Why did you decide to become a lawyer and – why tax?
I studied physics at university because I thought I was brilliant at maths. Then I hit the wall of my maths ability about two weeks into the degree so I decided I wanted to be a crusading criminal barrister. I then made the mistake of doing a mini-pupillage and, seeing how the criminal law impacts people’s lives, decided it wasn’t for me. Complete respect to people who can do that, but I can’t.
I then decided I wanted to be an IP litigator, and that the two best firms were Clifford Chance and Bird & Bird. Both firms binned my CV. By sheer luck, I managed to win a debating competition sponsored by CC, and then had dinner next to the senior partner. Fifteen years later, I discovered that the next morning he asked graduate recruitment to take my CV out of the bin and give me an interview.
My discovery of tax was equally haphazard. I was doing a seat in banking, which was fantastic, albeit I worked harder than at any other time in my life. My supervising partner, the wonderful Rob Lee, suggested I might do well in a tax seat. To my utter shock and horror, I enjoyed it and ended up qualifying into tax. It was something of a source of personal embarrassment for years. People would literally run away from me at parties if I said I was a tax lawyer. My wife claims it was only six months into our relationship that she found out what I did for a living. I have come to terms with that. Not sure if my wife has.
What were your career highlights at Clifford Chance?
The problem with being a tax lawyer is that the biggest obstacles you have to overcome are generally things that you can’t talk about. I have one exception. I was closely involved in structuring Citibank’s enforcement, acquisition, restructuring and eventual auction and sale of EMI. It was an amazing transaction for a whole host of reasons. And, even though it’s now 12 years ago, it’s probably the most fondly remembered transaction of my career. It had everything: a soap opera background, multiple difficult issues in multiple difficult jurisdictions, a wonderful client, brilliant colleagues and, ultimately, a great result for the client.
Aside from deals, the highlight is the partner made up to succeed to most of my practice, Jemma Dick. She’s amazing and deserves all the success she’s already achieved, one year in.
What makes a good tax lawyer?
Being good at tax is quite important. Other than that, I think it’s a mistake to think there is a particular set of skills, or personality type, that makes a successful tax lawyer. Chris Davies, Doug French, David Harkness and Jonathan Elman are the four tax partners I learnt the most from, and they are four very different people, with very different skillsets and personalities. What’s probably hard these days is to be a very reserved academic type, who isn’t comfortable with clients, and still make partner. That used to be possible but in the modern world I’m doubtful that it is. In many ways that’s a shame.
Why did you leave private practice?
It’s a pretty boring and clichéd story of reassessing priorities during a challenging lockdown. I realised that while I loved my job, I didn’t need to do it any longer from a financial point of view. That was an absurdly privileged position to be in, but if you’re doing something because you enjoy it and not for the money, then it’s not a job. It’s a hobby. And being head of tax at a City law firm is a really strange hobby. Quite a selfish one too. So, from the moment of that realisation, there wasn’t really a decision to make.
And what was the motivation for setting up Tax Policy Associates?
It would be easy to say that I did it to make a difference, to nudge tax policy in a slightly better direction, and to act as a corrective to what I think most tax lawyers see as a generally poor-quality public debate on tax.
I have a serious point that I very much believe, which is that it is indefensible that we tax employment income so much higher than self-employment income.
That’s all true, but my primary motivation was that I needed to continue to be a lawyer because psychologically I enjoy it, I’m good at it, and I think it’s good for me.
It was just a question of how exactly I’d do it. After lots of conversations with lots of different people, I concluded the best model would be one where I tap into all of the friends and contacts I had made over 25 years in practice. So I’d always be working in association with other people who would usually have more subject matter expertise than I did. That was the idea behind Tax Policy Associates.
What do you regard as your biggest accomplishment at TPA and why?
Identifying that there was a serious tax problem with the compensation for the victims of the Post Office Horizon scandal, and being part of the campaign to fix it. That ended up with the government agreeing to fund about £36m pounds of ‘top-up’ payments to postmasters to undo the tax mess the Post Office had dumped them in. Many other campaigners and MPs were also involved, and we were pushing at an open door: full credit to Kevin Hollinrake, the responsible Minister, who responded within hours of our first report on the subject to say that the government would act.
What prompted your decision to look into the affairs of Nadhim Zahawi?
I got onto Zahawi because I’d been looking into reports that various other Conservative Party leadership contenders had avoided tax. These reports were rubbish and I was getting a little bored of that when The Independent ran an incredible front page saying that Zahawi had been the subject of investigations by HMRC and the National Crime Agency. This was just after he was appointed Chancellor.
The unusual thing about Zahawi was that YouGov, which we thought was his main source of wealth, had been listed years earlier. So there was an amazing quantity of high quality legal and accounting documentation on the history of YouGov (thank you, Mishcon de Reya, for a really high-quality piece of work). This let me put the pieces together in much the same way as if I was looking at a transaction for a client. And just as one occasionally looks at a transaction and immediately sees a problem, I immediately saw that there was something very strange going on. That initial review only took half a day. Proving it by going through all of the historic documentation took rather longer and involved many more people.
Were there moments when you regretted your decision to stand firm and publish Osborne Clarke’s letter?
When I first received the Osborne Clarke threat and had an initial discussion with defamation counsel, my wife and I were definitely concerned about the potential to lose a year of my life and hundreds of thousands of pounds if we won a libel suit. Potentially millions if we lost.
But we both decided quite quickly, and after speaking to a lot of very experienced tax people, that Zahawi was bluffing. There were so many highly questionable elements of his financial affairs that it seemed inconceivable that he would be willing to provide disclosure or be cross-examined. So it was just a legal game and I am a very bad person to challenge to a legal game.
How do your former private practice colleagues feel about your calls for HMRC to tax partners in law firms and other professional services firms in the same way as employees?
I confess to having been slightly provocative here. I have a serious point that I very much believe though, which is that it is indefensible that we tax employment income so much higher than self-employment income. That should absolutely be fixed and law firm partners and plumbers should be taxed in the same way as bankers and teachers. That would be more fair and it would also eliminate what is currently a huge distortion that creates uncertainty, tax avoidance and tax evasion.
It’s politically difficult, but can be done, for example staged over a ten year period, with national insurance dropping by 1% every year, and income tax going up by (probably) around 0.8%. Eventually eliminating employer’s national insurance as well. For most people, that would be a rise in take-home pay. For law firm partners, a slight decrease – but I reckon they can live with it. I’m confident the profession is 100% behind me on this.
Would you ever return to private practice?
I loved private practice, but I think that’s now behind me.
What are your next goals at TPA?
I’m trying to continue to highlight what I think is a very serious – and under-reported – problem of HMRC automated late-filing penalties being issued to hundreds of thousands of people on incomes so low that they don’t actually have any tax to pay. Often, these are people with difficult lives, in difficult circumstances, and the state should be supporting them – not making their financial circumstances even worse. My goal is to change that, and return to how things were before 2011, when late filing penalties were capped at the amount of tax due.
What new hobbies have you taken up since leaving CC and moving to the countryside?
Growing tomatoes.
What do you think is the single biggest change that needs to happen in the UK tax system and why?
Tax exemption for tomato growers.
Dan Neidle founded Tax Policy Associates after retiring from Clifford Chance in May 2022.