Case Study: Institutional Readiness

The Situation: Strengthening Tax Risk Management Before Scaling

A boutique real estate investment manager was in the process of expanding its investor base beyond a small group of high-net-worth individuals. As part of this transition, the firm had appointed a veteran CFO to enhance financial governance, improve investor reporting, and prepare the firm for institutional capital.

However, the CFO needed expert support to get clarity on what historical positions had been taken, to understand the quality of historic compliance and record keeping and to design improved tax processes. 

The Challenge: Identifying and Resolving Historical Tax Issues

• The firm needed a full audit of past tax positions, comparing historical tax treatments to advice received from external firms.
• The CFO needed to quantify potential exposures and determine whether additional restructuring was required.
• The firm was considering switching tax advisors and needed a clear roadmap for engaging a new firm.

Our Approach: A Comprehensive Tax Risk Review

1. Assessing Historical Tax Advice: We reviewed historical documentation, tax filings, and external advisor recommendations, identifying discrepancies and areas of potential risk. Several tax positions taken on past deals had no clear documentation or supporting analysis.
2. Quantifying Exposure: We conducted a structured risk assessment, estimating potential liabilities and highlighting areas requiring immediate attention.
3. Advisory Firm Selection: While we do not provide tax advice, we facilitated discussions with new tax advisory firms and guided the CFO on how to present key issues.
4. Operational Improvements: We identified process weaknesses in tax risk governance and recommended structural improvements.

The Outcome: Improved Governance and Strategic Tax Planning

• The firm discovered that past tax positions needed restructuring, and were able to pre-emptively regularise their position before it came up on investor due diligence.
• A new tax advisory relationship was established, providing the firm with deeper tax expertise moving forward.
• The CFO implemented new processes for tax documentation and oversight managed by a fractional tax director, ensuring compliance and reducing future risk exposure.