One minute with Patrick Wooddisse, head of private wealth at TLT LLP.
What’s keeping you busy at work?
A wide variety, but one of the main themes is wealth planning for entrepreneurs. Pre-business exit, I am surprised at the number of new trusts that people still set up, in spite of the unfavourable income tax rates and related bureaucracy. Post-exit, family investment companies are much more popular. In essence, they are straightforward and I think they are often over-complicated when sold as a product to clients.
If you could make one change to tax, what would it be?
Changing tax policy is never simple and it would be naïve for me to suggest any quick fix. But I do think tax practice is made more difficult for the many, by the few who advocate aggressive tax avoidance. I strongly believe that the best planning involves trying to work in accordance with, rather than against the intention of the law. With lateral thinking and a willingness to tailor solutions to a client’s precise aim and circumstances, it is usually possible to produce an effective plan without being aggressive. Conversely, there are numerous examples of tax avoidance schemes (flip flop, home loan, film) which turned out not to be in the client’s best interests. Governments have inevitably used sledgehammers to crack tax avoidance nuts and there has been significant collateral damage to the simplicity and fairness of our tax system. I lean towards, if anything, strengthening the GAAR in order to minimise the need for more specific rules. However, I acknowledge the challenges caused by the inevitable subjectivity of this approach.
What do you know now that you wish you’d known at the start of your career?
The most helpful lesson that I learnt, from John Barnett at Burges Salmon, was to look at the evolution and political and practical context of a tax rule in order to understand it fully. What was it intended to achieve and what were the practical reasons for its introduction and amendment? I have found that the meaning of the detailed legislation is much easier to discern once I have thought about it on a macro level. Having a simple conceptual vision of a tax rule also helps me to integrate several strands of legislation into a coherent plan, as well as to explain it clearly to clients.
Are there any new rules that are causing a particular problem?
Although not particularly new, the 2017 IHT rules relating to residential property ownership cause continuing difficulties for international clients. I accept the central justification for the rules – that foreign owners of UK property should pay inheritance tax – but find the effect on relatively innocent parties is excessive. I have one case where an unwitting elderly lender, many years earlier, lent to a child who subsequently used the loan to buy a house in the UK. The lender had no control over this but faces a significant liability on his death. I think my real objection is to the retroactive effect.
What should we look out for in 2022?
I will be interested to see the final form of the US tax rules when they are agreed in (hopefully) February. They will be significantly emasculated compared to Biden’s original radical proposals, but a tangible increase in tax on long term capital gains and an accelerated reduction in the estate tax threshold are still possible.
Has a recent tax case has caught your eye?
Although technically trust cases, the recent line of cases on the law of mistake, combined with the 2013 amendments to its variation of trust laws, have significantly increased the ability to rectify a tax error in Jersey. I am relieved that the most recent cases, notably re M Settlement [2021] JRC, have introduced an element of sanity in preventing a trustee from substituting one course of action for another, fundamentally different, course of action (essentially re-writing history with hindsight). Whilst I am as keen as any tax practitioner to have some leeway if things go wrong, I felt disturbed by the apparently almost open-ended discretion of the Jersey court in, for example, BNP Paribas Jersey Trust Corporation Ltd v Crociani [2018] JCA 136A. At some point, to make sense of the present, you need to know that things actually and irreversibly happened.
You might not know this about me but...
In my previous career as an officer with the Royal Gurkha Rifles, I became a leading specialist at adjusting mortar fire in the jungle whilst based in Brunei. We refined a technique, originally used in Vietnam, calculating where the bomb landed based purely on sound (since you couldn’t see anything in the thick vegetation). It was surprisingly effective. The interesting part was once you had used sound to get the bomb in line with where the (fortunately hypothetical) enemy were, you adjusted the mortars to fire closer and closer, along that line, towards your own position (the enemy inevitably not being far away in the jungle). We pushed the limits to the extent where the ground shook as the bombs landed. It wasn’t something that you wanted to get wrong.
