UK’s High Court would be hearing the HMRC’s appeal about the judgment on two offshore schemes that allow an evasion of tax on bankers’ bonuses.
Banks, including institutions in the United Kingdom have been using various schemes to avoid paying taxes for bank bonuses. The HMRC has heavily criticised these activities.
In the wake of PPI mis selling amounting to £26 billion, most senior bank officers are earning double their bonuses for their performance.
Employee benefit schemes allowed banks to derive considerable tax benefits. The HMRC described it as a “carefully planned tax avoidance scheme enabling banks to provide substantial bonuses to employees.”
Employee Benefit Trusts (EBTs) are still widely used by companies today. A crackdown on disguised remuneration in 2010 revealed that some bank employees used it to avoid about £1.7 billion of tax, putting national insurance contributions at stake.
Like PPI mis selling, EBT holders believed these were legitimate bonuses awarded by their banks. Unfortunately, the HMRC said the EBT could land holders behind bars if they do not comply with the settlement offer.
Most senior CFOs of banks hold an EBT for their bonuses