Linda Henry

EY London-based tax partner

Hamlin Lovell
Originally published in the June 2018 issue

With services ranging from tax compliance for large private equity real estate managers to European fund tax reporting for alternatives fund administrators, EY provides a range of tax services across the alternative investment sector. Tax Partner & Leader of the EMEIA Wealth & Asset Management Tax Practices, Linda Henry has been a key driver to the growth of the firm’s London-based tax practice over the past decade. In addition to her day job managing EY’s EMEIA WAM tax practice, including a 50 person US tax team, Henry is also turning her attention to furthering EY’s commitment to diversity and inclusion and, more broadly, to the advancement of women across the professional services sector.

Establishing a practice

Henry had an early introduction to the professional services sector. She worked full-time in an insurance firm in the US, while studying at the University of Texas, before moving into tax. “I enjoy working in tax because I love numbers and problem solving,” she says, “and I have now really found my niche within the asset management sector.”

Her EY journey began as the firm acquired Henry’s then employer; real estate specialist Kenneth Leventhal & Co. In this early role, Henry relished the complexities around property, which presented the structural challenges of large pools of credit, loan origination and different underlying real assets. The takeover by EY enabled Henry to work with major global businesses, and it was during her time working with Lone Star Funds that she forged a vision of building a hub of US tax expertise based in the London office. “London had a strong need for US tax people who understood how the funds industry operates and how to apply US tax pragmatically to global businesses,” Henry says, viewing the global financial services hub as a real opportunity.

Henry landed in London on the cusp of the financial crisis in 2008. “Very simply, clients needed to return cash and stay afloat or shut down,” Henry recalls. Once the dust began to settle, a clear commitment was made to invest in growing the US tax team across all areas of alternatives – from real estate and private equity to credit and hedge funds. The team saw 100% year-on-year revenue growth in its first year and has since grown from a team of five to over 50.

We are using the power of diversity to grow our people and teams. Having diverse teams leads to better working, as it creates diversity of thought, which helps us to be innovative.

Linda Henry, partner, EY

From the outset, Henry was clear in her objectives: “I knew that we would only succeed if we were fully integrated into the local London office, but also supported by the global EY practice and US firm. Our London location enables us to bring relevant, up-to-date ideas and market knowledge to UK clients as if we were working in the US. It also enables us to meet and work with our UK clients in person, in real time, creating relationships based on understanding and trust that are critical to successful client-service provider partnerships.”

Diversity and inclusion

Beyond her work in the US tax practice, Henry has been a major advocate for diversity at EY, and currently holds the role of Financial Services Diversity and Inclusion (D&I) Partner Sponsor. In this position, Henry has firm-wide responsibility for D&I across EY’s business in financial services, championing key focus areas such as gender equality, ethnicity, ability and LGBT. She has been pivotal in changing the culture within EY, and ensuring that D&I remains a priority for the business to create an inclusive environment for all and the best-performing teams.

“I made partner in 2006, and we have come a long way since then in terms of the number of female partners in the firm and in the London office,” she reflects. In March this year, EY was the first of the Big Four UK accounting firms to include partners’ income in calculating its gender pay gap, reporting a 19.5% median and 38.1% mean pay gap between male and female staff in the UK. “The numeric metrics are just the headline, but we continue to work behind the scenes to address the pay gap through a number of programmes, because we know that we can and must do more to narrow the gap,” Henry adds.

Sponsorship and mentoring have been hugely helpful for Henry’s career, and are initiatives she now promotes to other women coming up the ranks. As part of EY’s ‘Career Watch’ programme, which focuses on high performing women and BME employees, Henry was assisted in setting high achieving professional goals and had access to senior level guidance throughout her career as she moved up the ladder. “Being sponsored gave me a voice and a seat at the table,” recalls Henry.

Now, from her position on EY’s UK Financial Services board, Henry engages on all issues, including D&I, at the most senior levels. “D&I is a number one priority for us as a firm. It is one we are committed to getting right and constantly improving upon,” she says.

“We are using the power of diversity to grow our people and teams. It is important to us and to our clients; having diverse teams leads to better working, as it creates diversity of thought, which helps us to be innovative. We are committed to creating a sense of belonging for all our staff and have provided inclusive leadership training for employees across the business at all levels,” Henry says.

Since 2011 EY has sponsored The Hedge Fund Journal’s ‘50 Leading Women in Hedge Funds’ report. In 2017, the firm announced a medium-term target of global gender parity by 2030, which The Hedge Fund Journal explored in a feature article.


In 2017, EY announced a medium-term target of global gender parity by 2030.

