HMRC to take banks to court over tax avoidance on bonuses

HM Revenue & Customs (HMRC) is set to take two banks to the Supreme Court over using alleged tax avoidance schemes to avoid paying big tax bills on bonuses for its staff.

HMRC has previously lost two court cases against UBS and Deutsche Bank over the two schemes which operated in 2003 and 2004, but has been permitted to appeal to the Supreme Court in a hearing expected to take place later this year, according to the Financial Times.

In both cases, the taxman said the money given to bank employees as part of the schemes as bonuses were liable to income tax.

At an earlier court case, HMRC said the banks took a ‘carefully planned tax avoidance scheme which was designed to enable the [banks] to provide substantial bonuses to employees in the tax year 2003/2004 in a way that would escape liability to both income tax and national insurance contributions.’

A number of the banks’ employees received shares in the schemes as restricted securities which would escape income tax. The banks then paid the bonuses into the schemes without informing HMRC of the tax liabilities.

According to the Financial Times, it had been claimed at an earlier court case that UBS created schemes to avoid paying £37 million of tax and £13 million in national insurance on £92 million of bankers’ bonuses. UBS won its case against HMRC in the tribunal and HMRC failed to overturn the decision at the Court of Appeal.

Deutsche Bank’s scheme was devised to benefit £91 million of bonuses and some share awards to individual bankers were above £2 million. Although the bank lost a tribunal case, it won its appeal over the decision.
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