Money Covered: The Week That Was – 25 July 2025

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

'The fourth episode of Season 4 of our podcast, Money Covered – The Month That Was, where the team looks at Employment Practices Liability insurance and its relationship to Directors & Officers insurance, is now available.

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

Headline Development

Supreme Court hears appeal in KVB Consultants

On Monday, a 5-justice Supreme Court heard the final appeal in Kession Capital Ltd v KVB Consultants Ltd and others. Followers of RPC's professional and financial risks commentary will be well-acquainted with the case, given in-depth our coverage on both the first instance and appellate judgments.

The background of the case is that Kession Capital Limited (KCL) appointed Jacob Hopkins McKenzie Limited (JHM) under an appointed representative agreement (ARA) pursuant to section 39 of the Financial Services and Markets Act 2000 (FSMA). The effect of an ARA is to dispense with the need for the appointed representative to obtain their own FCA authorisation for the regulated activities specified in the ARA. However, this is subject to the proviso that the principal accepts responsibility for the actions of the representative under the ARA. JHM promoted collective investment schemes to retail clients. Those schemes substantially failed, resulting in losses of c. £1.7m to the Claimants, which the Claimants then sought to recover from KCL.

The key question on the appeal is whether a term within the ARA prohibiting JHM from dealing with retail clients was sufficient to limit KCL's responsibility to those retail clients. Both the High Court and the Court of Appeal had relied on a previous Court of Appeal decision Anderson v Sense Network Ltd [2019] –where a distinction was drawn between restrictions placed in an ARA on what regulated activities the representative carried out (with such restrictions being effective to prevent the principal being liable for the representative engaging in such prohibited activities), and how activities were carried out (with restrictions being ineffective to limit the principal's liability). Both had reached the same conclusion: that the characteristics of targeted investors went to the 'how' and not the 'what', and, as such, was ineffective to limit KCL's liability. It is this point under appeal to the Supreme Court.

You can find the Supreme Court's page on the case and watch the full 4.5-hour hearing, here.

Auditors

Auditors comment on new ICAEW internal controls reporting requirements 

In October 2024, the ICAEW met with a number of large audit firms to discuss the proposed requirement for companies to make annual declarations on the effectiveness of their internal material controls and board effectiveness. 

The new reporting requirement, which is due to apply from 2026, will require companies to prepare a: 

• Description of how the board monitors and reviews the effectiveness of risk management and material internal controls.
• Declaration by the board of the effectiveness of those internal controls; and
• Description by the board of any controls that have not operated effectively, together with an action plan to resolve/improve. 

Auditors will need to be alert to any inconsistencies in the above declaration/ descriptions, as well as audited financial statements. This also includes any other knowledge that the auditors may have gained during the audit. 

In the consultation in October 2024, auditors raised concerns about the knowledge they may acquire and the subjective nature of applying that knowledge to any inconsistencies noted. Further concerns were raised about the pressure of the increased volume of work that the new requirements are likely to bring, in the hope that the ICAEW will release further guidance on the reporting approach. 

To read more, please click here.

FRC publishes new guidance to support SME audits

The Financial Reporting Council (FRC) has published proposed guidance to help auditors take a more proportionate approach when working with small and medium-sized enterprises (SMEs).

Released on 17 July, the guidance is part of the FRC’s wider effort to make the audit process more effective and accessible for smaller businesses and to reduce unnecessary complexity where possible.

The move follows a year-long market study, during which the FRC spoke with more than 500 stakeholders – including audit firms, SMEs, investors and professional bodies. That work highlighted a number of issues, such as:

• Difficulties applying audit standards in a scalable way for smaller companies
• Concerns that regulatory expectations lead to more work than is necessary
• Mixed experiences with using technology in smaller practices
• Questions over whether statutory audit is always the right fit for SMEs
• Limited time and resources affecting both auditors and their clients

The guidance aims to give auditors clearer, more practical guidance on how to tailor their work to the size and complexity of the business they’re auditing – without compromising quality.

The FRC is also working with supervisory bodies to encourage a more consistent and proportionate approach across the sector and plans to explore how technology could further support smaller firms.

To read more, please click here.

Tax Practitioners

New 'transformation roadmap' for HMRC

The Government, as part of its commitment to the simplification and digitisation of citizen-state interactions, has launched a new 'transformation roadmap' for HMRC. This aims to bring 90% of interactions online by 2029-30, and to similarly improve efficiency by automating processes where this is appropriate.

The immediate effect is most likely to be felt in personal tax, with reforms expected to PAYE and NIC systems this tax year. In particular, HMRC expects to swiftly create an online service for PAYE taxpayers, accessible via its app, for taxpayers to be able to check and update their affairs or submit relief claims more swiftly and efficiently. The changes will also see an expansion of digital options for NIC refunds, and in the medium term a switch to digital forms of communication as a default.

