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U.K. Election and Taxes • C Corp Conversion • Gig Work Defense

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This is a weekend roundup of Bloomberg Tax Insights, which are written by practitioners featuring expert analysis on current issues in tax practice and policy. The articles featured here represent just a handful of the many Insights published each week. For a full archive of articles, browse by jurisdiction at Daily Tax Report, Daily Tax Report: State, and Daily Tax Report: International.

This week we look at what the U.K. election means for taxes, private equity fund entity choice, California’s new worker classification law, multilateral v. unilateral digital taxation, and good deeds with opportunity funds. We’ll hear from:

Paul Falvey of BDO U.K. on what the election means for U.K. taxes

Jeremy Swan, Jonathan R. Collett, and Robert Richardt of CohnReznick LLP on private equity C Corp conversion

Christopher Karachale and Nancy Dollar of Hanson Bridgett LLP on a potential defense to the California classification law

Duncan Edwards of BritishAmerican Business on unilateral v. multilateral digital services tax solutions

Christopher Hanewald of Wyatt, Tarrant & Combs LLP on finding the good in opportunity zones

Boris Johnson, U.K. prime minister, delivers a speech outside No. 10 Downing St. in London on Friday, Dec. 13, following the general election.

Photographer: Chris Ratcliffe/Bloomberg

The Conservative Party has won the 2019 general election. Paul Falvey of BDO U.K. discusses what this means for U.K. taxes. How bold will the new government be? Read: What the Election Result Means for U.K. Taxes

Since enactment of the 2017 tax law, some large private equity funds have converted from publicly traded partnerships to C corporations. Jeremy Swan, Jonathan R. Collett, and Robert Richardt of CohnReznick LLP look at whether conversion makes sense for middle-market funds. Read: What Middle-Market Private Equity Funds Should Know About C-Corp Conversions

California’s new worker classification law—intended to restrict the classification of workers as independent contractors—goes into effect on Jan. 1. Christopher Karachale and Nancy Dollar of Hanson Bridgett LLP analyze a potential defense raised by technology platform companies, which argue they are third-party payment intermediaries and not employers. Read: IRS Form 1099-K in the Technology Platform Defense to California AB 5

Several countries have enacted or proposed a digital services tax on such firms as Google and Apple. Duncan Edwards of BritishAmerican Business says these unilateral measures are the wrong solution to a genuine problem and stresses the need to pursue a multilateral agreement. Read: Taxing the 21st Century Economy—A Multilateral Approach?

The opportunity zone program has fans and critics. Many of those fans are among the affluent and their advisers. While the program has received some deserved criticism as a way to make the wealthy wealthier, it is also a significant opportunity for local nonprofits, economic development organizations, and local governments to shape an incomplete program into something transformational, writes Christopher Hanewald of Wyatt, Tarrant & Combs LLP. Read: Impact Investing and Finding the Good in Opportunity Zones

From the Archive

Bloomberg Tax contributors have stayed on top of the twisted tale of Brexit from the beginning.

With the U.K.’s departure from the EU having been postponed for a third time, until Jan. 31, 2020, James Ross, of McDermott Will & Emery, considered whether the Brexit fog is now finally about to lift.

Clive Jie-A-Joen and Monique van Herksen listed some transfer pricing aspects companies may want to consider while they are making (last-minute) Brexit-triggered decisions.

Beyond Tax

What’s happening outside the world of tax?

Litigators can learn about good legal writing from a recent New York Times review giving zero stars to Brooklyn’s Peter Luger Steak House. Boies Schiller Flexner LLP’s Evan North says litigators who contend with audiences ranging from neutral to hostile should take the same approach as the review and catch and release all but the most compelling legal arguments. Read: What a Peter Luger Steak House Review Can Teach Lawyers About Effective Legal Writing

The global growth of cryptocurrency paves the way for an expanding legal practice around regulatory and investigations work. FTI Consulting’s Steve McNew has seen the growth first hand and examines the most common types of legal cases, illicit activities, and other issues emerging around cryptocurrency. Read: Crypto Advancements Stir Legal Work in Investigations, Asset Tracing

