The LCN Property Interview: Richard White

Richard White talks to LCN Property about his early career at the Inland Revenue, his experience at Ernst & Young and KPMG of handling inward investment into property deals, and his current role as a director of a new and interesting tech company.

Now semi-retired, Richard was a tax partner in two Big Four firms. He now focuses on coaching, mentoring, and trustee work. He is also a director of the technology firm AORA, which develops software that automates the production of legal opinions.

How did you get into tax, and into property?

When I left university, I applied for a number of jobs and had a number of offers. I decided to accept one at NatWest Bank, because it was paying more than any of the others. After about six months or so, I realised it wasn’t for me. I really didn’t enjoy it.

One of the other applications I’d made was to the Civil Service, so I’d gone through the Civil Service selection process. As part of that, you have to fill in a form that includes which departments you might be interested in working for. I ticked the Inland Revenue box. (If you do that, you’re automatically sent to the Revenue, because almost everyone goes for the Foreign Office or the Home Office or whatever.)

So I reapplied to the Civil Service and in 1983 I joined the Inland Revenue, which I absolutely loved. The training was fantastic: we had two days a week in the training centre in London, and then half a day in the office dedicated to doing follow-up work from the training centre. I’d always been a bit of a frustrated lawyer, so learning all the tax cases was brilliant.


Presumably working life was different from today?

It was very different. The idea at the time in The Inland Revenue was that every set of accounts – every tax computation that came into the office – would be reviewed. And it was clear that that wasn’t working. The backlogs were incredible, and the review for a lot of cases was pretty rudimentary. So what happened fairly shortly after that was that the cases coming in were split into categories. They called it the A-R-E system.

A was Accept with no questions asked, if it looked straightforward. R was Review – generally around technical issues. If there was something in there that technically you thought didn’t look right, you would review it and ask questions. E was Enquire: to really investigate if you thought there was something that was really amiss. And that was the fun bit! As a young and relatively naive person, being given all of this authority and responsibility very early on was great.

In my first or second week, the District Inspector came into my office. (Yes, I had an office, in fact it was the largest I’ve ever had.) He handed me the local paper and said, “Have a look through the small ads, pick one or two of the tradesmen, give them a call, ask what they quote to do a job, and then have a look at their accounts and see whether you think what they’re quoting stacks up with what they’re declaring.”

And that sort of mindset was great. I investigated a carpet fitter, and it was quite clear he was living beyond the means that his accounts were showing. So I got his books and records, and went through those. When I looked at the number of carpets he had in stock, the ones he’d bought, and the ones his tax declaration showed him fitting, it didn’t add up. I called him in for an interview and talked him through it.

I said, “What happened to those carpets?” He said, “I don’t know. Maybe I lost them.”

“Alright, so let’s look at when you bought petrol. There’s a gap here where you bought petrol, but you’ve got nothing going out of your bank account for petrol and no cash withdrawals. Is it possible that you fitted some carpets, got paid in cash, and used it to meet some of your expenses?”

He confessed at that point!

After a while I applied to Ernst & Whinney [which later became Ernst & Young after a merger]. Lots of Revenue staff were making moves like that because the salary difference was so huge. The chap who interviewed me was a former inspector.

He said to me, “I bet you’re concerned that we’ll work you to the bone, and you’ll be here all hours. Let’s wander around the floor and see how busy it is.” It was a Friday afternoon, and there were very few people there. After I’d joined them, I found out that that was because he had organised a group meeting down the pub.

As with all firms when I joined, it was a general tax group. We did everything; personal and corporate, compliance and advisory. As the years went on, firms became far more focused. We moved to industry specialisation, which is when I first started doing real estate. I joined what was then called the Property Construction Advisory Unit, which evolved into the real estate team.

We had a very successful real estate tax team for a number of years. But then for no particular reason it started to fall apart. I ended up being the only tax partner in the team. And it felt to me that the firm had rather lost interest in real estate. I got approached by KPMG and I thought it was a pretty good time to move. So I did, and spent ten years at KPMG before rejoining EY in 2017.

So that’s what I’ve been doing for nearly 40 years, really: tax and property.


What sort of property projects did you work on?

Largely inbound investment into the UK and Europe. Back in the nineties, it was primarily US investors.

