Bank of London caught off guard by HMRC petition over unpaid tax

The board of directors at the Bank of London, along with its new leadership, were taken by surprise when they discovered that the UK tax authorities had filed a winding-up petition against its holding company. According to three sources familiar with the situation, the board had been unaware of outstanding tax liabilities until HM Revenue & Customs (HMRC) lodged the petition on Thursday.

Chaired by private equity executive Harvey Schwartz and featuring prominent figures such as Lord Peter Mandelson, the bank’s board was forced into urgent action over the weekend. Their immediate focus was on reassuring regulators and customers of the stability of the institution, which has been striving to establish itself as a challenger to the dominant UK clearing banks.

Amid the turmoil, the Bank of London announced on Sunday that it had secured £42 million in fresh funding, led by Luxembourg-based Mangrove Capital Partners. Mangrove’s CEO, Mark Tluszcz, who has served on the holding company’s board since 2018, spearheaded the investment round, which the bank revealed had actually closed the previous month.

A spokesperson for the bank clarified that the fundraising was not related to the HMRC petition. They attributed the petition to an “administrative” delay, adding that the outstanding amount had been settled, resolving the issue. HMRC typically files such petitions when a business fails to meet its tax obligations.

This development comes shortly after the bank’s founder, Anthony Watson, announced his resignation as CEO, transitioning to a senior advisory role. Watson, a figure with strong ties to the Labour Party, had been at the helm since the bank’s founding in 2021.

The board members of the holding company held discussions with the Bank of England’s Prudential Regulation Authority (PRA) over the weekend, reviewing the bank’s governance. The winding-up petition, had it escalated, could have posed severe risks for the fledgling institution.

The Bank of London Group Limited, a subsidiary of the holding company, obtained its PRA licence last year, enabling it to start signing up clients. Despite this progress, the bank has been operating in a precarious position, described by one insider as “hand-to-mouth” until the latest capital infusion.

In a statement, the bank asserted that it now holds a “strong capital and liquidity position” and is well-placed to pursue its growth strategy. The bank also reported substantial customer growth, with deposits exceeding £500 million and over 4,500 clients as of last month.

Stephen Bell, who recently succeeded Watson as CEO, emphasised that all customer deposits are held at the Bank of England, providing clients with confidence that their funds are secure and accessible at all times.

Mark Tluszcz expressed that the new funding underscores the confidence investors have in the bank’s leadership and its distinctive business model.

While an HMRC spokesperson declined to comment on specific cases, they noted that the agency generally takes a supportive approach to working with businesses facing tax debts, aiming to find solutions based on individual financial circumstances.

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