HMRC ‘to be hit’ by Keydata payout provisions

The principal of Middlesex-based Norwest Consultants argued that firms could be claiming tax relief on deferred payouts “for years” before the Financial Services Compensation Scheme brings its test case for mis-selling the against six advisory firms in a high court showdown.

Herbert Smith Freehills, the lawyers representing the FSCS, said the scheme would be seeking to recoup at least £210m in total Keydata compensation from advisers at a case management conference in March.

Mr Katz said: “When a limited company is faces the fines currently on the table, it has potentially huge liabilities that would wipe out profits this year, and even next. If the FSCS is going to fine advisory firms less than is being currently asked for, the revenue will get that shortfall back. But if compensation claims stay the same, HMRC loses out, so this is another example of how badly this case has been handled.”

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Mr Katz also said that firms who are risk of closure as a result of compensation could force the FSCS or firms with better profit margins to shoulder claims, the latter of which would be a “wholly inequitable” way to spread the liability.

“This case has been a monumental muck-up on the part of the FSCS, who is trying claw money back, irrespective of case-by-case, detailed claims on the part of each adviser.

“If certain limited companies have to close, whatever is being claimed against them falls onto the FSCS. If they pursue these claims to their logical consulsion, just how many firms will go out of business? And what will happen if the FSCS does not want to take their claims on?

“If the FSCS makes an exception for those firms, they will continue claims against those who have more robust profit margins. It’s a bit outrageous for other advisers to pick up the bill on behalf of less profitable firms.”

Simon Webster, managing director of Kent-based Facts and Figures Financial Planning, said: “The advisory group is being asked to pay for the failure of a company. On the one hand, one man bands that have liabilities could belong to networks, but the networks, in turn, could have very big holes in their pockets if they have a small number of members with larger liabilities.”