December 29, 2009
UK Clarifies 50% Tax on Bankers’ Bonuses
– Broc Romanek, CompensationStandards.com
Some overseas news below, based on this new memo from Sullivan & Cromwell:
In the UK Pre-Budget Report delivered on in early December, the United Kingdom’s Chancellor of the Exchequer unveiled the heavily-trailed Bank Payroll Tax, a 50% tax on bonuses in excess of £25,000 paid to employees by certain financial institutions operating in the UK: see our client memo of 10 December. France has now indicated that it will enact a similar tax (see our client memorandum). The BPT is imposed upon the employer not the employee. It continues to prove highly controversial. In certain quarters, the BPT (along with other recent UK tax and regulatory changes) has raised questions about the continued competitiveness of the UK as a location for international financial services business.
Nonetheless, the Conservative Opposition has said that it will not oppose this measure. In principle, the BPT is a “one-off” levy which applies to awards of performance-related remuneration (i.e., “bonuses”) in excess of £25,000, between 9 December 2009 and 5 April 2010. However, the Government has indicated that it may be extended until such time as new UK regulatory legislation comes into force requiring financial institutions to maintain higher levels of regulatory capital. Draft legislation imposing the BPT has been published and is expected to be enacted in UK Finance Act 2010.
Since our original client memorandum, there have been ongoing submissions by interested parties to the UK tax authorities (“HMRC”) about the scope of the BPT. HMRC have in recent days made statements regarding the scope of the tax. This memorandum sets out the updated picture regarding the BPT.