Tomorrow, and tomorrow, and tomorrow
Creeps in this petty pace from day to day
To the last syllable of recorded time.
And all our yesterdays have lighted fools
The way to dusty death. 

Macbeth, William Shakespeare, 1606

We hope you enjoyed our latest cheerful lockdown opening quote, which also has a bit of a link to the historical trivia at the end. Both nothing has happened and a lot has happened since our previous newsletter two weeks ago. It is also frightening remember that under the Fixed-term Parliaments Act 2011, yesterday would have been polling day at the end of David Cameron’s 2015 government. Which obviously leads straight into…..

In our newsletter a month ago (see here), we returned to the difficult subject of Brexit. This was just before the timetable was agreed for the next round of Barnier / Frost negotiations. In our comments, we stressed the importance of the looming 30th June deadline both for the Brexit transition period and the treatment of financial services post full departure. The timetable was announced on 15th April and provided for three negotiating rounds before 30th June, in the weeks commencing 20th April, 11th May and 1st June. The first of these has now taken place and played out pretty much in line with our worst expectations, i.e. that it would get bogged down on fisheries, a topic that provokes patriotic fervour vastly in excess of its economic importance on either side of the Channel. The press statement from Michel Barnier after the negotiating session is blunt and can be found here. The other hugely contentious issue, the Irish border, has also moved forward in a distinctly not moving forward sort of a way. In his statement, Barnier noted that the Specialised Committee on the Protocol on Ireland/Northern Ireland would take place the next week, on 30th April. This has now happened and adds further to the impression that the UK is hoping to blag its way out and do nothing in practice. You can read the official statement following the meeting here if you are interested, but it says nothing.

It is only fair to point out that others on both the UK and EU side are significantly less pessimistic than I am. Sharon Donnery who is Deputy Governor of the Central Bank of Ireland answering questions at the end of a PwC Ireland webinar last week seemed confident that this was brinkmanship by the UK and that everyone would step back at the last minute. She also suggested that there might be flexibility on the 30th June deadline, a position supported by other EU countries. Her wording on why she thinks a deal will happen was interesting - “The EU wants a deal, the UK needs a deal”. 

Regardless of where the UK ends up, developments in the EU will remain a hugely important topic and it is therefore important to watch what might happen in a post covid-19 world. Others are better placed than we are to comment as to whether this will result in greater EU centralisation or fragmentation. We will concentrate on specific topics that are key to our day-to-day work.

On 4th May, “Politico” as part of its “Brussels Playbook” series ran a fascinating online interview with Italian MEP, Irene Tinagli. Although she was only elected to the European Parliament for the first time in May 2019, she was immediately elected as chair of the highly influential Committee on Economic and Monetary Affairs (ECON), replacing her Democratic Party colleague Roberto Gualtieri, who had chaired the committee since 2014. Whilst neither is in the same league as Sharon Bowles, who chaired the committee from 2009 to 2014, it remains an extremely important role, and the committee will be highly relevant as the EU determines its long-term response to the covid-19 crisis. Irene’s observations are therefore of considerable interest. Some of her comments relate to specific topics that we have been covering over the years:

  • Tignali emphasised the importance of accelerating the Capital Markets Union (CMU) to encourage investment. There are initiatives that ECON had planned to take forward that have been delayed by the current crisis, but which they are keen to pick up again as soon as some degree of normality returns to their work.
  • The cost of the recovery package is concentrating minds on how this will be financed. Tignali believes that there will be greater enthusiasm for tax harmonisation and it sounds as though the Financial Transactions Tax (FTT) may be coming back onto the agenda. We will be monitoring this closely. We have some comments on tax avoidance later in this newsletter.

