Money Covered: The Week That Was – 11 April 2025

Welcome to The Week That Was, a round-up of key events in the financial services sector over the last seven days.

The third episode of Season 4 of our podcast, Money Covered – The Month That Was, where the team discusses developments that we expect to see in 2025 in relation to Financial Services and Accountants is now available.

To listen to this and all previous episodes, please click here.

Headline Development

Potential new sanctions for tax advisers

On 26 March 2025, HMRC published a consultation proposing expanded powers to investigate and penalise tax advisers suspected of contributing to inaccuracies in taxpayer returns. Announced alongside the Spring Statement, these proposals build on the Autumn 2024 budget requiring all tax advisers dealing with HMRC to register with HMRC from April 2026. The proposed changes include:

•  Expanding HMRC's information powers.
• Reviewing the threshold for charging penalties.
• Broadening the scope of disclosures to professional bodies; and
• Widening the scope of publication of the tax adviser's details.

The scope of these proposals includes both UK-based and overseas advisers providing service related to UK tax, whether or not they interact directly with HMRC.

Feedback for ICEAW's response must be submitted by 23 April 2025.

To read more, please click here.

Tax Practitioners

New residence-based foreign income and gains regime is introduced

On 7 April 2025, HMRC updated a number of its manuals to reflect the move to a residence-based tax regime for non-UK domiciled individuals. In the 30 October 2024 budget, the Chancellor Rachael Reeves announced that the previous regime that governed the taxation of non-UK domiciled individuals would be abolished and replaced by a new residence-based foreign income and gains (FIG) regime. This means that all UK residents are taxed on the arising basis of assessment on their worldwide income and gains. This new regime came into effect on 6 April 2025.

HMRC have also published a new manual, the Residence an FIG Regime Manual. The manual gives information about the statutory residence test, and also on the FIG regime which provides tax relief that qualifying new residents can claim on their foreign income and gains that accrue during their first 4 years of UK residence.

To read the Residence and FIG Regime Manual, please click here.

Financial Institutions

No duty of retrieval for receiving bank in APP fraud

The Court of Appeal has held that a receiving bank does not have a tortious duty of retrieval in relation to a payment received as a result of automated push payment (APP) fraud.

CCP Graduate School Limited (CCP) made 15 payments, totalling c. £400,000, from its NatWest bank account to a Santander account as a result of APP fraud. From there, the fraudsters disseminated the funds to other accounts so that they could not be traced.

CCP issued proceedings against NatWest and Santander for breach of their Quincecare duty but brought an additional claim against Santander in respect of its duty of retrieval in respect of the payments. At first instance, the claims against NatWest and Santander for breach of Quincecare duties were struck out however the claim against Santander regarding the duty of retrieval was allowed to continue on the basis that it was sufficiently arguable. Santander appealed the judgment and the Court of Appeal held that there is no duty owed by a receiving bank to take reasonable steps to recover payments made by a customer of the payment bank and therefore this part of the claim was struck out also.

Had the claim been allowed to continue it could have caused increased apprehension in the banking industry about the scope of duty of receiving banks. However, the Court of Appeal seemingly acknowledged that this is a balancing exercise as noted by Lord Leggatt in the leading case of Philipp v Barclays Bank UK plc [2024] who said that "the balance that has to be struck between the need for payments to be facilitated at speed and the desirability of increasing protections against fraud."

The judgement can be accessed here.

CMA publish a letter sent to Lloyds bank regarding breach

The Competition and Markets Authority (CMA) have published a letter sent to Lloyds Bank regarding a breach of Part 5 of the Retail Bank Market Investigation Order 2017 (the Order).

The Order provides that banks (and building societies) are obligated to provide customers' payment transaction histories of any personal current accounts that they decide to close. Lloyds identified that around 360,000 clients (who had closed personal accounts) were not given letters explaining how to access their payment transaction histories (due to an internal procedural flaw). Lloyds identified the issue and self-reported the breach to the CMA in October 2024

In the CMA's letter, they stated that one of the reasons for having the requirement for providers to provide transaction histories was to "make switching between PCAs easier for customers. We found that some customers were concerned that, by moving to a new current account provider they would lose access to their banking history, which was required by lenders when offering credit"

The CMA does not intend to take formal enforcement action due to Lloyds self-reporting and having taken proactive steps to put things right. However, the CMA will be reviewing Lloyds' future compliance closely.

