Tax, trusts and protection related news to 28 April 2023

A brief roundup of the weekly tax, trusts and protection news not featured in our main bulletins.

FCA sets out recommendations for LDI managers

The FCA has published a series of recommendations for asset managers designed to increase resilience of Liability Driven Investment (LDI) funds. Guidance set from the FCA is around risk management, such as stress testing and client communication, as well as operational arrangements for LDI managers so that they can address risks to market integrity and financial stability. The FCA has been engaging directly with firms involved in the management of LDI portfolios to develop and maintain increased resilience to deal with possible future volatility.

Financial watchdog puts banks on alert in fight against money laundering via the Post Office

A series of measures designed to reduce the risk of money laundering via the Post Office have today been set out by the FCA. The regulator brought together partners, industry, and government to strengthen controls while seeking to ensure that legitimate customers can continue to use the Post Office for Everyday Banking

The measures set out for banks today include:

  • A move towards card-based transactions and away from paying-in slips, where possible, to allow enhanced monitoring. 
  • Upskilling staff to spot patterns of suspicious activity. 
  • Enhancing monitoring capabilities in banks which allow them to identify suspicious activity.
  • Reducing cash deposit limits at the Post Office, subject to customer arrangements, to below the existing limit of £20,000 per transaction. Banks should take a data-led approach and consider whether a tailored offer is appropriate.
  • Reducing the time taken to submit Suspicious Activity Reports to the National Crime Agency (NCA), enabling them to take timely action.  
  • Improving intelligence sharing so that information is passed on to other firms, law enforcement and the FCA on a regular basis.

Post Offices are an important part of protecting access to cash for people and small businesses. FCA research found 6% of adults in the UK used cash to pay for everything over the 12 months from May 2021, with this figure increasing (9%) for those in vulnerable circumstances. While most people have reasonable access to cash, it is vital that any money laundering protections don’t get in the way of legitimate customers and businesses accessing services at the Post Office.

While banks have made good progress in improving safeguards, including a 43% drop in the time taken to report suspicious activity at Post Offices, there is still more work to do.

HMRC One to Many letters – Electronic Sales Suppression

HMRC have advised the Chartered Institute of Taxation (CIOT) about a One to Many (OTM) letters campaign connected to the use of till systems that hide or reduce the value of individual transactions on a business’s electronic sale records. Such systems reduce the recorded turnover of the business and corresponding tax liabilities, whilst providing what appears to be a credible and compliant audit trail. This is known as Electronic Sales Suppression (ESS).

The campaign is targeting businesses which might not have paid the correct amount of income tax, corporation tax and / or VAT due to misuse of their till systems. The intention is to provide an opportunity for businesses to get their tax affairs in order, by coming forward voluntarily and disclosing undeclared sales. If people do not come forward, HMRC may issue an assessment and/or open an investigation and harsher penalties will apply.

The letters started to be issued from 11 April 2023 and will continue to be rolled out during May. It is envisaged that this campaign will be continuous for at least the coming year.

OPBAS publishes report on legal and accountancy sector supervision

The Office for Professional Body Anti-Money Laundering Supervision (OPBAS) is housed within the FCA and is responsible for overseeing 25 Professional Body Supervisors (PBSs) for anti-money laundering in the legal and accountancy sector. In its fourth report, OPBAS has found that professional bodies are continuing to demonstrate good levels of compliance with money laundering regulations but improvements in how effectively they supervise have not been good enough.

For example, the report found that too many PBSs still failed to share relevant information and intelligence proactively with regulators and law enforcement, and that action taken against firms who break the rules has been too slow in some cases. OPBAS will continue to use all the regulatory tools and powers available within the current anti-money laundering (AML) framework to hold them accountable.

Tax take up 10% in a single year

HMRC has published its latest monthly bulletin: “Tax receipts and National Insurance contributions for the UK”. This shows that the total tax collected by HMRC soared this year by £71.1bn to £786.6bn, up from £633bn pre-covid as a result of the highest tax burden in 40 years. Below is a breakdown of various tax collected by HMRC:

Receipts from PAYE income tax and National Insurance contributions (NICs) for tax year 2022/23 were £378.2bn, which was £40.2bn higher than in the same period a year earlier.

Tax receipts from income tax, capital gains tax (CGT) and NICs alone hit £47bn in March, £7.6bn higher than a year ago.

Income tax take totalled £20.2bn, down from £20.8bn in February 2023, which is always a higher figure due to year end self-assessment payments. When compared with the previous year, income tax accounted for £19bn in March 2022.

Overall receipts for business taxes for the 2022/23 tax year hit £84.9bn, an increase of £17.5bn compared with the same period a year earlier.

This was mainly due to higher offshore receipts, as a result of high energy prices following Russia’s invasion of Ukraine, and the new energy profits levy, which was introduced in May 2022.

VAT receipts for the year hit £159.5bn, up by £2bn compared with the same period a year earlier. For the month, VAT receipts hit £8.3bn

House price increases, especially in the southeast, and double figure inflation pushed inheritance tax (IHT) receipts up to a record £7.1bn from April 2022 to March 2023, an increase of more than £1bn on the same period a year earlier.

FCA warns consumers about mismanagement of ‘asset protection’ trust schemes

The FCA has set out a warning to consumer in a Press Release in relation to trusts in general and “asset protection” trusts in particular. The FCA states that it has seen trust assets to be inappropriately invested, including into high-risk illiquid assets. In most cases, these investments are not suitable. When investing through a trust, there is also a risk that the usual protections in place for consumers are lost.

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