Historically, the UK real estate market had been dominated by privately owned property companies. Some of them were quite large, but they didn’t have the sort of leverage that some of the US private equity houses had, so in the nineties they became the new players in UK real estate, in a very big way.


How did that change the market?

It tends to have a spiral effect, because they come in with a relatively short-term horizon. They’re coming in to buy assets, increase the value of those assets over a three- to five-year period, and then exit. And because you’ve got that more constant churn of real estate, then you add more liquidity into the market, which attracts new players in itself.

In the mid-2000s we got to the stage where we had a real bubble: there almost seemed to be a perception that property would never go down in value, and the more you could buy and the more gearing you had, the more money you’d make. Certainly, a lot of players got their fingers badly burned when they suddenly realised that property value could actually go down as well as up, and they quickly went underwater. But back in those days, we were looking at 80, 90, 95% leverage. So it didn’t take much of a drop in value for you to be really underwater.

In property, the financial crisis was a gradual process, because there was a period when there were still winners and losers: there were still people looking for opportunities. Around 2010, I started to get really concerned because there was literally nothing happening. There were no transactions. You just couldn’t see how the market was going to come out of that.


What got the market out of that trough? How important were the government’s actions?

Policy decisions by government rarely make much of a significant difference. It’s usually much more around sentiment. So much of the property market is built around confidence. If the collective thinking is, ‘We’re getting past the bottom, things aren’t going to get any worse. We can risk a transaction now,’ then people start to dip their toes back in. That happens very gradually. We certainly saw corrections. Buyers were taking out much less leverage, and that gradually gives more solidity back to the market.

It also helps when you see the overseas investors starting to come back in. Because, of course, the global financial crisis wasn’t actually global. Some markets suffered more than others. Some of the middle eastern and far eastern countries were not badly so affected. So, after the crash, the overseas investment started to come more from those areas. I was spending a lot of time working with Singaporean investors, for example.


Was that very different to working with investors from the US?

There’s a slightly different mindset. For US investors, it’s the financials they’re interested in. The investors from the far east were more interested in the bricks and mortar, so they would spend a lot of time actually looking at the real estate, making sure they were happy with the property itself. They were very detailed in their approach. They tended to have a longer time horizon as well.


What were the long-term effects of the financial crisis in the property sector?

The post-crash era saw a change in the type of real estate investment that money was going into. Office blocks have always been popular, but we started to see more student accommodation, more purpose-built housing, and logistics as well.

Also, before the financial crisis, supply got shorter and more expensive in the major western European capitals, so investors started to look to southern and eastern Europe. You had big portfolios being built up in Greece, Turkey, Ukraine, Russia, and throughout central and eastern Europe.

After the global financial crisis, for a long time investors didn’t diversify so aggressively geographically. They maintained the core countries, but they diversified in terms of the types of assets.


Where do you think we are in the cycle right now?

It’s a really tough question. I would say that property broadly goes in ten-year cycles. Every ten years or so there is a readjustment of pricing, and we were just coming towards that ten-year point when Covid hit.

So if you had asked me pre-Covid, I’d have said there’s going to be an adjustment pretty soon. But Covid really slowed things down. Particularly if you look at the far eastern investors. As I said, they’re really hands-on: wanting to know the property and to look at it very closely. If you’re not allowed to travel, you can’t come and inspect properties, so they weren’t doing transactions.

Gradually, people got a little bit more confident about doing remote viewings. And in more recent times, I read that there have been higher levels of activity. Talking to my former colleagues, they’ve never been busier. So one has to assume that a price correction is going to happen pretty soon.


Do you see yourself as primarily a tax person or as primarily a property person?

It changed. I started life as a tax person through and through, and it was almost a deliberate move on my part to try to change that. Once I’d made partner, I did feel I was a bit niche as a tax partner in the real estate world. So I wanted to understand a lot more about the sector. And gradually, I did that. Certainly at KPMG I felt that I was very much a real estate partner.

But then when I went back to EY, I had had enough of management roles, and so I wanted to go back as a client service partner. So then I almost went back to being a pure tax partner. But if you’re pitching to do tax work for a real estate firm, the challenge is often not how much do you know about tax, but do you understand how it works within real estate?