Driving innovation

In her day-to-day role, Henry has a close dialogue with clients from right across the alternatives sector, talking to fund managers to better understand their business and pay mechanisms, and discovering what clients are seeking in terms of strategies and fund structures.

Through this, Henry has observed the convergence of asset classes, as managers increasingly seek returns through new investment approaches and via new investor markets. These structural shifts in the investment industry have brought a new set of operational, financial and tax challenges, which Henry has worked through with a diverse range of clients.

From day one, the US tax team aimed to cover all areas of alternatives, collaborating with UK and European-based advisors to provide a holistic service offering for alternative fund clients.

The convergence of asset classes has not removed the need for oversight across multiple moving parts – whether for tax, audit or regulation. Increasingly, businesses are encountering scenarios where complex tax frameworks may interact or overlap, which has driven demand for technology solutions. “There is a strong need for individuals who can combine a knowledge of tax with technology to develop the requisite tools for clients,” Henry says. EY is turning to technology to respond to an evolving regulatory backdrop and has formed an aligned global group – its Tax Technology & Transformation team – which brings together expertise from the firm’s financial services and FinTech teams.

Brexit reform and Europe

Asset management is a truly global industry and EY manages the service of its clients via three geographic areas – the US, EMEIA and Asia Pac, which provides a strong platform to deliver global insight and services. “Our clients have multiple competing business issues that require us to provide an understanding of the corresponding tax, legal and regulatory issues,” says Henry.

“Brexit is just one issue our clients have on their minds,” she says. “Combine this with the changes in the tax landscape due to US tax reform, changes in the tax landscape across the UK and Europe, changes in regulations and economic changes, and you quickly see the need for a strong UK, EMEIA and global presence to service our clients’ needs.”

US tax issues

Henry briefly touched on a few US tax issues:

“As transparency and tax laws have changed, the pressure points in terms of what US investors seek from fund managers, inside and outside the US, have changed dramatically.”

“It is a totally different tax world now with FACTA, CRS, AEOI. From the start, we did roadshows telling managers that if they want US allocations, they have to reckon with these forces. We have worked with new launches, talking all hours of the day, to help with understanding US investor requirements.”

“Alternative asset managers know their clients well and make a big effort to ensure that classifications are right. Where third parties are relied upon, managers must maintain strong oversight as the obligation is still at the fund level to report on their investors. Outsourcing does not relieve them of this responsibility. Through FACTA fatigue, there is scope for errors across AEOI, with some managers over-reporting data for entities that are not covered. Managers need to keep on testing their processes.”

US person’s definition
“For institutional investors, it should be easy to identify if they are US entities, although there are always complexities and the potential for error. For individuals born in the US who have never lived there, but get caught in the net, there are interesting conversations to be had, which include some drastic measures, like renouncing citizenship.”

Tax reform: partnerships versus corporations
“The rules are very complex, and other factors such as dividend taxes and the treatment of non-US investors should be considered in addition to the headline 21% US corporate tax rate. But tax reform could challenge and change the current structuring of funds and management companies. Some managers are looking at converting from a publicly traded partnership to a corporation.”

Tax reform: US real estate
“Effective tax rates for non-US persons, which had been as high as 50%, could now be lower, making US property a more affordable investment.”

Passive Foreign Investment Corporation (PFIC) Statements and Schedule K1s
“PFICs definitely still matter. Funds need to issue PFIC Statements to US investors in order for US investors to obtain beneficial tax rates and comply with their own reporting requirements – US tax reform has not changed that. There are different tax rates for ordinary income, short term capital gains and long-term capital gains, so investors need PFIC Statements (and Schedule K-1s if the fund is transparent).”

UK tax

Henry, who also has a focus on UK tax, made brief comments on a number of topical UK tax issues:

UK non-domiciles
“A huge number of individuals working in the hedge fund industry have been, or will soon be, affected by the changes to the UK domicile regime. There has been a trickle of people leaving the UK, and more may continue to do so. US nationals are potentially the most impacted, as once deemed UK-domiciled they are taxed on a worldwide basis in two jurisdictions. The intricacies and complexities of dealing with this, in a way that is efficient and not punitive, are challenging.”

Reporting status for funds
“The UK reporting status regime remains attractive, notwithstanding the removal of deductions for performance fees. This has slightly lessened the benefit, but generally not to the point where investors would want funds to opt out of the regime. We do not see managers changing their decisions, though some now offer investors share classes with and without reporting fund status.”

Transfer pricing
Transfer pricing is under close scrutiny. “Transfer pricing is front and centre. We need to make sure that clients have the proper documentation to satisfy the requirements of various jurisdictions in a robust and consistent way. It is not just a mandatory compliance requirement as the political angle and public perception have changed, at a time when the industry’s international footprint continues to expand.”