Bonus tax: no breach of rights

BANKERS smarting from the government’s new super-tax on bonuses were yesterday warned by MPs that attempts to use human rights law to challenge the levy are likely to fall flat.

Those searching for ways to get around the tax are unlikely to be able to “demonstrate hardship amounting to an excessive individual burden”, the parliamentary joint committee on human rights said in a report.

The committee added it was “difficult to conclude that the measure is devoid of reasonable foundation”, given that it is expected to raise £550m in revenue, is directed at banks rather than individuals, and is intended as a one-off measure to combat excessive risk-taking in banks.

Lawyers had cautioned that the levy, requiring banks to cough up 50 per cent in tax on bonuses over £25,000 until next April, might constitute a breach of human rights, which stipulates that individuals and companies should be treated equally.

But experts yesterday said bankers would be able to contest the tax in numerous other ways, including arguing that a so-called “discretionary” bonus could in fact be deemed a contractual obligation.

“A contract spans not only what is committed to paper but also what is implied by conduct – in this case influenced by expectations and the actions of banks in previous years,” said Nigel May, a tax principal at business advisory firm Macintyre Hudson.