The ICSA Isle of Man Corporate Governance Conference 2014 Presentations

The ICSA Isle of Man Corporate
Governance Conference 2014
Upholding ethical values in a competitive
environment
#icsaisleofman14

Conference chair
David Venus FCIS,
President, ICSA
#icsaisleofman14

Opening address
The Hon W E Teare MHK,
Minister of the Isle of Man Treasury
#icsaisleofman14

Governance versus commerciality
Simon Osborne FCIS,
Chief Executive, ICSA
#icsaisleofman14

• Until 1980s prevailing view was that company’s role was to
make money for its owners, and nothing else; more
complicated now:
• Companies must also conform to:
olaws/regulations of society in which they operate
oethical norms of that society – they need a licence to
operate
• Otherwise they will be liable to legal and moral sanctions
• Why?
The role of the company in society

• Shareholders & those controlling environment in which the
company operates – politicians, press & public – have
differing priorities.
• Not tenable to assume that they will all want the same.
• Hence ethical funds /high or low risk investments, etc.
• Therefore traditional corporate measures will suit some
stakeholders, some of the time: they will never suit all of the
stakeholders all of the time!

• Company managers must balance conflicting interests of owners,
regulators, press & public.
• As we all become increasingly technically aware, these
considerations become increasingly important e.g.

All these companies were the target of significant public
campaigns in the UK

• Companies’ tax affairs were targeted by protesters.
• Loud cries of “It’s not *fair!”
• “The idea of a strictly ‘fiduciary’ duty to avoid tax is wholly
misconceived....[and] unknown to English law”: Farrer & Co.
• Have companies learned? Yes and No.
*The new four letter F-word!

• “Amazon shields £11bn haul from taxman..and even receives a
£4m rebate”: Sunday Times, 25-5-2014.
• Day after Barclays was fined £290m for rigging Libor, precious
metals trader Daniel Plunkett decides to fix the gold market!
• “Long hot summer of revolt over top pay”: The Times, 26-5-2014
(RemCo’s “just don’t get it. They don’t listen to their shareholders”:
Martin Gilbert, Aberdeen Asset Management).
• “SFO launches [bribery] probe into GSK”: FT, 28-5-2014.
• Rising fines & litigation costs are penalties for poor governance.
• Reputational cost of litigation may be even greater.

• “The [financial sector] still prizes short-term profit over long-
term prudence, today’s bonus over tomorrow’s relationship”:
Christine Lagarde (FT Conference on Inclusive Capitalism,
May 2014).
• Sports Direct exec share scheme vote – threat of votes
against directors’ re-election.
• Fidelity has voted against remuneration proposals in majority
of its FTSE350 investee companies.

“Fifth of suppliers ignore ministers’ tax queries”: FT,
26 May 2014 (ergo 80% of leading public sector
suppliers are replying and being more transparent).

• Similar issues have affected companies with poor records for
working conditions; use of child labour, etc.
• Other companies affected by Government decisions taken for
political reasons or by social campaigns related to climate
change, pollution or environmental damage.
• So, companies are responsible not just to their owners, but
also to myriad other stakeholders – creeping pluralism.
Q.1: Is it possible for well-governed companies to fulfil all
these responsibilities; and to do so profitably?
Q.2: What do we mean by corporate governance?

“The purpose of corporate governance is to facilitate effective,
entrepreneurial and prudent management that can deliver the
long-term success of the company. ”
• Leadership
• Effectiveness
• Accountability
• Remuneration
• Relations with shareholders
Corporate Governance Code

First version of the UK Corporate Governance Code produced
in 1992 by the Cadbury Committee. Para. 2.5 is still the classic
definition of the context of the Code:
“Corporate governance is the system by which companies are directed and
controlled. Boards of directors are responsible for the governance of their
companies. The shareholders’ role in governance is to appoint the directors
and the auditors and to satisfy themselves that an appropriate governance
structure is in place. The responsibilities of the board include setting the
company’s strategic aims, providing the leadership to put them into effect,
supervising the management of the business and reporting to
shareholders on their stewardship. The board’s actions are subject
to laws, regulations and the shareholders in general meeting.”
Corporate Governance

