19 November 2019: The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have issued a former chief executive with a fine amounting to £154,000 after it was found that he paid his wife part of his salary to avoid tax obligations.
An investigation by the regulators found that the former chief executive, Stuart Malcolm Forsyth, “transferred excessive amounts of his own remuneration to his wife to reduce his own tax liability and took steps to conceal that arrangement”. Specifically, between 2010 and 2016, Forsyth had transferred more than £200,000 to his wife, which saw him pay £18,000 less income tax than he was required to. Forsyth took steps to conceal the payments from the board of his company by creating false minutes that suggested that the payments were legitimate and had been agreed to by the board.
It is not unusual in small, family run businesses for the company to recognise the contribution of spouses by paying them a small salary. However, such payments must be “reasonable” and in line with the market rate in order to be acceptable to the tax authorities. However, head of tax at Moore Kingston Smith, Tim Stovold, commented that in this instance “matters seem to have gone beyond what could be considered reasonable, with his wife becoming the highest earning employee save for Mr Forsyth.”
Forsyth was issued a fine of £78,318 by FCA and £76,180 respectively. He has appealed against the decision, which means the regulators’ decision is provisional until a tribunal ruling.