View the article online at http://citywire.co.uk/money/article/a888158
Taxman shuts £135m 'Houdini' banker bonus scheme
The scheme used by banking giants UBS and Deutsche Bank was described as a 'Houdini' tax avoidance ploy by the Supreme Court.
HM Revenue and Customs (HMRC) has shut down a major tax avoidance scheme used by banking giants UBS and Deutsche Bank.
The scheme, designed to avoid around £135 million in tax, saw bankers given their bonuses as shares in specially created companies, rather than cash. This was intended to classify the initial award and subsequent redemption as exempt from income tax and National Insurance Contributions (NICs).
However, the Supreme Court ruled taxes should have been paid on the bonuses as it handed out its judgment.
Judge Lord Reed said the scheme saw a great deal of 'intellectual effort devoted to tax avoidance'. He went on to describe it as 'the most sophisticated attempts of the Houdini taxpayer to escape from the manacles of tax.'
After winning the case HMRC plans to pursue a further £30 million in tax from 27 other users of similar schemes.
Financial secretary to the Treasury David Gauke said: 'This is an important victory and confirmation from the UK’s highest court that tax avoidance is simply unacceptable.
'The UK is home to some of the world’s most successful banks and we have been clear we expect them and their employees to pay their fair share of tax.'
Jennie Granger, HMRC director general for enforcement and compliance, added: 'This is another important success for HMRC against an avoidance scheme with the top court in the country confirming our view this scheme did not work.
'This is the latest in a series of successful HMRC challenges to such schemes marketed at wealthy individuals to get out of paying tax. We will continue to challenge artificial arrangements such as these in the interests of the vast majority of businesses and people who choose to play by the rules.'
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