One minute with Patrick Wooddisse, head of private wealth at TLT LLP.
What’s keeping you busy at work?
A wide variety, but one of the main themes is wealth planning for entrepreneurs. Pre-business exit, I am surprised at the number of new trusts that people still set up, in spite of the unfavourable income tax rates and related bureaucracy. Post-exit, family investment companies are much more popular. In essence, they are straightforward and I think they are often over-complicated when sold as a product to clients.
If you could make one change to tax, what would it be?
Changing tax policy is never simple and it would be naïve for me to suggest any quick fix. But I do think tax practice is made more difficult for the many, by the few who advocate aggressive tax avoidance. I strongly believe that the best planning involves trying to work in accordance with, rather than against the intention of the law. With lateral thinking and a willingness to tailor solutions to a client’s precise aim and circumstances, it is usually possible to produce an effective plan without being aggressive. Conversely, there are numerous examples of tax avoidance schemes (flip flop, home loan, film) which turned out not to be in the client’s best interests. Governments have inevitably used sledgehammers to crack tax avoidance nuts and there has been significant collateral damage to the simplicity and fairness of our tax system. I lean towards, if anything, strengthening the GAAR in order to minimise the need for more specific rules. However, I acknowledge the challenges caused by the inevitable subjectivity of this approach.
What do you know now that you wish you’d known at the start of your career?
The most helpful lesson that I learnt, from John Barnett at Burges Salmon, was to look at the evolution and political and practical context of a tax rule in order to understand it fully. What was it intended to achieve and what were the practical reasons for its introduction and amendment? I have found that the meaning of the detailed legislation is much easier to discern once I have thought about it on a macro level. Having a simple conceptual vision of a tax rule also helps me to integrate several strands of legislation into a coherent plan, as well as to explain it clearly to clients.
Are there any new rules that are causing a particular problem?
Although not particularly new, the 2017 IHT rules relating to residential property ownership cause continuing difficulties for international clients. I accept the central justification for the rules – that foreign owners of UK property should pay inheritance tax – but find the effect on relatively innocent parties is excessive. I have one case where an unwitting elderly lender, many years earlier, lent to a child who subsequently used the loan to buy a house in the UK. The lender had no control over this but faces a significant liability on his death. I think my real objection is to the retroactive effect.
What should we look out for in 2022?
I will be interested to see the final form of the US tax rules when they are agreed in (hopefully) February. They will be significantly emasculated compared to Biden’s original radical proposals, but a tangible increase in tax on long term capital gains and an accelerated reduction in the estate tax threshold are still possible.
Has a recent tax case has caught your eye?
Although technically trust cases, the recent line of cases on the law of mistake, combined with the 2013 amendments to its variation of trust laws, have significantly increased the ability to rectify a tax error in Jersey. I am relieved that the most recent cases, notably re M Settlement [2021] JRC, have introduced an element of sanity in preventing a trustee from substituting one course of action for another, fundamentally different, course of action (essentially re-writing history with hindsight). Whilst I am as keen as any tax practitioner to have some leeway if things go wrong, I felt disturbed by the apparently almost open-ended discretion of the Jersey court in, for example, BNP Paribas Jersey Trust Corporation Ltd v Crociani [2018] JCA 136A. At some point, to make sense of the present, you need to know that things actually and irreversibly happened.
You might not know this about me but...
In my previous career as an officer with the Royal Gurkha Rifles, I became a leading specialist at adjusting mortar fire in the jungle whilst based in Brunei. We refined a technique, originally used in Vietnam, calculating where the bomb landed based purely on sound (since you couldn’t see anything in the thick vegetation). It was surprisingly effective. The interesting part was once you had used sound to get the bomb in line with where the (fortunately hypothetical) enemy were, you adjusted the mortars to fire closer and closer, along that line, towards your own position (the enemy inevitably not being far away in the jungle). We pushed the limits to the extent where the ground shook as the bombs landed. It wasn’t something that you wanted to get wrong.
