FSCS chief hits back over tax avoidance criticism


Last week Money Marketing printed an open letter from West Riding Financial Solutions managing director Neil Liversidge criticising the FSCS for considering claims against ‘victims’ of tax avoidance schemes.

You can read his letter in full here.

Below is FSCS chief executive Mark Neale’s response:

Thank you for your personal letter of 11 September which appears in Money Marketing.  I have always welcomed the opportunity to discuss issues of common interest with Apfa and its members.  So perhaps you will not mind if I follow suit and address publicly the issues you raise?  Those issues are of wider interest.

You accuse me, on the one hand, of gaming the Scheme and, on the other, of being a jobsworth in the manner of Concentration Camp guards. Both can’t be true. In fact neither is.

FSCS reaches independent decisions about claims on their merits within the legal framework set for us by Parliament and the regulators.  We operate within this framework to protect consumers who have legitimate claims against regulated financial services firms which have failed. We apply a civil liability test and, in effect, ask the question: would a court uphold this claim if brought against a firm that was still trading?

FSCS’ protection underpins confidence in financial products.  Our independence ensures that both the industry and consumers can have confidence in our decisions.  We accept some claims where the civil liability test is met, but reject others where it is not.

This is exactly the process we have followed in considering whether we can consider claims arising from advice to participate in certain tax mitigation schemes which take the form of Unregulated Collective Investment Schemes (Ucis).  The question for FSCS here is whether some consumers may have a legitimate claim against the financial adviser who recommended participation.  For example, some claims have been made by basic rate taxpayers who were unable to benefit from any tax advantage.

The fact that we have concluded, after careful consideration, that we can consider such claims does not, of course, prejudge the outcome of individual claims.  We shall review all the circumstances of each claim, including the actions and responsibility of the claimants themselves.

Considering claims certainly does not imply that I (or FSCS) condone artificial tax avoidance arrangements.  As a former HM Treasury director general responsible for tax policy, I certainly don’t.  But FSCS is not, and should never be, a means of implementing the personal policy preferences of its chief executive.

FSCS must operate within the law as it is.  It does so and is subject to the scrutiny of its board, of the regulators and of the National Audit Office.

That does not, of course, mean that the law cannot be changed to amend the scope of FSCS protection where there is a good case for doing so.  The right course for those who feel, as you do, that FSCS protection should not extend to people seeking advice about how to reduce tax liabilities through participation in artificial schemes is to make that case.

Mark Neale, chief executive, Financial Services Compensation Scheme