Decades after their debut, MS Word and email are still used by law firms for contract management. Olga V. Mack, CEO of ParleyPro, explores the opportunities contract management software (CMS) can bring to law firms and legal departments willing to understand its core technologies enabling real-time access, artificial intelligence, and blockchain capabilities. Read: Beyond MS Word—Three Technologies Transforming Contract Management

Law firms need to protect against cyber attacks. OpenText legal and data experts offer steps to take and warn a key concern is that a breach may violate the professional and ethical obligations lawyers have to protect privileged client information from unwanted access and disclosure. Read: Four Steps Law Firms Should Take to Reduce Cybersecurity Risks

Jane Fogarty, vice president and global counsel at SYNNEX Corp., explains why it’s important to listen to and address whistleblower complaints, especially for global companies. She walks through some decisions SYNNEX made when upgrading its internal review program. Read: How a Global Company Embraces Internal Whistleblowers

The director of the U.K.’s Serious Fraud Office, Lisa Osofsky, has made clear her goal of increasing U.S.-U.K. cooperation in investigating and prosecuting complex international financial crimes. Timothy J. Coley, counsel with Buckley LLP, says increased cooperation between the SFO and U.S. law enforcement agencies like the Justice Department and the SEC’s Division of Enforcement would be mutually beneficial. Read: Stronger Transatlantic Cooperation Could Be Boon for DOJ, Ailing U.K. Serious Fraud Office

Public comments on proposed CFIUS regulations are in, and final regulations must take effect by Feb. 13, 2020. Kirkland & Ellis attorneys look at the issues raised by industry trade groups, foreign government agencies, and law firms about their potential breadth, perceived ambiguities, and gaps, and highlight areas where more clarification and guidance is needed. Read: Proposed CFIUS Regs Draw Questions on Foreign Investment Definitions, Enforcement

Exclusive Content for Bloomberg Tax Subscribers

(*Note: Your Bloomberg Tax login will be required to read the following content.)

Kim Blanchard of Weil, Gotshal & Manges looks at whether treating a domestic partnership as an aggregate causes small U.S. partners to become subject to the passive foreign investment company (PFIC) regime.

The weekend roundup of Bloomberg Tax Insights will take a break for the holidays and return Jan. 4.

Bloomberg Tax Insights articles are written by experienced practitioners, academics, and policy experts discussing developments and current issues in taxation. To contribute please contact Erin McManus at emcmanus@bloombergtax.com.

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Workers

Uber Eats, Peers Given Deadline to Abandon Gig-Worker Model in Spain

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By Adam Clark

Uber Technologies Inc. and other operators of food-delivery platforms in Spain have three months to change their current gig-labor models, the Spanish government said on Tuesday.

Ministers approved a law to regulate the employment conditions of delivery workers who work via digital platforms such as Uber Eats or Amazon.com Inc.-backed Deliveroo PLC. The approval begins a countdown for companies to convert their workers from independent contractors into employees by mid-August.

The new regulations could be an important precedent as the European Union is consulting on rules on platform work across the bloc this year. Uber, Deliveroo and local delivery startup Glovoapp23 SL had campaigned for a deal which would avoid reclassification of workers, similar to arrangements reached in France, arguing the majority of couriers would prefer to be self-employed.

“This regulation will directly hurt thousands of couriers who use food delivery apps for much-needed flexible earnings opportunities and made it clear they do not want to be classified as employees. It will also impact Spanish restaurants that increasingly rely on delivery solutions to make ends meet,” a spokesperson for Uber said.

The companies will now have to consider how to implement the changes to their business models. Couriers’ groups said the most likely solution will be for the companies to subcontract workers via fleet-management companies.

The subcontracting model is already used by major European food-delivery platform Just Eat Takeaway.com NV but would likely result in relatively higher costs for Uber and Deliveroo, which have a greater proportion of restaurant deals where they handle the logistics of delivery. Uber said last month that it would use fleet-management companies for the planned expansion of its Uber Eats service to Germany.

“We want to be a long-term partner to Spain and are exploring different options to adapt our delivery business to the new regulation,” the spokesperson for Uber said.

