The billionaire chief executive of the money transfer provider Wise has been fined hundreds of thousands of pounds by HMRC for deliberately defaulting on his taxes, The Telegraph can reveal.
Kristo Kaarmann, the Estonian co-founder of Wise, was charged £365,651 for a deliberate default during the 2017/18 tax year on a £720,495 tax bill.
The penalty means that Mr Kaarmann, who has this year steered Wise to the London Stock Exchange’s biggest technology debut and a current valuation of £11.3bn, has been found to have either deliberately provided inaccurate documents to HMRC, deliberately failed to comply with an obligation to notify HMRC about his circumstances or committed wrongdoing in relation to VAT or excise.
Legal experts warned that the finding may represent a breach of rules that public company directors must be free from conflicts between duties to their employer and private duties or other interests.
Mr Kaarmann may also face questions about his status as a “fit and proper” senior manager of a financial services company.
When there is evidence that an executive has failed to comply with standards of honesty, including openness with self-disclosures, integrity and reputation, the Financial Conduct Authority (FCA) may revoke an individual’s approval to carry out their role.
The FCA confirmed it considers information such as HMRC’s deliberate defaulters list in its supervision of the financial services industry.
A spokesman for Mr Kaarmann said: “Kristo was late submitting his personal tax returns for the 2017/18 tax year, despite sufficient reminders from HMRC. His tax returns have since been completed, and he paid substantial late filing penalties. He has since devoted more time to keeping his personal admin in order.”
Mr Kaarmann, 41, co-founded Wise in January 2011 with fellow Estonian businessman Taavet Hinrikus, and is now Estonia’s richest man. Mr Kaarmann was previously a management consultant with Deloitte and PwC and worked with European banks and insurers to modernise their systems.
Wise, formerly known as TransferWise, allows customers to avoid costly exchange fees when exchanging money between different currencies by using a peer-to-peer model that pairs the currency requirements of customers and businesses.
Its record-breaking debut in July left Mr Kaarmann with a stake valued at almost £1.7bn, making him Estonia’s richest man. His co-founder, Mr Hinrikus – Skype’s first employee – was left with a stake worth close to £1bn.
The company also has the backing of a number of well-known investors including Sir Richard Branson and the PayPal co-founder, Peter Thiel. Wise more than doubled its pre-tax profit to £41.1m for the year to March 31, while other financial technology companies continue to generate substantial losses.
HMRC gave Mr Kaarmann’s home address as a five-bedroom villa in Islington that was last sold in 2009 for £895,000.
Its list relates to deliberate defaulters who have been dealt with using civil proceedings. It does not include convicted tax evaders. They have been found by a court to have engaged in deliberate concealment, which is a criminal offence.
HMRC cannot explain the details of Mr Kaarmann’s default due to strict rules about what may be disclosed.
An HMRC spokesman said: “We are able to publish the names of those penalised under civil procedures for deliberately defaulting on certain tax obligations. This is about influencing behaviour by encouraging defaulters to engage with HMRC.”
An FCA spokesman said: “We are unable to comment on individual firms but we do consider information of this type in our ongoing supervision.”
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