The government has confirmed that deferred bonuses will not fall under its new tough tax avoidance regulations.
Last December, the Treasury revealed plans to close the loophole that let bankers avoid paying income tax on their bonuses by making use of offshore employee benefit trusts (EBT). However, this new ruling would mean that genuine deferred bonuses, i.e. those paid over several years, would attract income tax.
HMRC has confirmed that it is altering the draft wording so that regulations are only applicable to arrangements that involve a third party and seek to reduce, defer or avoid income tax. Bonus arrangements will not be taxable provided they are subject to fulfilment conditions, have a specified vesting date and are not intended primarily to defer tax.
Meanwhile, banks might have to provide detailed information to the Treasury Select Committee about corporation tax remittances after Barclays Bank admitted that it paid only 2.4% in 2009.
Banks may be asked to remove payroll taxes from their bill after Barclays revealed that just £113 million out of the total tax paid was corporation tax. The bank made a profit of £4.6 billion and that figure excludes the money received from selling Barclays Global Investors.
MPs were angered when Barclays justified its actions by offsetting the toxic debt losses it incurred during the economic crisis against its British tax bill.
Lord Oakeshott, the former Treasury spokesman for the Lib Dems, said he was going to ask HMRC to disclose the degree to which banks stick to the code whereby they agree to comply with tax regulations as corporate citizens.
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