A copy of the letter can be found here.

Pensions

Pensions Ombudsman confirms independent trustee duty in SSAS

The Pensions Ombudsman (TPO) has determined that an independent trustee should be held to the standard of a professional trustee.

The Complainant set up a SSAS (with Rowanmoor) in 2014 intending to invest in the German Property Group (GPG). The Complainant was appointed as a member trustee, alongside Rowanmoor Trustee Limited (RTL) who was appointed as an independent trustee.

Having signed a disclaimer, confirming that he understood the risks associated with investing into GPG (as well as choosing not to obtain legal or regulated advice regarding the GPG investment), the Complainant instructed Rowanmoor to invest £84,700 into GPG in January 2015. In October 2020, the regulator announced that GPG had entered into insolvency and that investors were most likely to lose their investment.

The Complainant made a complaint to the TPO regarding the suitability of the investments within the SSAS (including GPG), and RTL's involvement as an independent trustee (as well as Rowanmoor in their capacity as a scheme administrator). The TPO determined that RTL as an independent trustee should be held to the standard of a professional trustee and ultimately breached their duty of care to the Complainant by allowing the GPG investment without adequately assessing its suitability.

The TPO determined that RTL had a responsibility to ensure that the investment was suitable for the Complainant, and that the investment was aligned with his best financial interest. TPO held that a reasonable trustee would not have approved investing into GPG without conducting proper due diligence. TPO determined that Rowanmoor had satisfied their duties as a scheme administrator.  

To read RPC's commentary on the TPO's determination and our analysis of apportioning liability for professional trustees, please click here.

Regulatory developments for FCA regulated entities

FCA publishes Annual Work Programme 2025/26

On 8 April 2025, the FCA published its annual work programme for 2025/26, which sets out how it will deliver its four strategic priorities for the year ahead.

The FCA's four strategic priorities are:

1.  A smarter regulator (more efficient and effective): The FCA intends to achieve this by streamlining data collection to improve regulatory interactions, digitise and improve the authorisation process, improving how they use intelligence to spot and act on harm, optimising operational performance and enhancing their supervision model.
2. Supporting growth: The FCA will unlock capital investment in liquidity and support growth in the wider UK economy, accelerate digital innovation by embracing a digital first approach, and streamline data collection rules to assist in reducing the regulatory burden.
3. Helping consumers navigate their financial lives: The FCA will work with the government to bring deferred payment credit into their regulatory regime and encourage firms to use innovative solutions that improve consumer resilience.
4. Fighting financial crime: The FCA will building a new data-led detection capability to bring together multiple data sets that will enable them to increase the identification of financial crime.

To read the full publication, please click here.

FCA aims to enable faster marketing of innovative products in new work programme

Following on from the above, the FCA's 2024/2025 work programme includes offering an authorisation case officer from the outset for firms participating in its regulatory sandbox. It is hoped that this hands-on support from an early stage will assist innovators behind new financial products to have UK regulatory compliance built into their plans sooner, and thus speed up the process by which new products and services can safely be brought to market.

On a similar note, the regulator's pre-application support service is to be rolled out to all wholesale, payment, and crypto asset firms. Previously, the service (which focuses on providing feedback on applications at an early stage, and has generally been well-received) was selectively available in limited cases which were considered to be particularly complex or high-risk.

You can read the FCA's press release here.

Call to action: FCA and HM Treasury plan to reform regulations of Alternative Investment Fund Managers

On 7 April 2025, the FCA and HM Treasury released a call for input and a consultation paper on reforming the regulation of alternative investment fund managers (AIFMs). The objective is to replace the current regime based on the EU’s AIFMD (2011/61/EU) with a new UK-specific framework set out in FCA rules and secondary legislation.

Key proposals include a new rule structure for AIFMs, removing current legislative thresholds for AIFMs, introducing three size-based firm categories and assessing the impact on specific types of firms, such as listed closed-ended investment companies (LCICs) and venture/growth capital fund managers.

The deadline for responses is 9 June 2025.

To read the Call for Input published by FCA, please click here.