Write to Adam Clark at adam.clark@wsj.com

(END) Dow Jones Newswires

05-11-21 0846ET

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Local chef creates app to connect gig workers with hospitality jobs

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CHARLESTON, S.C. (WCBD) – Connecting gig workers to hospitality jobs in Charleston is now easier than ever thanks to the app, Gigpro. It was created by a local chef, Ben Ellsworth, along with three others. The app lets anyone apply for and book jobs for just a single night at a time. It’s a fast and easy way to fill open shifts without committing to full employment with a business.

The hospitality industry is facing a detrimental shortage of workers with both back-of-house staff like line cooks and dishwashers as well as front-of-house staff like servers and bartenders.

The idea came to Ben Ellsworth, who’s been a chef in Charleston since 1998, as he stared at a pile of dishes in the Royal American kitchen during a shift when the dishwasher called out. He says the lightbulb switched on when he checked his cell phone.

“I got a notification on my phone that someone had booked my Airbnb and I said out loud ‘I wish he had booked to wash these dishes.’,” said Ellsworth.

That’s when Gigpro was born.

Nearly 150 Charleston businesses and over 2,000 workers have joined the platform since its initial release in late 2019. In the first month of beta testing, 36 gigs were booked and in the second month, 86 gigs were booked.

Now Ellsworth says around 200 gigs are posted to the platform each week.

There are only a few simple steps to set up Gigpro and begin picking up shifts. Download the free app, create a profile with a resume, fill out insurance information and add a payment method. A restaurant will post a shift with information like date, hours, and pay, then workers on the app can scroll through and apply for a job. If the employer finds a good fit for the night, the job will be booked. After a worker completes the job, payment is sent through the app two to three days later.

“Everybody that’s on the platform gets covered with occupational accident insurance,” explained Ellsworth. “Which takes the liability off the business and keeps the pro safe.”

He says the occupational accident insurance is about $0.38 per hour. Many gigs pay $15 to $30 an hour.

It’s a big help for employers working to fill shifts when employees call out or when staff is short.

Wild Dunes Resort on the Isle of Palms has been working with Gigpro for just over a year and recently has been booking workers most weekends.

“It’s a great tool to have in our toolkit,” said Manny Montes, the assistant director of HR at Wild Dunes Resort.

In some cases, at Wild Dunes and other businesses, workers have been asked to stick around.

“There’s actually two people that we connected with originally on the app that we’ve ended up offering positions to stay on board with us as actual employees,” said Montes.

Gigpro is a way to get some fast cash and help out businesses that are in dire need of staff.

“I would say right now that our biggest mission is to try and get more money in the pockets of the workforce in this industry. I’ve heard from multiple businesses that we’re working with that we’re kind for the only thing that’s moving the needle and getting help in the door,” said Ellsworth.

Gigpro is officially expanding to Nashville, TN and Charlotte, NC and Ellsworth hopes to add more “food eccentric cities” to the list soon.

For more about Gigpro, click here.

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Rep. McHenry introduces Gig Worker Equity Compensation Act

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U.S. Rep. Patrick McHenry (R-NC) introduced legislation that would include the gig workforce in the category of workers who can benefit from equity compensation.

© Shutterstock

The Gig Worker Equity Compensation Act (H.R. 2990) would help gig workers share in the economic resurgence while preserving their flexibility and independence.

“How people choose to work is changing. Our technology-driven economy is embracing this shift, Washington needs to keep up,” McHenry, the Republican leader on the House Financial Services Committee, said. “By giving these non-traditional workers access to equity compensation—just like traditional employees—we can ensure they benefit from the growth of the companies they are making successful. While Democrats attempt to stifle this growing sector of the workforce, my bill ensures they retain the flexibility they need while giving them the opportunity to grow wealth. This is a win for our capital markets, job creators, and gig workers.”

McHenry points out that about a quarter of the U.S. workforce participates in the gig economy or non-traditional work — whether as a rideshare driver, food delivery courier, or sharing their property through a platform like Airbnb. Further, about 10 percent of workers rely on alternative work arrangements for their primary source of income. These workers do not want to be bound by constraints like an office, set hours, or a traditional employer-employee relationship. This bill seeks to provide additional flexibility to support these workers.

In November 2020, the Securities and Exchange Commission (SEC) voted to propose rules to provide equity compensation options for gig workers. McHenry welcomed this initiative and is committed to working with the SEC to implement his broader proposal.

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