Not specifically covered by Tignali, but still one of the pillars of CMU is the Alternative Investment Fund Managers Directive (AIFMD). We are expecting the formal review of the AIFMD to emerge at some point relatively soon, but covid-19 delays are making the timing something of a mystery. We will cover this when we have more information. For managers of funds distributed to retail investors, we await the EU review into the regulation for packaged retail investment and insurance products (PRIIPs). According to the Financial Times (25th April, see here), the European Commission is now at loggerheads with the EU regulator, the European Securities and Markets Authority (ESMA).

Turning to more immediate matters, John has continued to chair the fortnightly AREF Crisis Forum series.

AREF Crisis Forums: Webinar #3

The third in this series of fortnightly webinars for the Association of Real Estate Funds was on Tuesday. Thank you to the panelists:

  • Sarah Cockburn, Head of Real Estate Capital Partners at Schroders 
  • Paul Tebbit, Fund Manager at BlackRock
  • Nick Ridley, Partner, Head of Asset Services, Cushman & Wakefield
  • James Taylor, Partner at Workman

The webinar concentrated on operational matters, looking at current and short-term rent collections as well as operational issues as lockdown is gradually eased.

You can download the recording here. As promised in our previous newsletter, John did indeed wear a bow tie. I wait with interest and some trepidation to see where he goes next with this. Hopefully not a cravat.

You can find details and register for Webinar #4 here.

More on open-ended funds

A few brief updates:

Valuation for open-ended funds

On 24th April, the FCA distributed a statement on annual valuation of immovables for property fund managers to managers of Authorised Funds. The FCA have said that we can share it more widely as we think it raises points that should be considered by fund managers more broadly. You can find the statement and our comments on our website here.

IPE Real Assets article

John contributed to the article "Talking Point: Are UK open-ended property funds fit for purpose?” in the current edition of IPE Real Assets published earlier this week. You can find it here.

AREF / INREV report on open-ended fund subscription and redemption pricing

As we have covered in previous newsletters, John is part of the AREF / INREV group drafting this report, a chapter of which on dealing with pricing under exceptional market circumstances was released early a month ago so that managers could consider it in view of the March quarter end valuation uncertainty. The rest of the report is now in its final stages of drafting and is expected to published as a consultation draft well before the June quarter end.

Tax consultation on Asset Holding Companies

We have been covering the consultation on Asset Holding Companies (AHCs) since the Budget. John is drafting the Investment Property Forum response. We provided our general comments on the consultation in our post-Budget newsletter here. As we mentioned in our last newsletter, on 16th April, John chaired an AREF / IPF webinar on the consultation. AREF members can download the recording here and IPF members here. We had anticipated a follow-up webinar on 6th May. Since then HMRC have announced that the deadline for responses has been delayed by three months to 19th August. This has taken away some of the urgency and allows for a more considered approach, but also resulted in the cancellation of the webinar in case you wondered what happened to it.

A key element of the IPF response will be the economic case for change, and the benefit that might be gained by UK businesses. The specific question in the consultation is "What do you consider to be the main fiscal and economic benefits to the UK – both direct and indirect - of greater AHC domicile? Can you support this with any quantitative evidence?”. As mentioned in our previous newsletter, we would be very keen to hear from lawyers, accountants, administration providers and other service providers who would like to help with information for the business case aspects. 


Continuing the theme of tax, as we have been covering in our newsletters, the EU has been taking significant steps to reduce the scope for corporate tax avoidance. The Anti-Tax Avoidance Directive II (ATAD II) applies for most of the matters that it covers from 1st January 2020. The next major change is the EU Directive on Administrative Cooperation (DAC-6) which applies from 1st July 2020, so now in under two months time. However, it is important to note the changes were adopted by the EU on 25th May 2018 and came into effect on 25th June 2018, so what is reportable from 1st July 2020 includes transactions from 25th June 2018. 

As we have previously noted, DAC 6 requires “intermediaries” in the EU, or if there is no intermediary, the taxpayer, to report to their home tax authority on certain cross border transactions that have certain “hallmarks” of tax avoidance.

