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Tesco accounting scandal: how to claim compensation

Written by: Paloma Kubiak
A compensation scheme for Tesco investors affected by the retail giant’s accounting scandal of 2014 is set to launch next month.

It is estimated that around 10,000 Tesco shareholders are eligible for compensation following its misleading trading update and overstated statement of profit in August 2014.

Tesco subsequently released a corrected trading statement a month later. It was fined £129m by the Serious Fraud Office in March this year and the regulator, the Financial Conduct Authority (FCA) announced a compensation scheme for all those investors who overpaid on shares and bonds between 29 August 2014 and 19 September 2014 due to the inaccurate report.

These investors will receive a rate of 24.5p per share plus interest of 4% for retail investors (1.25% for institutional). This interest is taxable although it will be tax-free if your shares were held in an ISA or SIPP.

According to Hargreaves Lansdown’s own customer data, it estimates the typical compensation amount per retail investor will be around £400.

The administrator of the Tesco compensation scheme is KPMG and investors have a choice of going direct to claim, or via their stock broker – if the service is offered.

Hargreaves Lansdown said the claim process is a ‘little clunky’, adding it may be easier and quicker to go via the original stock broker where the shares were purchased. It will be providing the service free for customers, though if your broker also offers the service, check if any fees are payable. It added that existing customers who are no longer investing via Hargreaves Lansdown will need to go direct to KPMG.

‘No claim, no compensation’

Danny Cox, chartered financial planner at Hargreaves Lansdown, said: “Tesco needs to repair the reputational damage from the accounting scandal and will hope that this compensation scheme will help draw a line under the matter. The claims process is a little clunky but important to follow as it’s a simple equation: no claim, no compensation.

“Investors should check whether their broker offers help with the claims process. They will still receive the same amount of compensation, but the exercise will be much simpler. If people would like to use this service they will need to supply their authorisation to their brokers quickly.”

In HL’s case this is by noon on Thursday 13 July 2017. KPMG will then issue login details to them before the claims website opens in early August. Investors then have six months to make a claim.

How the compensation scheme will work

  1. Investors need to supply their personal details and evidence of Tesco share transactions to the administrators KPMG
  2. They then receive log in details for a claims website from KPMG
  3. Investors upload evidence of their identity for anti-money laundering purposes onto the claims website
  4. Then download the discharge form from the claims website, sign and then upload onto the claims website
  5. The compensation claim will be processed. A KPMG spokesperson, said: “We anticipate receiving a large volume of claims once the scheme opens in August, which will be processed as quickly as reasonably possible.  We are not able to give a set timescale for processing claims, because the timescale will vary by the claimants’ individual circumstances.”

Hargreaves Lansdown said that customers who authorise it to make the claim will avoid them having to submit all their details and evidence of their Tesco share transactions directly to KPMG – step 1 – and the compensation would be paid directly to their Hargreaves Lansdown account(s) – steps 5.

How is the money paid?

Hargreaves said that compensation in respect of shares held within ISA is not paid directly back into the ISA. However the compensation can be paid in without the amount counting toward the annual ISA allowance.

In the case of HL SIPP investments, claims are being made in bulk by the pension trustees. No action is needed by the investor and it will notify customers once the payment has been received. Compensation will be paid directly back into the SIPP and will not be treated as a contribution. This means the payment will not benefit from tax relief but also not count towards normal annual allowance entitlements.

Investors should confirm with their stock broker exactly how the money is paid as the process may vary depending on the provider.

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