In addition, the FCA is planning to consult on detailed rules in first half of 2026, subject to feedback and HM Treasury decisions; whilst HM Treasury may publish a draft statutory instrument based on the consultation outcome.

To read the HM Treasury's consultation paper, please click here.

Other

FPC publishes risks of AI to financial stability

On 9 April 2015, the Financial Policy Committee (FPC) published a report on the financial stability risks of AI in the financial system. In the report, the FPC noted the many potential benefits that AI can bring, including increasing productivity and making products and services better and more tailored to customers’ needs.

However, the FPC also noted potential risks of AI in core decision making of banks, insurers and financial markets, along with operational risks in relation to AI service providers and the external cyber threat environment. The risks identified include the reliance on a small number of AI providers, conduct related risks by relying on AI models, the risk that market participants inadvertently act collectively and the increased capability of malicious actors through their use of AI.

The FPC has stated that it intends to build its monitoring approach to enable it to track the development of AI related risks to financial stability.

To read the report, please click here.

FRC publishes observations from the first phase of the actuarial monitoring programme

The pilot phase of the Financial Reporting Council's ("FRC") actuarial monitoring programme ran in 2024. The aim of the programme was to determine whether its Technical Actuarial Standards were fulfilling their role effectively. On 7 April 2025, the FRC published its conclusions from that pilot phase.

A trend throughout the conclusions was deference to the norms within organisations in which actuaries were employed. In particular, the extent to which work was documented and compliance processes followed varied based on the organisation. In addition, concerns were raised about practitioners using models without criticism which were centrally developed within a firm without considering whether said models were actually sufficiently tested or fit for purpose.

The full set of observations can be found here.

Relevant case law updates

Court confirms vicarious liability does not apply to LPA receivers

A recent High Court decision has clarified that employers of Law of Property Act 1925 (LPA) receivers cannot be held vicariously liable for the receivers' actions during receivership - claims against LPA Receivers should be made against those personally appointed to the role.

In this case, Mark Getliffe and Diane Hill, acting as joint LPA receivers over a property in Herne Bay, Kent, sold the property for approximately £722,000 less than its £5 million valuation. The purchaser also covered the receivers' fees. A claim was subsequently filed against their employer, an accountancy firm, alleging that the property was sold without proper market exposure and to a connected party at a price merely sufficient to redeem the loan.

However, the High Court upheld the decision to strike out the claim, determining that the receivers acted in their personal capacities, not as agents of their employer. Consequently, the employer was not vicariously liable for the receivers' conduct during the receivership. The Court set out a two-stage test on the issue of vicarious liability, and the upshot of it is that the capacity in which the wrongdoing party is acting and the nature of the activities they are carrying out which give rise to a tort/claim can alter the incidence of vicarious liability by their contracted employer. 

To read the RPC's in-depth review of the reasoning behind the decision and what it means for other personal appointments, please click here.

Penalties payable following regulatory investigations are not a deductible trading expense, says Court of Appeal

Payments settling regulatory investigations are a deductible trading expense, but penalties payable as a consequence are not deductible from profits for the purposes of calculating corporation tax. However, it is not uncommon for an investigation to be concluded by agreement with the regulated body. This was the case in ScottishPower (SCPL) Ltd and others v HMRC [2025] EWCA Civ 3, where Scottish Power had settled an investigation by Ofgem into alleged breaches of consumer protection regulations by agreeing payments of £28m to consumers and charities in lieu of penalties. Scottish Power then sought to include these payments as a deductible trading expense. HMRC disagreed that this was permissible.

After the First-Tier and Upper Tribunals had held against Scottish Power in whole or in part, the Court of Appeal ultimately agreed with their analysis. The rule in respect of regulatory penalties was not capable of being extended to payments arising out of settlements of investigations (and Falk LJ cautioned against judges effectively making tax policy). There was no policy imperative requiring the rule to be extended in such a way and as such, Scottish Power were entitled to apply the payments settling regulatory investigations as a corporation tax expense.

You can read the judgment here.

With thanks to this week's contributors: Nitin Mathias, Haiying Li, Rebekah Bayliss, Damien O'Malley, Faheem Pervez, Joe Towse, Shauna Giddens.