The definition of  “intermediary” is incredibly broad and includes any person that designs, markets, organises or makes available for implementation or manages the implementation of a reportable cross-border arrangement or provides directly or indirectly advice, aid or assistance.

The “hallmarks” are set out in Annex IV to the amending Directive which you can find here

The UK regulations implementing DAC-6 were published by HMRC in January, slightly after the 31st December 2019 deadline. You can find them here.  Along with the regulations, HMRC published its summary of the responses received to its earlier consultation. This includes helpful guidance and can be found here. Further guidance is due to be published prior to 1st July. We will share this once it is available.

From a UK perspective, there is also the uncertainty as to what happens once the Brexit transition period is over. The January HMRC paper states that while the UK is an EU Member State, and during any implementation period, under the terms of the Withdrawal Agreement, the UK is obliged to implement this Directive. It is also important to note that leaving the EU will not diminish the UK’s resolve to tackle tax avoidance and evasion, and we will continue to work internationally to improve tax transparency. 

On 22nd April 2020, the Confédération Fiscale Européenne (CFE) sent a statement addressed to the European Commission and the Council of the European Union, seeking leniency in the enforcement of penalties for DAC-6 infringements in view of the challenges posed by the covid-19 outbreak. We strongly suggest not relying on this happening.

European Union Environmental, Social and Governance disclosure rules

We have been covering the developments on European Union regulation in respect of environmental, social and governance (ESG) matters.

On 23rd April, the three European Supervisory Authorities (ESAs), the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA) issued a consultation on the proposed Regulatory Technical Standards (RTS) for ESG disclosure. The regulation to which the RTS relates, the Sustainable Finance Disclosure Regulation “SFDR” was published on 27th November 2019, and was briefly covered in our newsletter on 18th December 2019. It sets out  provisions for sustainability reporting that will apply to organisations regulated under AIFMD, Solvency II and other EU investment regulation. 

You can find the regulation here and the consultation here

The RTS which the consultation covers relate to some specific reporting requirements under the SFDR. These are set as the publication of: 

  • the details of the presentation and content of the information in relation to the principle of ‘do not significantly harm’ as set out in Article 2(17) of the SFDR consistent with the content, methodologies, and presentation of indicators in relation to adverse impacts referred to in Article 4(6) and (7) SFDR. 
  • a statement on an entity’s website of a statement on the due diligence policy in respect of the adverse impact of investment decisions on sustainability factors in relation to climate and other environment-related impacts (Article 4(6)) and adverse impacts in the field of social and employee matters, respect for human rights, anti-corruption and anti-bribery matters (Article 4(7)). 
  • pre-contractual information on how a product with environmental or social characteristics meet those characteristics and if an index has been designated as a reference benchmark, whether and how that index is consistent with those characteristics (Article 8). 
  • pre-contractual information to show, where a product has sustainable investment objectives and a) has a designated index as a reference benchmark, how that index is aligned with the sustainable investment objective and an explanation as to why and how that designated index aligned with the objective differs from a broad market index (Article 9(1) SFDR); b) if no index has been designated as a reference benchmark, an explanation on how that objective is to be attained (Article 9(2) SFDR). 
  • Information on an entity’s website to describe the environmental or social characteristics of financial products or the sustainable investment; the methodologies used; the pre-contractual information referred to in Articles 8 and 9; and the periodic reports referred to in Article 11. 
  • Information in periodic reports according to sectoral legislation specifying (a) the extent to which products with environmental and/or social characteristics meet those characteristics, and (b) for products with sustainable investment objectives and products which objective is a reduction in carbon emissions: (i) the overall sustainability-related impact of the product by means of relevant sustainability indicators and (ii) where an index has been designated as a reference benchmark, a comparison between the overall impact of the financial product with the designated index and a broad market index through sustainability indicators (Article 11 of the SFDR). 

The consultation runs until 1st September 2020. John is part of the group that will be working on the Association of Real Estate Funds (AREF) response to the consultation.