Corporate governance is therefore about what the board of a
company does and how it sets the values of the company,
and is to be distinguished from the day to day operational
management of the company by full-time executives.
Not much there that is not commercial……

Every company should be headed by an effective board which is
collectively responsible for the long-term success of the company.
There should be a clear division of responsibilities at the head of
the company between the running of the board and the executive
responsibility for the running of the company’s business. No one
individual should have unfettered powers of decision.
The chairman is responsible for leadership of the board and
ensuring its effectiveness on all aspects of its role.
As part of their role as members of a unitary board, NEDs
should constructively challenge and help develop
proposals on strategy.
Corporate Governance – Leadership

The board and its committees should have the appropriate balance
of skills, experience, independence and knowledge of the company
to enable them to discharge their respective duties and
responsibilities effectively.
There should be a formal, rigorous and transparent procedure for
the appointment of new directors to the board.
All directors should be able to allocate sufficient time to the
company to discharge their responsibilities effectively.
All directors should receive induction on joining the board
and should regularly update and refresh their skills and
knowledge.
Corporate Governance – Effectiveness

The board should be supplied in a timely manner with information
in a form and of a quality appropriate to enable it to discharge its
duties.
The board should undertake a formal and rigorous annual
evaluation of its own performance and that of its committees and
individual directors.
All directors should be submitted for re-election at regular
intervals, subject to continued satisfactory performance.
Corporate Governance – Effectiveness

The board should present a fair, balanced and understandable
assessment of the company’s position and prospects.
The board is responsible for determining the nature and extent of
the significant risks it is willing to take in achieving its strategic
objectives. The board should maintain sound risk management
and internal control systems.
The board should establish formal and transparent arrangements
for considering how they should apply the corporate reporting,
risk management and internal control principles and for
maintaining an appropriate relationship with the
company’s auditors.
Corporate Governance – Accountability

Levels of remuneration should be sufficient to attract, retain and
motivate directors of the quality required to run the company
successfully, but a company should avoid paying more than is
necessary for this purpose.
A significant proportion of executive directors’ remuneration
should be structured so as to link rewards to corporate and
individual performance.
There should be a formal and transparent procedure for
developing policy on executive remuneration and for fixing
the remuneration packages of individual directors. No
director should be involved in deciding his or her own
remuneration.
Corporate Governance – Remuneration

• There should be a dialogue with shareholders based on the
mutual understanding of objectives. The board as a whole has
responsibility for ensuring that a satisfactory dialogue with
shareholders takes place.
• The board should use the AGM to communicate with investors
and to encourage their participation.
Corporate Governance – Relations with
Shareholders

• But is good governance an end in itself ?
• Enron won various awards for governance, notably from Fortune
magazine which dubbed it ‘most innovative company’ (!); on
paper it had a model board of directors - as did RBS (!):
oWere these governance tools effectively applied?
oWere the issues that arose simply completely unexpected?

• Enron was, largely, a victim of internal malfeasance, but :
oCompensation and performance management systems
encouraged a culture obsessed with short-term earnings to
maximize bonuses.
oCosts were largely disregarded.
oRisk, whilst subject to sophisticated risk management tools, was
ultimately self-hedged.
oAggressive accounting practices were approved by the board;
in many cases were too complex for board members to
understand.
oAudit and audit oversight lacked rigour.
• Similar considerations plagued some of the UK banks

The purpose of corporate governance is to facilitate effective,
entrepreneurial and prudent management that can deliver the long-
term success of the company.
“Corporate governance is the system by which companies are
directed and controlled. Boards of directors are responsible for the
governance of their companies. The shareholders’ role in governance
is to appoint the directors and the auditors and to satisfy themselves
that an appropriate governance structure is in place. The
responsibilities of the board include setting the company’s strategic
aims, providing the leadership to put them into effect, supervising
the management of the business and reporting to shareholders
on their stewardship. The board’s actions are subject to laws,
regulations and the shareholders in general meeting.”

