Shrewd offshore strategies
Calum Robson learns about what has been described as the pinnacle of tax work
Governments around the world are anxious to maximise revenue for the public coffers, just when unemployment is rising and corporate profits are falling. So they’ve been increasingly keen to identify and close loopholes that allow wealthy people and listed companies to arrange their affairs to legally avoid paying domestic tax, through shrewd offshore strategies.
Ahead of the game
That means that advisers who can stay one step ahead of the game are in big demand, by corporations and individuals alike. Barry Murphy, PricewaterhouseCoopers tax partner, says: ‘Whichever jurisdiction you’re advising on, while you provide advice based on today’s laws and regulations, you need to consider how things might look two or three years down the line. If we were advising a client on the tax aspects of re-structuring their supply chain, or on tax-efficient ways of reducing costs and complexity across borders, we’d also consider if certain rules were likely to shift later on, in ways that might make the arrangements inefficient. It’s unpredictable at the moment, as there are so many changes being made by governments in response to the recession.’
Effective avoidance strategies exploit foreign tax rules – but with full disclosure of why there should be no domestic liability, although this can be challenged by HMRC. Paul Captieux, who heads up Clough Taxation Solutions, a West Yorkshire firm, says: ‘Avoidance schemes that tax-planning boutiques devise using offshore jurisdictions must be notified to the authorities, who may take action to close off the loopholes that facilitate them.’
Some advisers specialise in specific countries – but according to Richard Mannion, national tax director at Smith & Williamson, there could be a risk of encountering unfamiliar rules in other jurisdictions where clients operate. ‘Many high net-worth individuals in the UK come here from the US but have interests in Switzerland or elsewhere in Europe,’ he says. ‘However, certain complications unique to the US may mean you deal with large numbers of Americans, broadening your knowledge of tax laws in places like Switzerland, the Channel Islands and the Caymans. But it’s rare to come across someone who’d specialise just in, say, the UK and the Caymans.’
Creative thinkers
Skill sets required are about much more than numerical ability, says Captieux: ‘Those who are successful might just as likely have legal experience as accounting backgrounds; they’re good at interpreting legislation and writing reports. They must be creative thinkers who can tailor their foreign tax know-how to each client’s circumstances – bearing in mind their assets may be held in many countries. That means being an empathetic listener who can translate complex legislation into plain English.’
And every client is different; from get-up-and-go entrepreneurs – time-constrained, unconcerned about finer points but extremely demanding – to those who inherited their wealth, with more time on their hands to take an interest in the details. ‘They present different challenges and rewards,’ says Captieux. ‘Inheritance clients might be more prepared to invest time in developing deeper, more loyal relationships. Entrepreneurs are used to going from deal to deal; they could be unforgiving and more inclined to move elsewhere if unsatisfied – but the work moves at an exciting pace; they’re inspiring individuals to be around.’
Mannion recommends that those who have their heart set on private-client tax work gain a grounding in generalist accounting first. ‘It makes you more rounded,’ he says. ‘If you didn’t realise the meaning of something because of a lack of basic training, it could be a critical miss. The ability to grasp concepts you don’t necessarily specialise in is invaluable.’
‘You need a certain mindset,’ he continues, ‘a high level of intellect and incredible persistence, because offshore tax work is so cutting-edge.
‘It can be like squeezing jelly – no matter where you press down, some will ooze out elsewhere; dealing with one aspect of offshore tax can generate another 20 to consider as a result.’
Offshore tax advice involves much legal analysis, planning the complex affairs of people with homes and investments around the world, and cross-border trusts for their offspring and grandchildren.
‘There are often fingers in lots of pies,’ concludes Mannion. ‘But it all makes for an extraordinarily interesting career – in my book, it’s the pinnacle of tax work.’