Money Covered: The Week That Was – 9 May 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

FOS releases new complaints data

Recently published FOS complaints data shows that 140,000 complaints were received by the service between July-December 2024, a 49% increase from the same period in 2023. The increase can be attributed to banking, credit affordability disputes and a rise in motor finance commission cases.
46% of complaints were brought by professional representatives (most likely, claims management companies) which relate to credit affordability and car finance complaints. However, under FOS' new fee model professional representatives who submit more than 10 complaints per year will be charged a case fee. This was only introduced last month and therefore is likely to have an impact upon the number of professional representatives submitting complaints in the next quarter.

The sharp increase in complaints has put pressure on an already stretched service but FOS plans to increase staffing capacity to deal with the influx.

More details can be found here. 

 Accountants 

ICAEW confirm audit regulation change 

The ICAEW have confirmed new changes to their existing audit regulations which are to become effective on 1 June 2025. The changes are in response to the changes in the regulatory environment. 

In accordance with the new regulations, audit firms must notify the ICAEW within 21 days of being appointed to audits that are considered "complex or high risk" and sole practice auditors are required to appoint an alternate. The purpose of this new requirement is for an 'alternate' to step in where a sole practitioner is incapacitated – which disrupts the service they are providing to their client.  

To read the regulations, click here.

Tax Practitioners 

HMRC Spotlight Notice 69 – warning to landlords 

HMRC has issued a Spotlight Notice (the Notice) in respect of a tax avoidance scheme used by landlords to mitigate tax liability. 

The scheme usually operates by a landlord incorporating a business into an LLP. The landlord then transfers their rental properties to the LLP at market value. The LLP is then put into Members' Voluntary Liquidation (MVL) – with the rental properties being sold to limited companies owned by the landlord. 

HMRC's view is that the scheme does not work and people who use the scheme may ultimately end up having to pay more than just the tax they sought to avoid, along with interest and penalties. 

HMRC has advised landlords to contact HMRC if they are involved with such schemes. 

To read the Notice, click here.

Parliament urges HMRC to restore trust, improve efficiency, and simplify tax administration

The Parliament's Public Accounts Committee (PAC) has recently published their latest report, which highlights key challenges HMRC is facing in managing an increasingly complex UK tax system, and recommends urgent reforms to restore trust, improve efficiency and simplify tax administration:

• Rising Costs: Tax administration now costs over £20bn annually. Complexity is a major factor, and PAC is prompting calls for simplification.
• Declining Trust: Trust in HMRC has fallen significantly among individuals and agents. PAC urges HMRC to engage more with stakeholders to rebuild confidence.
• Reduced Compliance Efficiency: Compliance productivity has dropped since the pandemic. HMRC is urged to outline plans to return to pre-pandemic performance.
• Outdated IT Systems: Legacy technology is delaying progress and limiting digital innovation, including AI use. PAC wants a clear improvement timetable.
• Mixed Results from Making Tax Digital (MTD): While MTD boosts VAT revenue, it imposes high costs on taxpayers and shows limited productivity gains. HMRC is advised to prioritise users' needs and learn from past experiences.

To read the PAC's latest report, please click here. 

Regulatory developments for FCA regulated entities 

The FCA provides clarity on multi-firm review into consolidation

Nick Hulme, the FCA's head of department for advisers, wealth and pensions, recently gave details regarding the proposed multi-firm review into consolidation of financial advice firms. The review was first announced by the FCA in October 2024. Hulme stated that consolidation is changing the landscape and the market that the FCA regulates.

Mr Hulme confirmed that the FCA wanted to give regulatory clarity to firms seeking "good growth" and to keep bad actors and bad practices in check through prompt and assertive action where there is potential for harm. He went on to say that where consolidation occurs without direct control to governance or a focus on good client outcomes, there is the potential for harm. Whilst stating that the FCA is agnostic on consolidation, Hulme stated that it could present "numerous benefits for all".

To read more, please click here.

FCA publishes discussion paper on regulating cryptoasset activites

Following the Treasury's plans to legislate for a financial regulatory regime for cryptoassets, the FCA has published a Discussion Paper setting out the outcomes it aims to achieve and the proposals it is seeking to implement.

The Discussion Paper sets out the proposed approach on how to regulate (a) cryptoasset trading platforms; (b) intermediaries; (c) cryptoasset lending and borrowing; (d) staking; (e) decentralised finance; and (f) use of credit to buy cryptoassets.
Comments should be submitted by 13 June 2025.

The Discussion Paper can be read here.

Stricter FCA rules drive 11% drop in principal firms

Between February 2022 and February 2025, the number of appointed representatives (ARs) fell by 22% and the number of principal firms dropped by 11%. This decline is partly attributed to stricter FCA rules introduced in 2022, requiring principals to better oversee and report on their ARs. Whilst this may signal tighter regulation, some experts, like Simon Harrington of Pimfa, caution against assuming it's a long-term trend. 

Despite recent declines, the AR regime remains a crucial part of the UK’s financial advice system. The FCA also noted sectoral shifts, with AR numbers rising in consumer finance but falling in general insurance. Meanwhile, the FCA is considering changing its fee model for principal firms and pushing for greater AR accountability.

To read more about the FCA's findings on how principals are embedding new rules for overseeing ARs, please click here.