Michael Sherry

Practice Areas

Michael has concentrated on developing particular areas of interest alongside advising and representing owner managed businesses generally: incorporating residential property businesses and partnerships (with a particular emphasis on issues arising around partnership severance payments) but his practice extends across the field of taxation. Advising OMBs involves advice on all taxes, including the business taxes (Corporation Tax, VAT, SDLT) remuneration taxation (PAYE/NIC) taxation of dividends etc., business sales and reorganisations (CGT/intangibles/loan relationships/stamp taxes) business succession issues (CGT/inheritance tax/BPR) and private client issues for the owners generally (including on divorce.) Michael’s Chartered Accountancy qualification and experience and practical approach to business problems aligned with his commercial experience as chairman of a listed company and other commercial directorships inform his understanding of client needs. Owner managed businesses range from smaller family companies to the largest hedge funds worth billions and professional practices with hundreds of members. Michael’s versatility is seen in litigation e.g. College of Estate Management v RCC (VAT on distance learning), Hancock v RCC (discounted securities and reorganization provisions) Forde & McHugh v RCC (tax and NIC on contributions to an unapproved pension scheme) and Gray’s Timber v RCC (employee securities valuation principles) all cases heard by the House of Lords/Supreme Court.

Michael has been involved in residence and domicile disputes (some of which have reached court e.g. Shepherd) and reference to the Competent Authority under Double Taxation Treaties. Issues around the application of the Transfer of Assets Abroad provisions regularly arise as well as the Settlement provisions. Recent work includes: Structuring the acquisition of a private jet for a non-dom who will operate the plane out of the UK and will probably become UK resident in the next few years,; Advising on whether a foreign insurance bond was a personal portfolio bond and the tax treatment of the redemption proceeds after the foreign holder had become UK resident; Advising a whistleblower whose career had been destroyed by his employer on the status of damages for loss of career; Putting in place an EoT for a OMB worth about £50 million. The application of the decision in Zim Properties and Extra Statutory Concession D33 concerning damages; first are the damages capital or revenue in nature? Damages were claimed against solicitors for professional negligence. Had they discharged their engagement properly the client would have had enduring rights to particular intellectual property, but because of the negligence the client had no rights. The loss took into account the likely future earnings. The Revenue argued that the damages were therefore revenue in nature being to compensate for lost earnings; in fact while the lost earnings quantified the value of the asset which the taxpayer should have had but for the negligence, so the damages ere for that asset and so were capital. Then on the Zim point the Revenue argued that the contract which was badly drafted was an ‘underlying asset’ and so ESC D33 did not apply. But of course the loss arose because the badly drafted contract did not succeed in creating an asset. The loss was because there was no asset and so concession D33 did apply; resolved – most of the tax was repaid to the taxpayer; World-wide debt cap problems: one client having carefully structured related party loans on an arm’s length basis found they were potentially within the scope of the revised rules. The related party debt was replaced by third party debt but with consequential issues for the group, including the connected parties who had originally provided the connected debt funding. An incorporation of a professional LLP into a limited company: shortly before the incorporation new partners were admitted. Upon the incorporation the new company’s accounts recognised the (large) value of the goodwill acquired. Because the new partners paid nothing for their share of the goodwill, the Revenue argued that SP D12 did not apply; admission of the new partners gave rise to CGT disposals of goodwill at mv. If the Revenue had succeeded in this argument then all admissions of new partners to professional firms where the goodwill is not paid for, would trigger CGT disposals. Also, the valuation of WIP on the transfer from the LLP to the limited company was disputed. The Revenue argued that the company cannot carry on a profession (notwithstanding that the SRA/ICAEW etc. regulate companies carrying on their respective professions) and that the value of WIP must be brought in at market value; not the agreed price. The Revenue’s requests for extensive information (to value WIP and goodwill) were successfully resisted as being irrelevant and oppressive and because of technical defects. After a decade of argument in correspondence and repeated requests for a meeting, and two changes of officer, all challenges from the Revenue were dropped after a single meeting, once finally secured. Over the last eight years Michael has acted for around 40 private clients wishing to incorporate their residential letting businesses without falling into inappropriate tax bear traps. Situs of assets is a perennial issue not just in IHT for non-doms but also for deduction of tax at source and remittance basis generally.

Career

After graduation from Lincoln College Oxford Michael was called to the Bar in 1978 by Gray’s Inn, after which he qualified, as a Chartered Accountant and Chartered Tax Adviser, in 1981 before going on to complete pupilage in 1984. Since then Michael has practiced from Temple Tax Chambers where he was Chair of the Management Committee from 2003 and Head of Chambers from 2012 until 2018.

Professional Memberships

Michael participates fully in professional life and has served as Chairman of the Tax Faculty, Treasurer of the ICAEW, President of the Institute of Indirect Tax, and has served on the Bar Council, the Gray’s Inn Management Committee, the ICAEW Council and Board and as Secretary of the Revenue Bar Association.

Publications

Michael lectures and writes extensively. For many years he edited the leading practitioner textbooks, Whiteman & Sherry on Income Tax and Whiteman & Sherry of Capital Gains Tax.