So it is about:
• establishing & promulgating core values of each organisation.
• cascading those values and instilling them at all levels of the organisation.
• putting in place a set of processes which:
oenable management to run the business effectively and in a commercial
manner
ofollow the constitution of the company - the agreement between owners
and managers as to how managers will exercise their authorities
oensure that the business will comply with relevant laws and
regulation
owill give due weight to appropriate societal norms

•UK Corporate Governance Code is based on “Comply or
Explain” principle - not a rigid set of rules (easy to circumvent)
but principles with supporting provisions outlining standards
that overwhelming majority of major companies and their
investors deem appropriate.
•Only requirement is either to say that you comply with the
Code or, if you don’t, to explain – clearly, carefully and for
good (commercial !) business reasons - why the Code is not
appropriate in your case.
•Thus governance is not the enemy of commerciality.
Comply or Explain

57% of FTSE 350 companies now comply with the UK Corporate
Governance Code, up from circa 51% over the past three years:
oThat is, fully compliant; other 43% are mostly compliant.
o85% of those companies that were not fully compliant complied
with all but (literally) one or two provisions.
o61% provided informative explanations (and it is on failures here
on which attention will fall in 2014.
oThe most common area of non-compliance was in a lack of
independent directors on the board.
So do all those companies believe governance is
uncommercial?
Source : Grant Thornton Corporate Governance Review 2013
Comply or Explain

• No – they understand that governance is an increasingly high-profile
requirement of investors.
• Part of the ‘price’ to be paid to secure/retain their investment.
• Increasing number of academic studies demonstrate that well-
governed companies have been affected less badly by economic
headwinds.
• Hermes: “It is not good governance that leads to outperformance, but
poor governance that leads to underperformance” (May 2014).
• So “good governance is good for your wallet” (FT, 11-5-14).
• Thus, in a sense, good governance is an insurance policy:
oproving to those around you that you operate in an
appropriate manner; and
oensuring that you don’t go off the rails.
Comply or Explain

Corporate Governance – stopping companies
going off the rails

Corporate Governance – giving confidence to
operate in society

Corporate Governance – the seat-belt, not the brake

• Has regulatory compliance dulled sensibilities? You can’t be
blamed if you can put a “tick in the box”.
• Has box ticking compliance impaired ethical judgment?
Arguable that it has; people may not think about rights &
wrongs of their actions or decisions.
• SO good insightful governance is not the enemy of
commerciality but regulation may be:
o Inherent rigidity of rules;
o Rules try to address yesterday’s problems rather
than tomorrow’s or even today’s.
So what has gone wrong?

It comes back to:
• Organisations need to set clear, well articulated values
• Cascade and instill those values
• Back up with an ethics programme
• Tone set at the top – the power of good examples
• Culture, Culture, Culture
• People, People, People
• A good company secretary
What conclusions may one draw?

The governance role of the company secretary

• Balancing the interests of different groups –
oChairman v SID or other directors
oChairman v CEO or CEO v Board
oExecutive directors v NEDs
oInvestors v management; or private v institutional investors
• Being a ‘wise friend’ to them all
• The bearer of unwelcome advice (aka ‘The Shot Messenger’) –
oTelling Chairman or CEO that he/she lacks the requisite authority
oReminding executive directors of undertakings to provide board
with data which they are not keen to disclose!
• A “jack of all trades” –
oExpected to know what is going on in all key areas of
the business
The governance role of the company secretary

1. Governance and commerciality are not & should never be
at odds.
2. Regulation needs to be more insightful.
3. Ultimately complexity & issues arise because of us –
people!
4. Good governance has real value.
Conclusions

