Tax and treasury functions are essential for the financial health, compliance, and strategic success of a business. They help manage risks, optimise financial resources, and ensure that the company operates efficiently and profitably in a complex financial landscape.
At Eton Bridge Partners, we understand that hiring the right people within tax and treasury roles is critical for an organisation, so it’s important to invest time and effort in finding the right candidates who can effectively manage these functions.
Mark Craddock, Head of the Executive Search CFO & Finance Practice at Eton Bridge Partners spoke to Tim Livett, currently CFO of Caledonia Investments, and previously CFO at Virgin Atlantic and the Wellcome Trust, to share his thoughts on the demands on Tax and Treasury leaders, and advice for those looking to lead in those areas.
Mark Craddock: Tim, you’ve been the CFO of three well-respected organisations in very different sectors. What can you tell us about the similarities and differences in regard to Tax and Treasury that you have faced as a CFO?
Tim Livett: Fundamentally, you need a high level of professional capability in both areas, whatever the organisation. It’s important to find individuals who put time and effort into understanding the organisations they work with and can develop a good level of dialogue with the key stakeholders. You can have fantastic experts but, unless they can understand the business well, they won’t be fully effective.
Virgin Atlantic was a truly commercial business operating with a heavily leveraged balance sheet, with large financial exposure, and a need to limit that risk effectively to allow the business to have security of operation. That immediately requires a depth of treasury knowledge in terms of understanding exposures in foreign exchange, fuel prices, interest rates and lease structuring. Whereas Wellcome is an organisation that is very wealthy, does not have that degree of financial risk exposure, but still needs to manage its cash and predict cash flow sensibly.
Equally, if you contrast tax across the three organisations, you find yourself looking for a different set of specialisms. In aviation, lease structuring has huge potential tax consequences if not managed well. It was so specialised that we effectively outsourced that core activity.
At Wellcome there were a different set of issues. As a charity, there should not, in principle be any need to pay tax – however, some foreign taxes do apply, and some investment activities are potentially taxable. So, we had investment tax specialists who understood international tax regimes and issues such as repatriating funds. Equally our VAT position was complex, and as this is quite specialised, we had an ex-Inland Revenue individual looking at this area.
Even at Caledonia, there are a plenty of tax issues. Investment trusts don’t pay tax on investments they hold directly – but there are limitations on the activities they can undertake. As CFO, consultants can often help formulate your tax strategy. You will build knowledge over time, but, particularly when you come into a new organisation, you need some assistance working out the core areas of complexity.
MC: When bringing in people with a high level of professionalism, do you tend to look at individuals from the same sector?
TL: If I think about the individuals I’ve recruited into these kind of roles, they haven’t generally come from the same sector. I would typically look for two things. Firstly, compatibility of experience – for instance, what industries have they worked in and what activities might be relevant to my business? Secondly, I also need to be clear when interviewing people that I want to hear about how they have gone about building relationships and bringing their expertise to bear to help an organisation. They need to be credible to me as a manager, but also to their team and in the wider business.
MC: What advice would you give to new CFOs about managing Tax and Treasury?
TL: You need to work out how to get enough knowledge to be useful. Then you look to professional advisors – because almost anything over and above standard UK trading can get complicated exceptionally quickly. So, choose your advisors well and build good relationships; they’re almost as important as the people you have in-house.
MC: What do you think is the right approach to tax planning?
TL: At Wellcome, my thought process was that our strategy should be very clear; we should pay the taxes we were due to pay, full stop. Any question of pushing boundaries on tax was definitely not appropriate for an organisation of that nature.
In a more corporate environment, I’d say you can adjust your risk assessment to a point where, if you’re confident your approach is really robust, you can push to get the benefits. If it could be questioned or deemed inappropriate by the Inland Revenue at some point in the future, I don’t believe that one should take that risk. The world has moved on significantly regarding tax, and the reputational risk that corporates take if they really push the boundaries is now much greater.
MC: One thing I often hear from CFOs is that, when hiring a tax director, it’s not an area they want to scrimp and save on.
TL: Yes, they are not cheap! However, managing the business to be tax efficient and ensuring full tax compliance are important elements of running a business well. Equally, professional advisors are expensive but highly valuable. We use a big four firm for tax advice. They do some work for us on compliance plus project work on acquisitions, and we’ve tried to think about that package as a whole so that the advisory element isn’t quite as expensive as it would be otherwise. We do try and keep it managed. But we are not going to not seek advice purely for financial cost reasons, that would not make sense.
MC: After 20 years of low interest rates and inflation, over the last year or so we’ve seen both go up notably. Any advice for other CFOs or treasury professionals on how to manage that?
TL: If you understand the cash flows of your business well and can forecast them effectively, you’ve got a good chance of managing your business well from a treasury perspective. If you can’t do that, you would have a problem in any interest rate environment. It’s important that financial planning and treasury interact well.
If I were in treasury now, I would be looking to build more flexibility into my model. If I have a debt that is renewable, I would be going very early to make sure that it’s sorted well in advance. You just don’t know what the appetite in the market is going to be.
At the moment, if you are sitting on cash, I would be thinking quite long and hard about whether you are getting the best out of it? If you’re active, the rates can be attractive if you invest in the right manner. I would try to ensure you are least getting some benefit out of a higher interest rate environment.
MC: Some of our clients have separate heads of tax and treasury, others are very keen to have them combined. What’s your perspective on that?
TL: Personally, I don’t understand the benefit of combining them. They are very different activities, and it’s an odd idea that someone could be an expert in both. The only reason I can see for a combination is that a CFO is trying to limit their number of direct reports.
Someone in a combined role will either be a Head of Tax and then overview Treasury, or a Head of Treasury and then overview Tax. They would need to talk to the CFO about the one they are not an expert in, come what may, and that feels sub-optimal. It doesn’t feel like two specialisms that naturally sit together to me.
MC: What do you see as the biggest barrier to tax and treasury functions achieving their full potential?
TL: In both cases, what’s important are the opportunities and risks as one looks forward. If I think about treasury, unless I understand the cash requirements for the business going forward, what funding might be needed, what new exposures there are, I can’t mitigate or manage them, or effectively put funding in place to support them. Equally, from a tax perspective, if you structure an investment or a contract well it will work – and if you structure it badly, it won’t. And it can be very hard to unpick. In both cases, it’s all about having that forward line of sight.
The CFO plays an important role here. However, it’s equally important for the senior individuals in tax and treasury to have a network around the business and talk regularly with key leaders. Then they will have enough underlying knowledge and understanding about what might be going to happen so that they can input when they need to, in an appropriate way. That’s the difference between doing OK and doing well, and thus being much more effective.
MC: Any final piece of advice for aspiring leaders in tax and treasury?
TL: They are both quite technical roles. In both areas, candidates should develop a breadth of vision and skills to be an all-round business professional, as well as an expert in their field. In the vast majority of cases, you need to be part of a broader team. As well as learning about your craft, you need to learn how to interact and be effective as a business advisor.
My sincere thanks to Tim for joining me for such an intriguing and insightful conversation.
To speak to the team about your Tax & Treasury recruitment, or for a confidential discussion around your job search please do get in touch.
Eton Bridge Partners’ Finance practice has an established reputation within the market and has been operating across the full range of leadership positions for over 13 years.
We are delighted to announce Lorna Blair has joined the team to extend their Tax & Treasury specialism this month and will be working alongside our existing, dedicated team focussing on the very specific needs of the tax and treasury market. Together with Lynley Hall, Freddy Herrod and Emily Egginton, they will support clients with finding outstanding Tax & Treasury talent, whether permanent or interim, in the UK and around the world.
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