The longer-term goal is to use these changes, along with AI support, to diminish the administrative burdens imposed upon taxpayers generally, and to minimise the opportunities which arise for evasion. It is also expected that reforms will be introduced to HMRC's manuals, and legislative change considered, to tighten up existing holes within the tax system.

You can read the roadmap here.

Draft Financial Bill 2026 tackles tax advisers 

On 21 July 2025, the government published draft legislation for inclusion in the Finance Bill 2026. Amongst other things, the draft legislation covers tackling tax advisers facilitating non-compliance and promotors of marketed tax avoidance.

One of the aims of the draft legislation is to improve the effectiveness and efficiency of powers that enable HMRC to tackle tax advisers facilitating non-compliance by their clients. In particular, it will strengthen HMRC's powers to issue penalties, collect information from advisers and publish tax adviser sanctions.

With regard to promotors of marketed tax avoidance, the draft legislation provides for new powers for HMRC to draw in on those who own or control promotor schemes.

The date for comments on the draft legislation closes on 15 September 2025 with the government to decide the final contents of the Finance Bill 2026 thereafter.

To read more, please click here. 

Mortgage Brokers

Mortgage Rule Review update

As part of the FCA's 5-year strategy to assist consumers with navigating financial services, the FCA has considered steps to simplify requirements to obtain a mortgage. On 22 July 2025, the FCA published their new policy statement, "Mortgage Rule Review: First steps to simplify our rules and increase flexibility."  

The policy statement largely implements proposals contained in a May 2025 consultation paper (with some minor changes) and sets out the previous regulatory reforms from 2008 - which improved mortgage market standards. The introduction of the Consumer Duty has also assisted with consumer protection in this area.

The FCA has considered ways to improve the speed and cost for consumers to:

• Liaise with mortgage providers regarding consumer needs
• Reduce mortgage terms
• Remortgage with new lenders

As part of the review, the FCA has changed the interaction trigger - meaning that interactions between firms and consumers do not automatically trigger advice. The FCA has also removed the requirement for full affordability assessments to be undertaken for those reducing mortgage terms. 

The FCA considers that the changes will bring this market more in line with their objectives. It remains to be seen what these changes may mean for the mortgage claims landscape. Less stringent rules may mean less claims, however, the removal of affordability assessments may mean we see more claims in this area. 

Given the permissive nature of the changes (rather than requiring a specific action by those impacted), the changes came into force immediately upon publication, and so mortgage advisers are free to implement them.  

To read the FCA policy statement please click here.

Pensions

Relaunched Pensions Commission to report on 2050 retiree 'crisis'. 

Following a concerning report prepared by the Department for Work and Pensions (the DWP) into private pension saving, the Government has relaunched the Pensions Commission (the Commission). The Commission will now prepare a report on the crisis facing future retirement plans. 

The Commission are preparing a report looking into the entire pension system, with a particular focus on why retirees in 2050 are on track to be poorer than those retiring today. The DWP data suggest that 2050 retirees will have 8% less pension income than those retiring today. The DWP also highlighted that 15 million people are under saving for retirement, with nearly 45% of working adults not saving into a private pension at all. Those at risk of either not saving, or under saving include lower earners, those who are self-employed and some ethnic minorities. 

The Commission Report, which is due in 2027, will address the DWP's data and suggest reforms to Parliament to develop a pensions framework moving forward that is strong, fair and sustainable. 

To read more, please click here.

DB pension transfer values rise for first time in 2025

Data from XPS Group's Transfer Value Index Tracker, which tracks estimated cash transfer value of defined benefit pensions, shows a rise in transfer values for the first time this calendar year. This is likely connected with a slight reduction in gilt yields during June (yields on 10-year gilts, for instance, dropped by approximately 18 basis points during the month), meaning that schemes' implied capitalisation requirements (and therefore costs) to offer existing scheme benefits will have seen a corresponding increase.

Overall, there has been a massive reduction in DB transfer values since the end of 2021, with almost half having been wiped off the index since its peak in December of that year. Unsurprisingly, this has also seen a similar-sized drop-off in DB transfer activity, limiting the size of the advisory market.

Further, it remains to be seen whether this increase will be at all sustained: at the time of writing, gilt yields have recovered nearly all of their June drop. 

For more information, see here.

Regulatory developments for FCA regulated entities

FCA publishes consultation on regulation deferred payment credit

The FCA has recently published consultation paper CP25/23 setting out its approach to regulating deferred payment credit (DPC), which is more commonly known as Buy Now Pay Later (BNPL).

DCP, or BNPL, is an interest-free credit product repayable over 12 month or less, or in 12 or fewer instalments and is currently exempt from regulation. Rather than introducing new rules, the FCA is looking to rely on the Consumer Duty for its proposals which include: information requirements, assessing creditworthiness and the FCA Handbook.

Comments on the proposal can be made until 26 September 2025.

To read more, please click here.

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