Doing Business Ethically...
Philippa Foster Back CBE, Director
Institute of Business Ethics
© IBE
...doing business ethically...
...makes for better business
ICSA Isle of Man Conference
July 2014

© IBE
About the IBE
The IBE was established in 1986 to encourage
high standards of business behaviour based on
ethical values.
 Advice
 Publications
 Training
 Forums
 Research
 Education
 www.ibe.org.uk

© IBE
What do we mean by doing
business ethically?
approach to Corporate Responsibility
Ethics
Policy & Code
Ethical Values underpin….
CSR Programme
doing things ethically doing ethical things

Where does the law fit in?
Legal position of a business
- what it must or must not do i.e. it is
mandatory, obliged to obey
Ethical responsibility of a business
- how it does it is discretionary – you have
choice – determined by values
© IBE

Topics
 What is business ethics?
 What are companies doing?
 Why it matters?
 Summary
© IBE

1. What is business ethics?
© IBE

© IBE
‘the application of
ethical values to
business behaviour’
What is business ethics?

© IBE
Where Ethical Dilemmas Arise
SocietalValues
CorporateValuesPersonalValues
ProfessionalValues

Identifying values
 Historical
 Top down
 Bottom up
 Hybrid
 Reviewing
 Words – business values &
ethical values
 First stage of embedding
 Importance of DRAFT
 Language
 Tone
 Cross cultural recognition
 Meaning and
understanding
© IBE

Some ethical values
 Honesty
 Transparency
 Integrity
 Openness
 Courage
© IBE
 Trust/trustworthiness
 Respect
 Fairness
 Responsibility
 Diversity

How are values used?
Ethical values are expressed and
given meaning through:
 Commitments
 Responsibilities
 Obligations
© IBE
The way we do things around
here, i.e. our culture

Culture is discerned through such questions as:
 What are the common issues facing our sector and company?
 What are the common understandings about the way this company does
business?Would our colleagues agree?
 What are the norms of how do we do our work?
 What core values drive us?
 What is the leadership style?
 Do we have effective policies and procedures?
 Can individuals challenge the norm? Is our culture open or closed?
 Do we live up to our values?Would our stakeholders agree?
© IBE
Corporate Culture

2. What are companies doing?
© IBE

Practical solutions
doing business ethically &
building culture
It is a day to day activity....
© IBE

The Aim of an Ethics Programme
… ethical values expressed in a code offer a
framework for the logical analysis of dilemmas
which emerge in the course of day to day
business …
© IBE

Risk areas
© IBE
• Advertising and sales
practices
• Use of company computers
• Data protection
• Money collection practices
• Gifts & hospitality
• Bribery, corruption
•Harassment, discrimination & bullying
• Environmental
responsibility
• Human rights
• Money laundering
• Employee Security
• Exec Pay
• Whistleblowing
• Conflicts of interest
• Governance
•Procurement/ Supply chain
• Ethical Investment
• Work/home balance
• Lobbying and political donations
• Facilitation payments
• Social media
• Tax

© IBE
Code of Ethics
•The Way We Work
• Business Principles
•Our Commitments &
Standards …
Elements of an effective ethics programme
Ethical Values -> Ethics Policy
Reflected in the business model, purpose, strategy, and
decision making process in the organisation
Guidance for staff on
expected behaviours,
how to deal with day
to day ethical
dilemmas, how to raise
issues
embed, implement, make operational with feedback loops
to build in learning and improvement
Embed values -> behaviour
Governance Structure

Reviews of codes of ethics
show that:
 Few are written with the user in mind
 Some are collections of polices on different
issues
 Some are couched in ‘do this or else….’
language
 Some are large & glossy while others are
memoranda
 They are necessary but not sufficient
© IBE

