60-second interview with Andrew Watters

Andrew Watters, 4/7/2018

Andrew Watters is Director of Tax Risk at Farrers, London. 

What does your firm do?

Farrers is a firm of solicitors which has been providing a full spectrum of legal advice from its home at 66 Lincolns Inn Fields in London, since the 18th century.

What has STEP done for you, individually or as a business?

In 1990 I joined what was then the Inland Revenue, and later transferred to its special office dealing with serious suspected tax avoidance, where I was introduced to the world of trusts and offshore structures. I discovered STEP to be a useful source of information, which gave a practical context to a world which to some carried overtones of exoticism. STEP provided one of the resources which gave me the confidence to start exploring that world.

What is the most important thing STEP does, in your opinion?

Planning structures, whether to generate wealth or to hold wealth, can be pretty complicated, especially if they cover several jurisdictions, due to expanding legislation and major developments in cross-jurisdictional agreements.

Often people don’t understand what planning structures are, why they are necessary, or how they work; and it’s easy to fear what you do not understand. The challenge for STEP is to provide context for, and to build understanding of, the job of its practitioners.

You're the firm’s first Director of Tax Risk. Why now?

Tax legislation is getting ever more complex. HMRC’s information powers, big data, and the growth of information exchange makes the world increasingly transparent. There are new penalties for non-compliance - financial, reputational and criminal. It’s not just easier to get things wrong, it’s more likely that you will be seen to get things wrong. In addition, the consequences of getting things wrong are far more serious than in the past.

What will be your priorities over the next year?

Increased tax risk does not just apply to taxpayers.

New legislation means that professional advisors now have skin in the game. If they have worked with clients and that work has 'enabled' (a widely-defined term) offshore non-compliance, or if they have planned tax arrangements which have been 'defeated', then the advisor, as well as the taxpayer, faces consequences to their reputation and finances.

There are also new criminal offences for both taxpayers and advisors, with no requirement to show intention. This legislation targets circumstances a million miles from traditional tax evasion, and means that people who are simply trying to do their job could be collateral damage.

Guilt is no longer about showing that someone was trying to do something bad. It is about whether someone was not trying hard enough to be good. We need to show how hard we have been trying to be good advisors, working within the legislative guidelines. That’s my core message over the next year.

You've said that many clients are living unhappily with the consequences of past tax planning. Are there any particular pitfalls you'd suggest advisors avoid?

Two things, neither of which is very new: firstly, if it seems too good to be true, it probably is. Secondly, if you don't understand how the planning works, don’t recommend it to your client.

What would you say to a young person thinking of a career in this industry?

If you like telling people what to do, you're probably in the wrong place. If you let people tell you what to do, you're probably in the wrong place. If you're up for the challenge of having conversations with people about what can be difficult choices, make sure you have something valuable to add to the conversation.

Which sectors are likely to see the strongest future growth, do you think?

As a service industry, our clients are people who want help with some key tasks: how best to generate wealth; then how best to protect it; then how best to pass it on. I don't see any of these concerns going away.

What about jurisdictions?

That is going to depend on what happens in the wider world. For example, as China and south east Asia become more wealthy, their international financial centres are likely to grow.

Other than that, assuming the world continues to become more transparent, jurisdictions whose unique selling point is being opaque are going to have a hard sell.

In general, I think there is going to be a return to traditional values. Is the jurisdiction politically stable? Does it have a reliable legal system? What level of professional expertise can it provide? Does it provide value?

What trends do you see in the global private wealth sector at the moment?

Many have seen traditionally seen Europe as the centre of the world, but economic, political and technical changes mean that’s no longer the case, and global private wealth is going to become more truly global than ever.

However, to think of a 'global private wealth sector' implies there’s a unified system with agreed standards of compliance and regulation. The broader the cultural base of that global sector, the more interesting will be the challenge of a unified system of standards.

What do you feel are the main challenges facing your organisation at the moment, and how will you deal with them?

While professional advisors have seen more regulation, it’s often written in a way that stresses the type of outcome desired, rather than the detailed steps required. The penalties for not complying are becoming more severe. The problem, of course, is that while we all know the outcome desired, it is extremely difficult to guarantee that our actions will achieve it.

It is like a jockey who’s been told to win a race. If he or she makes the weight, trains the horse, follows the race tactics etc, but does not win, should he or she be subject to penalties? These are the sort of challenges increasingly faced by all professional advisors. I don't think there is any one solution. We need to examine our legal requirements very carefully, and make sure that if we do not win every race, we can show how hard we have tried.

Which social medial channels do you use, and why?

As a firm, we use Twitter and LinkedIn, as we finding that many of our clients are increasingly using one or other of those channels.