'It’s easy to get tripped up in tax planning'

The tax director at RSM UK says even financial advisers could get caught out when they were not trying to break the rules.

She says the tax system should be made more user friendly and says there is a case for HMRC to be more open to having dialogue with taxpayers before they submit their returns.

Though Aitchison does sympathise with the government's attempt to clamp down on abuse, which has contributed to the complexity in the system.

“It is a case of making sure that you shut those loopholes so people can’t abuse the rules and do things that aren’t right. But sometimes it means that people who are in quite an innocent situation because they’re just trying to structure stuff in a better way get caught out and it can be quite painful," she says.

“I do wonder if there needs to be not necessarily a simplification, but a rewriting almost of the tax legislation to something more user friendly, particularly for people that are unrepresented. I think it’s easy to get tripped up and do something that’s not quite right.”

She adds: “Often it’s something that doesn’t quite feel right, that doesn’t pass the smell test…and I can’t quite put my finger on why, what part of the legislation we’re falling foul of here, but it doesn’t feel quite right.”

Aitchison says it would be useful if HMRC was more communicative when it comes to tax returns, allowing advisers to check difficult cases before submitting them.

“The challenge HMRC have got is that they are under-resourced," she says. "They’ve had some big ticket items to deal with over the last couple of years. You can see that in the service levels. Trying to get through to HMRC at all can be quite challenging.

“To make it more open and working with professional advisers would be useful.”

There’s nothing worse than sitting in a meeting and you can almost see the tumble weed rolling from the table because people just look bewildered.

Aitchison joined RSM in March 2020. Her role is to help clients plan their tax affairs as well as check compliance. Her clientele is made up of a mix of individuals with trusts, partnerships and family businesses who seek help with issues such as trust structures, as well as transactional tax advice, for instance when selling their business or taking on an investor.

She often works in tandem with financial advisers and lawyers, saying for bigger clients with more complex affairs having a core team of a tax adviser, financial adviser and lawyer is key.

“Everyone does a bit of inheritance tax planning, but we all come at it from a different point of view,” she says.

A happy accident

Aitchison says her job is "rewarding", through she has slipped into tax planning “by accident”. A student of English and German, after graduating she went to a recruitment agent who referred her to one of the big four accountancy firms for a graduate role that needed to be filled.

“It was entirely by accident but my first job was three years doing just trust work, so I didn’t deal with any individual, any businesses, it was just trusts,” she says.

But it was during a time when the trust rules changed in 2006, so “actually it was a really interesting time when legislation vastly changed and there were lots of planning aspects coming out of that.”

Changing legislation has been an unwelcome companion ever since.

"The best thing to do [in tax] is to plan and to plan ahead and it’s very difficult to plan ahead because the rules could change next month, in six months’ time, next year – they could change in all three," she says.

“It’s quite difficult when you’re talking to people about scaling businesses for sale or succession planning, and all that kind of stuff that is future focused, to not know what rules are going to look like. [It means] you can’t give a definitive answer.”

This means her job is mainly problem solving. “We can only really advise on what we know, what the rules say today. You can implement, but there’s always a risk."

After her training Aitchison moved into the middle market segment, involving entrepreneurs, owner-managed businesses, and established family business, and finally joined RSM.

“It was a mix of career progression and just the client bank at RSM, because it is very much a middle market focused firm and that’s the kind of clients that I enjoy working with and it’s rewarding,” she says.

Neat planning tool

Aitchison started the day the Covid lockdown began, which meant she was meeting her new colleagues virtually and holding client meetings online.

This changed the way meetings were held, she says, with people more likely to get straight to the point, cutting out the chit chat in the beginning, which can often be the most revealing part.

“Often in the work I do it’s the comments at the start and end of a meeting – it could be something like ‘how’s the family?’, 'well, Johnny’s marriage has gone wrong’. It’s that throwaway comment that can often be the more important bit of the meeting.

"And there’s a bit less of that on a Teams call because it’s very much, ‘we’ve called the meeting for this purpose and this is what we’re going to talk about’.”

When talking tax with clients, she says she tries to break it down as much as possible. “There’s nothing worse than sitting in a meeting and you can almost see the tumble weed rolling from the table because people just look bewildered.”

She says she prepares a report, showing what she has done and why and what the rules were at the time, as well as what to be aware of.

“What I like is that they at least understand the principles and the gist of it to understand why we are doing it and what the outcome is. To understand the real ins and outs of it, that’s my job.”

The days of turning up in a pinstripe suit and referring to each other as Mr and Mrs so-and-so [have gone].

When it comes to often forgotten tax reliefs, she says “it’s always surprising how many people don’t understand Isas".

Alongside wills, small gift allowances, and transfer of income between spouses, Isas are one of the most overlooked tax perk, she adds.

“It’s the basics really, it’s looking at using rates and allowances properly, so everyone’s got their personal allowance, it’s surprising how many people don’t use it in full, particularly where you’ve got portfolios and spouses that don’t necessarily equalise their income.”

Stakeholder pensions for children are another “really neat” planning tool, Aitchison notes. These can be funded up to £2,880 a year and the government tops that up to £3,600. If invested over the years this can add up to substantial sums.

“I’ve got clients in their early teens now, their pensions pots are about £150,000. And even better, they can’t touch it until they’re reaching retirement."

Since Aitchison started her professional career in 2005 a lot has changed, and not just tax policy, she says.

“There is a bit of a sea change in the sorts of clients we are seeing. It’s far more entrepreneurial now, we’re seeing much younger clients. To a certain extent the days of turning up in a pinstripe suit and referring to each other as Mr and Mrs so-and-so [have gone].

“That relationship with clients has changed a little bit. It’s almost like taking advice from a peer. And it’s exciting because it’s such a vast array of different businesses to talk to people about.

“That’s the bit I love about it, is that every client is different and every solution we come up with is bespoke.”

carmen.reichman@ft.com