© IBE
Code of Ethics
•The Way We Work
• Business Principles
•Our Commitments &
Standards …
Communication&
Awareness
Campaigns
Training
&
Reinforcement
Elements of an effective ethics programme
Supporting
context and
Culture
Monitoring
& Accountability
Ethical Values -> Ethics Policy
Reflected in the business model, purpose, strategy, and
decision making process in the organisation
recruitment practice,
induction; on-line or
face to face training,
dilemmas, appraisals;
incentives, Speak Up…
leadership, example,
strategy; polices;
resources, business
goals; compliance;
CR, CSR, Speak Up
…
what, why, how;
understanding as
well as information,
how to ask for help,
seek guidance etc
surveys, internal
audit, stakeholder
engagement;
business review,
external audit,
Speak Up…
Guidance for staff on
expected behaviours,
how to deal with day
to day ethical
dilemmas, how to raise
issues
embed, implement, make operational with feedback loops
to build in learning and improvement
Embed values -> behaviour
Governance Structure

How do values have an impact?
© IBE
57
Core ethical
values
Expressed in an
Ethics Policy and
Code
Influences
conduct
&
decision
making
Reinforces a
culture of
trust &
integrity
Supported by an
effective ethics
programme
individuals
company/organisation

Ethics in Decision-making
 What to do when
 the pressure is on
 you here someone say ‘but everyone else does it’
 or ‘no-one will ever know’
 Apply a decision making tool
 gives consistency
 reduces risk
© IBE

Set of decision making principles to
help employees make decisions
 Is it legal? Ask if unsure
 Would you be embarrassed if anyone found out
about your decision?
 How would you feel if you read about it in the
paper?
 Does it influence you in any way?
© IBE

Supporting employees who “speak
up”
IBE research has found that one in four
employees are aware of misconduct in their
organisation, but only about half of those
report it
© IBE

© IBE
The IBE Framework for Ethical Assurance

Using staff surveys
To assess aspects of ethical culture, such as:
 Company values
 Internal policies
 External relationships
 Awareness
 Experience
 Sensitivity
 Confidence
© IBE

www.investinginintegrity.org.uk

© IBE
Source: 2011 National Business Ethics Survey, Ethics Resource Centre (2012)

Why boards need to know that their
organisation is living up to its values
 Good Leadership – tone at the top, competency
 Business survival – internal controls, reputation, strengths
and weaknesses, scrutiny of investors, market opportunities
 Good Governance – guidelines require boards to meet
their obligations
 Disclosure trends – CR reporting, SEE risks in to Annual
Reports
 Legislation - UK Companies Act, UK Bribery Act.
© IBE

The growing business....
The public view
Trust me....
Show me....
Involve me....
Prove to me....
Obey me.....
© IBE
68

© IBE
Organisation
employees
shareholders
NGOs media
suppliers
communities customers
stakeholders
interested parties
competitors
Who is interested?
regulators

© IBE
London Whale scandal to cost JP Morgan
$920m in penalties
Bring more women on board or we’ll
vote you off
ICAP fined £55m over
Libor rigging scandal
Bangladesh clothing workers still
exploited
www.ibe.org.uk/businessethicsnews.asp
Banks Should Tie
Compensation To Compliance

Summary
© IBE
....doing business ethically
makes for better business….

Business Ethics
Values
Ethics Culture
Conduct
Risk
© IBE
Trust &
reputation
&
Financial
performance

Any questions?
www.ibe.org.uk
pfb@ibe.org.uk
© IBE

© Anna Bateson @ Cutting Through The Grey
Developing your Board to
deliver good governance
Anna Bateson
Cutting Through The Grey
July 2014

© 2014 Grant Thornton Ltd. All rights reserved.
Matthew Parker
Senior Manager
Cyber Crime – Managing the threat

Why is Cyber Crime Successful?
Sometimes the simplest thing can let you down
The human element is usually the weakest link
You can make something idiot proof – but they will
come along and make a better idiot!

What’s the connection?

