Former mutual insurer boss faces FCA’s wrath for dodging income tax

A joint investigation by the FCA and PRA revealed that the former chief executive of the Scottish Boatowners Mutual Insurance Association (SBMIA), Stuart Malcom Forsyth, was skipping income tax payments by transferring the majority of his salary and bonus awards to his wife.

The FCA issued its formal Decision Notice, detailing its investigation findings and proposed actions, on 30 September; Forsyth referred this to the Upper Tribunal on 25 October, which will provide the final determination on the case – all actions are pending until the Tribunal ruling.

In its Decision Notice, the FCA recommended that Forsyth be fined a £78,318 penalty for lacking integrity, as well as be banned from performing any function relating to FCA-regulated activity. The PRA intends to fine Forsyth £76,180.

Dodging tax

The investigation regarded payments made to Forsyth’s wife, who provided minor out-of-hours administrative support and occasional hospitality at the couple’s home. Prior to 2010, Mrs Forsyth was paid between £5,000 and £10,000 a year for her contributions.

After 2010, however, the FCA’s Regulatory Decisions Committee and the PRA’s Enforcement Decision Making Committee found that Forsyth was transferring increasing amounts of his salary and bonus payments to Mrs Forsyth in order to reduce his tax liability – between 2010 and 2016, Forsyth moved more than £200,000 of his pay over to his wife.

By the end of the 2015-2016 tax year, Mrs Forsyth’s remuneration totalled £52,000 – more than any other SBMIA employee, excepting her husband.

As a result of this arrangement, the FCA and PRA investigation found that Forsyth had avoided paying around £18,000 of income tax.

Deception

SBMIA’s Board and Remuneration Committee was also kept in the dark about Forsyth’s plot – it knew that Mrs Forsyth was paid, but not how much.

Forsyth originally covered his tracks by creating false meeting minutes, to give the impression that both of the Forsyth’s salaries had been agreed by the committee in 2013, 2014 and 2015; in fact, only Mr Forsyth’s pay had been confirmed.

Even after initial concerns were raised about his wife’s pay in late 2015, Forsyth inappropriately involved himself in a subsequent investigation by an external auditor, the investigate found.

In 2016, the former chief executive also sent false remuneration committee meeting minutes in response to an information request from the PRA.

Integrity

The joint investigation concluded that Forsyth acted without integrity for his own financial benefit.

The FCA and PRA await the Upper Tribunal determination in order to implement its proposed actions.

SBMIA transferred its policies to the TT Club earlier this year. The business is facing disolution and being struck off the register of companies at Companies House two months from 12 November.