FCA apologises to Scottish boat insurer Stuart Forsyth after tax row

Two years ago, the remote Scottish fishing town of Buckie was rocked by scandal when it became the centre of an alleged tax ruse.

Stuart Forsyth, a well-known member of the community who ran a boat insurance company, was accused by the City of London’s two main watchdogs of funnelling around £200,000 of his salary to his wife to cut his tax bill.

The Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA) fined him £154,498, and banned him from working in the regulated sector.

Unlikely setting: Stuart Forsyth, a boat insurer from the remote Scottish fishing town of Buckie (pictured), was accused of funnelling around £200,000 of his salary to his wife

But they yesterday had to apologise after a judgement from the Upper Tribunal found the accusations ‘wholly unsubstantiated’.

The alleged misconduct related to Forsyth’s time as chief executive of the Scottish Boatowners Mutual Insurance Association, set up by fishermen in 1918, which specialised in insuring fishing boats.

After 15 years at the business, he joined major insurer RSA in 2016 but lost his job due to the penalties which the FCA and PRA levied against him.

Forsyth, 51, said: ‘Before this case I had a 30-year unblemished career in the marine insurance industry. Over the years of being subjected to the regulators’ scrutiny, I have consistently maintained my innocence of the serious allegations levelled at me.

‘I am relieved that through the expertise and experience of the tribunal it has been determined as a matter of fact that I have done nothing wrong. 

‘My wife and I have been through a hellish experience, which seems to me to have resulted from the regulators’ flawed judgment.’

When they slapped Forsyth with penalties in 2019, the FCA and the PRA described his case as ‘highly unusual’.

Because Buckie was so remote, and the company so small, Forsyth roped in his wife Penelope to provide hospitality to fisherman clients and visiting insurance professionals. 

She also helped her husband with secretarial tasks, and took phone calls when he was out of the office. Between 2003 and 2010, Forsyth paid Penelope between £5,000 and £10,000 of his salary for the work – a sum the FCA and PRA said was ‘not obviously unreasonable’.

But from 2010, Forsyth, who was paid between £125,000 and £180,000 a year, began to transfer ‘excessive amounts of his own remuneration to his wife to reduce his own tax liability and took steps to conceal that’, the regulators said.

Between 2010 and 2016, he allegedly transferred around £200,000 in pay and bonuses and managed to avoid paying £18,000 in income tax. 

Hellish experience: Stuart Forsyth (pictured with his wife Penelope) was also accused of creating false boardroom meeting minutes

Forsyth was also accused of creating false boardroom meeting minutes, which created the impression that his company’s remuneration committee had approved the payments to his wife, and sending these to the PRA.

But the tribunal said: ‘We have found Mr Forsyth to be an honest and credible witness in respect of all of the disputed matters.’

It added that Mrs Forsyth was an ‘impressive witness’, and the tribunal panel, which included one judge and two independent experts, praised her ‘full devotion to supporting her husband in the difficult situation’.

The tribunal said the watchdogs had not produced enough evidence to support their allegations, and snubbed claims that Forsyth would have been able to ease his workload if he had employed consultants to help with regulatory changes.

And the regulators’ failure to comply with certain disclosure obligations ‘cannot be regarded as anything other but the most serious failing on the part of the regulators,’ the tribunal said.

The FCA said it would carefully consider the tribunal’s recommendations, and admitted errors resulted in the late disclosure of documents. A spokesman added: ‘The FCA has apologised to Mr Forsyth and the tribunal for those errors.’

The PRA said it ‘accepts the findings that it took a flawed approach in relation to identifying material held in this case. ‘These errors resulted in the late disclosure of certain materials, for which we have apologised to both Mr Forsyth and to the court.’