Security goes down the pan…

eHarmony
Online dating website
Members in more than
150 countries
Adobe Systems
Software Company
More than 2.9
million customers
Target
2nd largest discount
retailer in US
Experienced 46%
drop in profits
following breach
So many security incidents

Hacktivism

* Source Krebs Online
Why would anyone want to hack me?

We are doing it to ourselves!*
* Source www.theregister.co.uk

The regulators are taking notice as well!*
* Source www.theregister.co.uk

What do we share online?
People frequently reveal:
Email addresses
Phone numbers
Home addresses
Birth dates and other pieces of private data including
when they will be away on holiday!
Some of this information is often used as passwords
or as answers to secret security questions.
Criminals know this!

Social Engineering
Hack the Human
Much easier than trying to hack a computer
Use persuasion and pressure
Can facilitate other attacks e.g. obtaining names and phone
numbers etc

Phishing

Convinced?

Is it any wonder Cyber Crime is on the rise?
Black Market prices *
Credit card details $2-$90
Bank credentials from $80 to
$700 (with guaranteed balance)
* panda security report -
the cyber-crime black market: uncovered

40 million credit cards stolen
Spear-Phishing Email
Hacked PC
Install Software on Target
Store PCs
3rd Party Service Provider
Putting it all together - Target

Password Cracking

eHarmony
Over 1.5m
encrypted
passwords leaked
Password cracking – why pay?

Password cracking demonstration

We are creatures of habit
Study of leaked passwords*Over 17,000 passwords in a matter
of seconds!
I could crack over 255k passwords
in about 8 minutes
How many passwords do I actually
need?
1. 123456
2. password
3. 12345678
4. qwerty
5. abc123
6. 123456789
7. 111111
8. 1234567
9. iloveyou
10. adobe123
*Source: SplashData

Question what you see

Cryptolocker

Mobile Devices
Phones/Tablets
- Password/PIN
- Secure Erase
- Sandboxing corporate data
Memory Sticks
- Encryption
Wifi Networks – can you trust them?

Simple steps can go a long way…
Consider a framework of controls e.g. ISO27001
Encrypt and prevent removable devices
Restrict access to systems – segregation of duties?
Use good passwords and don’t share them across systems
Be aware of what you share and with whom – 3rd parties
Security awareness across the organisation – tone at the top

For further information
contact:
matthew.parker@gt-ci.com

© Boardelta 2014 101
15 July 2014
ICSA Isle Of Man Conference:
The cost of poor governance
Patrick Dunne
patrick@boardelta.co.uk
@patrickedunne
© Boardelta 2014

Welcome
Tax: is it a governance issue?
HMRC approach to compliance & enquiries
ICSA Isle of Man Corporate Governance Conference 2014
Tuesday 15 July 2014
Andrew Walker & Roy Baldwin, Partners, Manchester office

Disclaimer
This seminar is of a general nature and is not a substitute for
professional advice. No responsibility can be accepted for the
consequences of any action taken or refrained from as a result of
what is said
.

Who we are …
Andrew Walker, Partner, Manchester office
Tel: 0161 871 6614
Mob: 07730 733801
Email: andrew.walker@smith.williamson.co.uk
Roy Baldwin, Partner, Manchester office
Tel: 0161 871 6615
Mob: 07500 972 807
Email: roy.baldwin@smith.williamson.co.uk

The Aim
• To update and inform on the latest HMRC
compliance approach
• Specifically looking at HMRC’s approach to
enquiries and penalties
• Consider the changing environment in relation
to the offshore arena and information
exchange
• Understand the Connect system

Update on HMRC
• Shrinking department / higher compliance
targets
• Economic and budgetary challenges
• Public perception
• Tax Gap
• Avoidance/Evasion - “morally repugnant”
• Focus on “Behavioural change”