In a lot of cases in the real estate world, you’re not dealing with tax people. They’re very smart in their own field, but they’re deal transactors not tax experts. So one of the key skills you need is to be able to translate very complex tax technical issues into terms that other people can understand.


Is the nuts and bolts of doing tax very different in the property sector compared to other sectors?

It’s become a lot more similar. If you are an overseas company investing into UK real estate, up until a few years back you’d have been subject to a different set of rules than a UK company. You’d pay income tax rather than corporation tax – which is a bit odd for a company, but that’s how it worked. And you wouldn’t pay capital gains tax, subject to certain requirements. Those rules changed from about 2017 onwards. So the tax issues became more similar.


How has the working culture changed over your career?

When I started, I never got phoned outside office hours – on holiday, for example. That’s changed hugely through my career. Now you just can’t escape: people can get you wherever you are, whenever they want to.

The other thing about tax in particular that’s changed is that when I joined the profession, it was almost a game. It was us against the Revenue. How clever could we be to find ways around the rules? And intellectually that was great fun. But the moral element of tax became more and more prevalent. HMRC took some high-profile cases and were very open in their view that they saw some of what was happening in the profession was unethical. The mood switched from really aggressive tax planning to protecting clients’ interests. Making sure they were doing things in the most efficient way – very much within the rules and within the spirit of the rules. Avoiding pitfalls rather than trying to find loopholes.

Historically, there were teams within the Big Four firms that were solely there to come up with clever schemes: that was their raison d’être. That doesn’t exist anymore. If you’re doing a transaction, and you come across an opportunity to get a good result for your client, of course you’ll do it. But it’s very much now against the backdrop of, ‘If this was in the papers, how would it look?’ And now any sort of structured arrangement that you want to do for a client goes through an approval process within the firm, to make sure the firm as a whole is happy with the perception of it.


Do you think this new attitude will persist, or will the pendulum swing back?

I think it will go even further in the same direction. I think there are still arrangements that are there simply from a tax perspective, without much in the way of commercial substance. A lot of that is around holding companies: structures are still held through companies that have nothing in them, really, rather than just the holding of investments. There’s no purpose to them other than to get a tax benefit. Those sort of arrangements have increasingly come under scrutiny and I think there’ll be even more of that going forward.

Technology is allowing much more scrutiny and international co-operation. I think the only thing that will slow it down is the lack of resources within revenue authorities globally to actually deal with the amount of information they’ve now got available to them.


Does real time reporting and real time auditing – the way that the tax authorities can access your records whenever they want – make it easier for them catch taxpayers out when they’ve made mistakes?

Yes. It also puts more emphasis on the companies to make sure they’re doing things properly. You can’t rely on it just not being noticed by tax authorities. I think what we have seen to an extent historically, is a view that ‘If we get caught, that’ll be unlucky’. And maybe that’s changing, because it is more likely that you will get caught, and the penalties if you are caught are more severe. When you’ve got systems that can interrogate your information and identify for the tax office where the weaknesses are, it won’t be down to an individual inspector to review all of your accounts and find weaknesses. There’ll be an algorithm that will do that.


Is there a point where that goes too far? Where it stops just being a disincentive for people who want to bend or break the rules, and becomes a serious drain on resources for people who are genuinely trying to do the right thing?

I think there’s a risk of that. It puts far more onus on compliance reporting. And one of the issues we have seen is there’s more reporting now than perhaps there was ten years ago. And that puts a huge burden on the costs for companies just to satisfy all of the reporting requirements. There is a risk that we get more and more into that.

I think there is also a risk because legislation is not black and white. It certainly has grey areas in it. And we could end up in a situation where the tax authorities have a different view to taxpayers about what legislation actually means, but you can’t argue against it because you’ve got too many other things to deal with. And we’ve already moved a little bit that way. I think that the Revenue don’t accept there is an alternative view of the legislation.


And that can only be sorted out by taxpayers going to court?

Yes, which of course is time-consuming and costly. So that isn’t really an option for a lot of people, unless you want to spend your whole life in court. So you almost have to take it on the chin and accept the Revenue’s judgment. Even if you think that if it was tested, it might be wrong, you can’t really prove it.

And there is an assumption within legislation that companies will try and find ways around it. So most legislation now has anti-avoidance measures built into it. But with legislation being so complex, and in a world where there are many more global transactions, I don’t think the interaction between various pieces of legislation is always understood by the tax authorities or by the parliamentary drafters when the legislation is put in place. So unintended consequences become an issue.