European Union anti-money laundering rules

Again a topic that we have been covering over the years. The EU yesterday announced that it intends to implement a comprehensive anti-money laundering and countering the financing of terrorism (AML/CFT) framework.

The action plan published yesterday outlines how the Commission intends to deliver on these objectives, building on six pillars:

  • Ensuring the effective implementation of the existing EU AML/CFT framework; 
  • Establishing an EU single rule book on AML/CFT; 
  • Bringing about EU level AML/CFT supervision; 
  • Establishing a support and cooperation mechanism for Financial Intelligence Units (FIUs);
  • Enforcing Union-level criminal law provisions and information exchange; 
  • Strengthening the international dimension of the EU AML/CFT framework. 

You can read the publication here.

Some forthcoming events

AREF Crisis Forums: Webinar #4

John will be chairing this panel discussion, which will take place on 19th May. You can find details and register here.

London Stock Exchange Investment Fund Conference 2020

John will be speaking about real estate funds at this conference, which has been postponed until 4th September 2020. You can find details and register here.

A couple of other webinars

John is involved in two other webinars which are planned for June but for which the dates have not yet been fixed:

  • Institute and Faculty of Actuaries webinar - Challenges of including illiquids in DC Pension Funds
  • ULI real estate finance webinar

Drop us an email if you would like to be told when details are available.


Huge congratulations to John’s former colleague at PwC, Susanne Eickermann-Riepe, who becomes the first female chair of RICS Germany.

Historical trivia

Thank you all for your helpful suggestions as to which spirit to cover next in the lockdown history of alcohol series. We have, however, deferred this until our next newsletter as we thought it was important to share with you instead in this edition that John believes he has found a remedy for the symptoms of Covid-19 in the Statutes of the Scottish Church, 1225-1559 (Concilia Scotiae, Ecclesiae Scoticanae Statuta Tam Provincialia Qual Synodalia Quae Supersunt).

As some of you may be aware, John is an alumnus of the University of St Andrews where he read history. He has been taking advantage of the evenings of lockdown to re-read some of his old academics, including “A History Of The Scottish People 1560 - 1830” by T.C. Smout, who was Chair of Scottish History at St Andrews when John was there from 1983 to 1987. Professor Smout’s seminal work includes a nugget of information regarding John Hamilton, archbishop of St Andrews from 1547 to 1571, which John spotted as potentially highly relevant to Covid-19. Archbishop Hamilton had been suffering from very serious breathing difficulties, leaving him barely able to even speak. He was cured by the Italian physician Gerolamo Cardano, who had allegedly tried a number of unusual treatments including dangling him upside down by the ankles, before identifying a successful cure. Smout points out without providing detail that the answer to this mystery is on pages 301 and 302 of volume 2 of Concilia Scotiae. We have investigated and this is indeed the case. Cardano prescribed "De venere certe non est bona, neque vtilis; vbi tamen contingat necessitas, debet vti ea inter duos somnos, silicet post mediam noctem, et melius est execere eam in sex diebus, pro exemplo ita vt singulis duobus diebus semel, quam bis vna die, etam quod staret per decem dies”. For those who do not read Latin, the recommendation is sex every night.

This might seem to be an unusual suggestion to make to a Roman Catholic archbishop, but it seems to have done the trick. Not only were his breathing difficulties cured, he fathered six illegitimate children. 

Until now, Archbishop Hamilton was most noted for his largely unsuccessful attempts to fend off John Knox (also believed to be a St Andrews alumnus) and the Protestant movement in Scotland. This is a good excuse for two John Knox trivia points:

  • The graduation ceremonies at both Edinburgh and St Andrews universities feature bits of material from Knox’s trousers;
  • The extensive list of activities that Knox wanted punished by Calvinist ecclesiastical courts included, among other things, incest, adultery and banqueting. Post lockdown once banqueting is again permitted, John would like to remind everyone that he is a very convivial dinner guest.

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Helen Forbes
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