The Bank of London Group handed HMRC winding-up order after chief steps down
The Bank of London Group, a fintech ‘unicorn’ with Peter Mandelson on its board, was handed a winding-up petition by the UK’s tax authority just two days after its founder stepped down as chief executive, Morning Wire can reveal.
His Majesty’s Revenue & Customs (HMRC) lodged a winding-up petition against the loss-making challenger clearing bank’s holding company on Thursday, according to legal filings.
A winding-up petition is a formal legal process used against a company that has not paid its debts. It is commonly used by HMRC against companies that have failed to pay tax bills more than 21 days after a statutory demand and can result in their assets being forcibly sold.
HMRC filed its case shortly after The Bank of London announced on Tuesday that Anthony Watson was stepping down as chief executive eight years after founding the firm. A source close to the bank claimed the two matters were unrelated.
The person added that The Bank of London had a “multi-year funding deal agreed”.
Watson is remaining with the bank in a new “founder & senior adviser” role and is still a non-executive director of its holding company. Chief risk and compliance officer Stephen Bell was appointed as the bank’s new CEO.
Declining to comment on specific cases, an HMRC spokesperson said: “We take a supportive approach to dealing with customers who have tax debts and only file winding-up petitions once we’ve exhausted all other options, in order to protect taxpayers’ money.”
A company spokesperson said on Saturday: “The Bank of London Group is fully up to date with all tax payments to HMRC. Please feel free to contact them directly for confirmation.
“The issue was due to a simple administrative handling delay due to an internal miscommunication, which has been addressed. We spoke with HMRC this morning, and they are currently updating the filing.”
Dan Neidle, former UK head of tax at law firm Clifford Chance and founder of think tank Tax Policy Associates, told Morning Wire that the situation “suggests major governance and administrative failings”.
“The suggestion we can contact HMRC directly for confirmation that the bank has paid its tax is weird,” he added. “Anyone with knowledge of HMRC knows that it is prevented by statute from saying anything about individual taxpayers and will never give this kind of confirmation.”
In its latest annual report, HMRC named The Bank of London as one of 11 UK banks that had chosen not to adopt its voluntary code of practice on taxation for the sector as of March 2023.
The code, introduced after the financial crisis and adopted by 316 banks, is designed to clamp down on their potential use, promotion and funding of tax avoidance.
HMRC’s legal action comes despite The Bank of London Group raising £6.5m in share capital in July, according to Companies House. The group, valued at $1.1bn in February 2023, previously tapped investors for £25m last November.
Its most recent annual report, filed last December after a three-month delay, showed the group paid £7.9m in corporation tax in the year ending on 30 December 2022.
The same report showed its pretax loss widened to £41.8m, from £15.7m in 2021 – driven by technology spending and a hiring spree that saw the bank add more than 100 staff. It made no revenue over the period because the bank had yet to start trading, recruiting its first client last April.
The Bank of London’s auditor, Sedulo, highlighted tax legislation as one of four areas of law and regulation that would most likely have a “material effect” on the business if it were found non-compliant.
Sedulo resigned as The Bank of London’s auditor after signing off on its latest accounts and was replaced by EY. Sedulo did not respond to a request for comment.
Watson, a former Barclays executive and LGBT campaigner, launched The Bank of London in 2021 as a global clearing, agency and transaction bank for business customers.
It was only the second such firm to launch in the UK in 250 years, after fellow start-up ClearBank in 2017.
The Bank of London does not lend and holds all of its deposits with the Bank of England. The firm claims more than 4,500 businesses use its banking products and services.
It boasts former business secretary and New Labour architecht Peter Mandelson as its deputy chairman. The bank’s chair is Harvey Schwartz, an ex-Goldman Sachs and Citi executive who is CEO of the world’s fifth-largest private equity firm, The Carlyle Group.