document (the “donor”) to appoint a trusted person or persons to act as their attorney, who can then manage their bank accounts and sign financial documents on their behalf when they are physically unable to do so and also if they were to lose the mental capacity to make financial decisions themselves.  Attorneys have a duty under the LPA to always act in the best interests of the donor and if they do not do so, they may be investigated by the Office of the Public Guardian (the “OPG”). While the donor has capacity to make financial decisions, the attorney must involve them in each decision and take their wishes into account. 

Where shielding and repeated lockdowns are keeping many people at home, a Property and Financial Affairs LPA allows attorneys to monitor and manage bank accounts, organise and pay for online shopping, pay for cleaners and carers, reimburse neighbours who have helped out, and pay bills on the donor’s behalf.  It also allows attorneys to keep an eye out for targeted financial abuse as they can monitor bank accounts and look out for unusual payments or withdrawals of unexpectedly large sums. 

It takes a few months to complete the formalities of making an LPA, but there are short term measures such as a general power of attorney that can be put in place while the LPA is being registered.  We suggest this is discussed with your solicitor when you make your LPA.

The attorney’s role during lockdow

The last year has also created challenges for attorneys acting under LPAs, particularly if the attorney lives at a distance from the donor or if the attorney has also been shielding.   The OPG has issued guidance to attorneys reminding them that their role and responsibilities remain the same during the pandemic and that an attorney is not permitted to temporarily step down during lockdowns and then step back into the role at a later date.  The OPG has also made it clear that in discharging their duties under an LPA, attorneys must follow government guidance on social distancing and self-isolation and must observe any national and local lockdown rules. 

Our advice to attorneys throughout the pandemic has been to:

         Keep involving the donor in decisions that you make and keep at the forefront of your mind that every decision must be in the donor’s best interests.

         Keep in regular contact with the donor and see where you can help.  If you cannot visit in person, have regular phone and/or video calls and consider asking a care worker to pass on messages and keep you up-to-date. Try to obtain contact details for the donor’s neighbours and local friends, who you can call on to help, or to check in with the donor if you are unable to make contact.

         If the donor is happy for you to do so, register the LPA at their bank so you can pay bills and keep an eye on payments in and out.  If the donor is worried about bills sitting unpaid, register the LPA with the utility companies so that bills go directly to the attorney.

         If you need to talk to the donor about a specific decision, think about how urgent it is and whether the decision could be delayed. If it is urgent and you cannot discuss it with the donor remotely, think about decisions and written statements the person has made in the past.

         Although an attorney cannot ask a third party to make decisions for them, once a decision has been made, you can ask someone to help with the task in question.  For example, you can ask the donor’s neighbour to buy food for the donor and provide you with a copy of the receipt.

         Ensure any care visits, property repairs etc. that either you or the donor arrange are formally documented, that prices are agreed beforehand, and that you check credentials and take up references for anyone visiting the donor’s home. Remember that if a decision relates to the donor’s living arrangements or daily routine and care, then you must discuss this with the donor’s Health and Welfare attorney, if they have one.

If you suspect undue influence or financial abus

As the year has gone on and the initial neighbourly offers of help have dwindled, we are hearing that many vulnerable people have had to turn to strangers to help instead. This is a worrying trend as it allows fraudsters and unscrupulous new friends to exert influence on the elderly and vulnerable and put pressure on them to make poor decisions, give away control of their finances, or even give away money and assets.  

Remember that not all strangers have bad intentions and that not all financial abuse is deliberate, so attorneys should be careful not to jump to conclusions.  Our advice is to keep in regular contact with the donor to ensure you find out about any new acquaintances and so that you can stay alert to possible abuse. Red flags range from changes in spending habits, notices that bills have not been paid and unexplained transfers or withdrawals from bank accounts to less obvious signs such as a change in the donor’s behaviour.  These more subtle warning signs include the donor becoming secretive with you and others in their close circle, a seeming reluctance to spend money even on everyday supplies and an uncharacteristic lack of confidence in their abilities to deal with paperwork and carry out day-to-day tasks.    

If the donor has made a decision that you feel is unwise, for example if you discover they have given away property or changed their Will, get as much information as you can about what has happened and who was involved. If you think the donor has been coerced into making the decision or you are worried that they did not have the capacity to have made that decision, attorneys can use their power under the LPA to instruct a solicitor on the donor’s behalf.  A solicitor can arrange for a mental capacity specialist to visit the donor to talk through the decision they made and, if issues are discovered quickly enough, they may be able to intervene before any property has been formally transferred.   If fraud has already taken place or money or property has been given away, you should report the incident to the police.  The police alongside your solicitor can then advise on any steps that could be taken to recover those assets. 

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