Update on HMRC
Business reorganisation
(HNWI, SI, International,
Insolvency)
New Compliance
Regime
Sch. 36 FA 2008
New Penalty Regime
Sch 24 FA 2007
Alternative Dispute
Resolution
Managing deliberate tax
defaulters
Campaigns & Disclosure
Facilities
ATED
&
(CGT on non residents)
Contractual Disclosure
Facility (CDF)
Complex
Avoidance
Directorate
Increased Criminal
Investigations
Offshore and Exchange
of Information
CONNECT
Naming and Shaming
(Offshore related
criminal offence)
(Accelerated payments
& follower notices)

A new approach to compliance?
• Encourage disclosure
• Reward voluntary disclosure
• Simplified disclosure opportunities/campaigns
• Hit non compliant hard
• Via managing deliberate defaulters – enforce
new behaviour
• Alternative Dispute Resolution

A new approach to Avoidance?
• Complex Avoidance Directorate (CAD)
– 600 plus staff
– All marketed avoidance
– Central, coordination unit for tax schemes
• Accelerated payments & follower notices
• Avoidance settlement opportunities
• Litigation (head also chairs anti avoidance board)

A new approach to Criminal?
Criminal Investigations
• Increased Numbers
• Types of cases
– Evasion
– Avoidance cases
• Proposed new criminal offence related to offshore bank accounts –
some background

A new approach to penalties?
Penalties (not one, not two, but three regimes)
Old rules - 2007/08
Mitigation Disclosure 20/30%
Cooperation 40%
Seriousness 40%
New rules
2008-09 onwards for UK
Behavioural based
Error
Failure to take reasonable care
Deliberate
Deliberate with concealment
0%
0,15, 30%
20, 35, 70%
30, 50, 100%
Reminder – new assessing time limits Issues
2011/12 onwards – offshore penalties
• Inaccuracies and failures
• Income/corporation tax
• Dependent on offshore centre involved
• Error
• Failure to take reasonable care
• Deliberate
4 yrs
6 yrs
20 yrs
Category 1
2
3
100%
150%
200%
Guernsey
The rest
Panama
And more to come, an update

Engaging with clients directly
• Schedule 36 – write direct to client
• Simplified disclosure programs
• Direct mailings
– Swiss bank account campaign
– Tax avoidance strategy
– Tax rate letters
• SA digitalisation
• HMRC wants to engage more directly with taxpayers

A new approach to Offshore?
Why is dealing with offshore now so important?
• Criminal offence plans
• Beneficial terms of facilities
• From 2016 onwards HMRC will have access to:
– Details of offshore bank account holders via extensive
exchange agreements
– Facilities expire
– 3 years preparing teams, information processing and plans
– No sympathy if disclosure opportunity not taken

HMRC 2013 Offshore evasion strategy
International action Effective data use Operational excellence
Increase offshore analytical resource
and data mining capabilities
Behaviour change campaigns using offshore data sources
Take action to address gaps and weaknesses in offshore powers and penalties
Offshore evasion managed through Managing Deliberate Defaulters programme and Sustaining Offshore Voluntary Compliance programme
Review of offshore powers and
sanctions
HMRC access to new data, including Merchant Acquirers data and five new categories of direct tax data under the EU Administrative
Cooperation Directive
HMRC investigations to follow up Crown Dependencies disclosure
facility
Development of offshore evidence base, including refinement of estimates and research into high risk jurisdictions and behaviours
Building initial offshore
evidence base
Swiss agreement in force - upfront payment of £342 million in 2013 and withholding tax on UK taxable income and gains in Swiss accounts
Review of offshore information
UK seeks to negotiate further automatic information exchange agreements with those jurisdictions identified as high risk
Automatic exchange of information with the USA and Crown Dependencies leading to more offshore data
Identify international best practice and explore opportunities for more multilateral operational partnerships
UK G8 Presidency lead
on tax evasion
Liechtenstein Disclosure Facility - opportunity to clean up past tax affairs
UK and CDs
Agreement
Crown Dependencies (CD) disclosure facilities - opportunity to clean up tax affairs
2013 2015 2016 2017 2017 and beyond2014

Exchange agreements
Background
 Intergovernmental
Agreements
 ‘Son of FATCA’
 Foreign Account Tax
Compliance Act

Exchange agreements
Reciprocal agreements
 Jersey
 Guernsey
 Isle of Man
 Gibraltar

Exchange agreements
 Key dates
 Due diligence required
 Points of interest
A large amount of information will be provided
so how will HMRC sort and risk assess it?

