A.The main clarification put out by HM Revenue & Customs surrounds independent financial services firms such as asset managers, insurers and stockbrokers, which had all expressed concern about being potentially caught by the bonus levy. The government has now confirmed that such firms will not be subject to the tax. In addition, the rules will not apply to prime brokers, pension fund managers, and firms in non-banking groups with the sole responsibility of managing money for insurance firms in the same group. Where a non-banking group has a minority banking division, the bank will be subject to the tax while the rest of the group escapes it.
Q.WHICH FIRMS WILL STILL BE CAUGHT BY THE LEVY?
A.The tax will cover retail and investment banks, building societies and investment firms in the UK which are subject to a minimum capital requirement of €730,000 – including those whose head office is outside the country. However, the minimum capital requirement stipulation means that some firms – for example smaller boutique banks – may now fall outside the parameters.
Q.ARE SOME ASPECTS OF THE TAX STILL UNCLEAR?
A.Yes. An HMRC spokesman was yesterday unable to clarify if non-banking operations within banks – such as Goldman Sachs Asset Management or RBS Hoare Govett – will be subject to the tax, though the official guidance suggests such firms will still be caught. Banks are also still seeking clarification on how staff who only spend a small amount of time in the UK will be affected, as well as how deferred equity bonuses will be taxed.
Q.WHAT IMPACT IS UNCERTAINTY HAVING ON THE CITY AS A PLACE TO DO BUSINESS?
A.John Whiting, tax policy director at the Chartered Institute of Taxation, warned that what businesses want most from tax policy is certainty. “The whole thing is unsatisfactory if major firms are trying to take commercial decisions before the year end and don’t know what the tax policy is,” he said.