One minute with Hayden Bailey, Head of Private Client & Tax at Boodle Hatfield.
What’s keeping you busy at work?
My focus is to get clients to devote time and energy to the creation of a governance structure that can endure after their death. There is an explosion of founder generation entrepreneurial wealth in the world. Wealth creators often value control, and are comfortable with risk. The concepts of shared ownership, governance and asset protection are not familiar ones. I spend time putting a succession structure in place that avoids the death of the founder being a ‘single point of failure’ that can otherwise lead to wealth destruction and dispute. Advising on family governance and succession alongside the associated tax implications is a fascinating area of work that I’m lucky to be involved in.
If you could make one change to tax, what would it be?
There are several areas where the capital tax code in the UK leads to behaviours that lead to money leaving or remaining outside the UK. Similarly, why couldn’t UK based professional trustee businesses be treated as offshore for the purposes of the trustee tax residence tests? We have the skills to be a centre of excellence for trustee services globally. I also feel that many of our tax reliefs benefit investors rather than founders, and so would like to see greater incentives for entrepreneurs to establish and retain UK businesses long term. Perhaps the first change I would make would be to remove the IHT barrier to the creation of life interest trusts. The changes made in 2006 made it very difficult to create trusts for genuine asset protection and management reasons. Those rules could easily be reversed allowing trusts to serve their intended purpose of protecting assets and defining the beneficiaries.
What do you know now that you wish you’d known at the start of your career?
It has taken me a long time to appreciate how important it is to challenge clients on their thinking and to regularly question assumptions. I can think of many occasions where clients have come to me with a firm idea of what they want to do, but not necessarily with a clear rationale for doing it. It takes a lot of confidence and experience to ask a client ‘why do you want to do this?’ and to be able to discuss with them what the long-term repercussions could be. I am not sure how easy it is to ask those questions at the start of a career, so perhaps I would counsel my younger self to listen and question more, and to accept there is no such thing as a complete solution.
Are there any new rules that are causing a problem?
Deduction of liabilities rules create complexity for family business clients and estate owners as tracking what borrowing has been used for so as to balance the often-competing outcomes of income tax deductibility versus inheritance tax deductibility. The uncertainty around the tax treatment of natural capital creates similar issues as it is currently unclear whether any additional natural capital value in the land is capable of relief.
Has a recent tax case caught your eye?
The recent Butler case ([2023] UKFTT 872 (TC)) involving a wedding venue business was concerning, as it seems to suggest that almost any activity that involves the use of land in the business can face challenge where a claim for Business Property Relief from IHT is made. This makes it difficult to advise land-based businesses and trustees on their IHT exposure.
And finally, you might not know this about me but...
I have become a mildly obsessive gardener, finding it a very fulfilling alternative to screen time. Learning how to prioritise tasks in the garden is very helpful in the office. Mature plants (like senior staff) require less time, but guiding those trees/staff is very important. It’s equally important to look after the tender young plants, help them develop and give them sufficient resources and room to grow in the right direction – without ‘over-watering’ to ensure their resilience!
One minute with Hayden Bailey, Head of Private Client & Tax at Boodle Hatfield.
What’s keeping you busy at work?
My focus is to get clients to devote time and energy to the creation of a governance structure that can endure after their death. There is an explosion of founder generation entrepreneurial wealth in the world. Wealth creators often value control, and are comfortable with risk. The concepts of shared ownership, governance and asset protection are not familiar ones. I spend time putting a succession structure in place that avoids the death of the founder being a ‘single point of failure’ that can otherwise lead to wealth destruction and dispute. Advising on family governance and succession alongside the associated tax implications is a fascinating area of work that I’m lucky to be involved in.
If you could make one change to tax, what would it be?
There are several areas where the capital tax code in the UK leads to behaviours that lead to money leaving or remaining outside the UK. Similarly, why couldn’t UK based professional trustee businesses be treated as offshore for the purposes of the trustee tax residence tests? We have the skills to be a centre of excellence for trustee services globally. I also feel that many of our tax reliefs benefit investors rather than founders, and so would like to see greater incentives for entrepreneurs to establish and retain UK businesses long term. Perhaps the first change I would make would be to remove the IHT barrier to the creation of life interest trusts. The changes made in 2006 made it very difficult to create trusts for genuine asset protection and management reasons. Those rules could easily be reversed allowing trusts to serve their intended purpose of protecting assets and defining the beneficiaries.
What do you know now that you wish you’d known at the start of your career?
It has taken me a long time to appreciate how important it is to challenge clients on their thinking and to regularly question assumptions. I can think of many occasions where clients have come to me with a firm idea of what they want to do, but not necessarily with a clear rationale for doing it. It takes a lot of confidence and experience to ask a client ‘why do you want to do this?’ and to be able to discuss with them what the long-term repercussions could be. I am not sure how easy it is to ask those questions at the start of a career, so perhaps I would counsel my younger self to listen and question more, and to accept there is no such thing as a complete solution.
Are there any new rules that are causing a problem?
Deduction of liabilities rules create complexity for family business clients and estate owners as tracking what borrowing has been used for so as to balance the often-competing outcomes of income tax deductibility versus inheritance tax deductibility. The uncertainty around the tax treatment of natural capital creates similar issues as it is currently unclear whether any additional natural capital value in the land is capable of relief.
Has a recent tax case caught your eye?
The recent Butler case ([2023] UKFTT 872 (TC)) involving a wedding venue business was concerning, as it seems to suggest that almost any activity that involves the use of land in the business can face challenge where a claim for Business Property Relief from IHT is made. This makes it difficult to advise land-based businesses and trustees on their IHT exposure.
And finally, you might not know this about me but...
I have become a mildly obsessive gardener, finding it a very fulfilling alternative to screen time. Learning how to prioritise tasks in the garden is very helpful in the office. Mature plants (like senior staff) require less time, but guiding those trees/staff is very important. It’s equally important to look after the tender young plants, help them develop and give them sufficient resources and room to grow in the right direction – without ‘over-watering’ to ensure their resilience!
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