And certainly in the UK, what we’ve seen is that when there is a lot of pressure on parliamentary time, if faulty legislation is put on the statute books, it is much harder to get that amended because there isn’t the parliamentary time to do that.

What are you working on these days?

I’m a director of a small technology business called AORA which automates the production of legal opinions. They started with citizenship applications, and have developed software that can analyse them and produce an opinion for the Home Office, or whoever, without manual interference. It’s totally automated.

If the software is used by solicitors, it can produce the opinion on the firm’s own headed paper, creating a report that the solicitor can submit to the Home Office setting out all the facts and the basis of the claim. We’ve had very positive feedback from the Home Office: they say that they like the format, as it’s always very easy to follow.

Having started with that area, we’re now moving on to tax, which we think is a huge area. Because we know that firms have applied technology to producing corporate tax returns and individual tax returns, but have done very little to automate the production of tax opinions. Complex legislation currently takes a lot of time for humans to analyse. We can speed up that process and make it far more efficient.

If you think of how it works now, where a firm is considering a technical tax issue, there are likely to be others in the team all effectively doing the same research, applying the same legislation to a similar fact pattern. That’s hugely inefficient. I think we will reach a point – I don’t know when exactly, but in the relatively near future – where it is the norm that professional services firms will produce opinions automatically, without having a lot of people replicating the same process.


If you hadn’t gone into the Revenue when you started out, what other career do you think you’d be doing now?

My ideal job? Either an MP or a barrister. I like the law and I like arguing with people.


What do you do to relax?

Drumming. When I went through gardening leave between KPMG and going back to EY, I thought, ‘There are a number of things that I’ve never had time for before, because of work.’ And I picked two: learning to fly, and learning to play the drums. Once I got back to work, there just wasn’t time to keep up the flying. But the drums I just fell in love with, and I still have drumming lessons every other week.

I’ve never been brave enough to play in a band! But I sit up in my studio with my drum kit and the headphones. I play along to all sorts of songs, and I love it. Maybe that can be the next stage: to get into a band.


Good drummers are never short of offers…

Yes, good drummers. I’m not sure whether I am one, but I find it really relaxing.


How would you describe yourself in three words?

Approachable, thoughtful, caring.


Which actor should play you in the film of your life story?

Harrison Ford. Years and years ago, a few people said that I looked a bit like Harrison Ford. I don’t think I do anymore. I have got an Indiana Jones hat, though. Also there’s lots of things about the sort of characters he plays that are very different to me – the swashbuckling element is not really me – which I think would be quite fun.


Who would you invite to your dream dinner party?

Will they be totally honest with me?


Good question! Let’s say Yes.

In that case, John Lennon, Lenin and Hitler. (But maybe not all at the same time!)

I’ve just always been a huge fan of John Lennon. I’d like to hear about him growing up, how he dealt with stardom, some of the people he met. I think that would be fascinating.

And then Lenin was someone who changed the world. I’d like to understand how much of what happened was thought about and planned in advance, and how much was just being in the right place at the right time. Because it seems to me that much of the Russian Revolution happened more because the other potential opposition parties were too busy infighting and he just stepped into the gap. I’d love to get his thoughts on that.

And at university I studied the Second World War, particularly the rise of the Nazis. A lot of people say Hitler was a madman, or close to it. And yet in a very short period of time, he convinced a sophisticated country that he was the right person to lead them. And he managed to conquer most of Europe. I’d just like to understand his mindset, and the thinking behind his decisions.


If you could go back in time and give some advice to your younger self, what would you say?

Have more confidence in yourself. I was a very underconfident teenager, and probably into my 20s. I don’t think people would have said that about me, but that’s how I felt internally. I’ve always been surprised – and very flattered, in a way – that I’ve had a successful career. Up until very recently I was always thinking, ‘When are they going to find me out? When are they going to realise that I’m not actually that good?’

One of the joys of my career was being forced to do things that my younger self would never have believed I could do. I stood up in front of 150 people at a conference in New York and spoke to them for an hour about real estate tax. When I was younger just the idea of public speaking would terrify me. Or leading big teams of people: that’s not something I saw myself doing when I was younger.

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