The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have imposed a ban and fine on the CEO of a small Scottish mutual insurance society. The regulators found that he acted improperly by transferring excessive amounts of his own remuneration to his wife, with the aim of reducing the tax liability.

The CEO had always paid a proportion of his own salary to his wife as she provided out of hours administrative support and occasional hospitality at home. Up until 2010 she was paid between £5,000 and approximately £10,000 per annum, and the FCA says this was “not obviously unreasonable for the work she was undertaking.”

However, between 2010 and 2016 he transferred more than £200,000 to his wife, and in the 2015/16 tax year her remuneration (including bonuses) was £52,000, which was higher than for anyone within the firm, with the exception of her husband.

The FCA says that the firm’s Board and Remuneration Committee were aware she was receiving some remuneration. However, this Committee did not know how much she was receiving, and the FCA says that the CEO took steps to conceal information from the Board and Committee. He also created false minutes of meetings to make it look like the arrangement had been approved, and on one occasion the falsified minutes were sent to the PRA.

The FCA believes that he was able to avoid £18,000 in income tax by making these arrangements.

The FCA Decision Notice says:

“The Authority considers that, during the Relevant Period, the payment to Mrs [surname] of a proportion of Mr [surname]’s salary and, on four occasions, all or part of his bonus, resulted in Mrs [surname] receiving remuneration in excess of what was reasonable for the work she was undertaking, and was deliberately arranged by Mr [surname] in order to reduce his tax liability. Mr [surname] was aware that [name of firm]’s Remuneration Committee had not approved the amount of Mrs [surname]’s salary or these bonus payments being paid to her, and that Mrs [surname] had not carried out any additional duties, or other work, which justified the level of remuneration she received.”

The ban and fine is subject to an appeal to the Upper Tribunal. However, the FCA says that the lack of integrity he displayed justifies a fine of £78,318 and a ban from holding any role at any authorised firm.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article