Impact on UK residents – how
does it fit together
Offshore
Coordination
Unit
Connect IT
system
Tax
investigations
cases – offshore
evasion
Offshore
centre of
excellence
Data sources
• ESD
• Offshore trusts
• Company ownership
property
• Tax paid/unpaid
• Crown dependency
• FATCA
• Stolen bank info
• Foreign info exchange
• Property (UK and
offshore) etc
• Improve legal powers
• Improve international
cooperation
• Improve specialist
knowledge
• External experts
Internet data
• Analytical tools
• Web robot spider
1. Criminal tax
investigations
• Publicity
• Behavioural change
2. Suspected tax fraud
enquiry (CDF)
3. Nudge letters
4. Local compliance
enquiries
Disclosure facilities
and campaigns
• Lower penalties
• Avoid criminal
prosecution
• Low cost - HMRC
1, 2, 3
• Inc penalty
• Name & shame
• Managing deliberate
defaulters
• High cost to HMRC
Output
OR

‘Connect’
 Military grade software
 Proven in trials
 No expense spared!
 Sources of information
 Risk assessments
 Can suggest compliance focus

Any Questions?
Andrew Walker, Partner, Manchester office
Tel: 0161 871 6614
Mob: 07730 733801
Email: andrew.walker@smith.williamson.co.uk
Roy Baldwin, Partner, Manchester office
Tel: 0161 871 6615
Mob: 07500 972 807
Email: roy.baldwin@smith.williamson.co.uk

These notes have been produced for the guidance of delegates at the
conference for which they were prepared and are not a substitute for
detailed professional advice. No responsibility can be accepted for the
consequences of any action taken or refrained from as a result of these
notes or the talk for which they were prepared.
© Copyright Smith & Williamson Holdings Ltd 2014

Smith & Williamson LLP
Regulated by the Institute of Chartered Accountants in
England and Wales for a range of investment business
activities. A member of Nexia International
The word partner is used to refer to a member of Smith & Williamson LLP
Vantage Point, Hardman Street,
Spinningfields
Manchester, M3 3HF
Tel: 0161 871 6600 Fax: 0161 871 6601
www.smith.williamson.co.uk/manchester

Is the IoM top of the governance league?
Simon Osborne FCIS,
Chief Executive, ICSA
Phillip Dearden,
Director, Equiom Solutions Ltd
Paul de Weerd ACIS,
Deputy Director, Financial Supervision Commission
Sinead O'Connor,
Head of Regulatory & Compliance Services,
Dougherty Quinn #icsaisleofman14

Governance in the Boardroom
An Inside View
Sharon Constanҫon
CEO
07773 777 495
sconstancon@geniusmethods.com125

• So what does corporate governance look like
from the perspective of the board?
• What appetite is there to take on the
challenges it poses?
• What changes in behaviour are being seen
• Where are further changes needed?
Summary
126

Governance - Perceived Perfection
127

Governance – witnessed behaviour
128

Lack of independent thought
133

Everyone knows – no-one discusses
134

Role of the Company Secretary
138

• So what does corporate governance look like
from the perspective of the board?
• What appetite is there to take on the
challenges it poses?
• What changes in behaviour are being seen
• Where are further changes needed?
Summary
139

Engage rational thinking
Better articulation of the
business case for best
practice corporate
governance,
and more
focus on directors’
responsibilities and potential
liabilities,
should incentivise directors
to exhibit appropriate
boardroom behaviours.
ICSA: 2009
Boardroom Behaviours
140

The ICSA Isle of Man Corporate Governance Conference 2014 Presentations

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