THE GOVERNMENT has retreated from plans to tax deferred bank bonuses.
New rules would have forced bankers to pay tax when a reward package was agreed, rather than when they cashed in on their bonus.
Yet HMRC last night confirmed the measure, drawn up for chancellor George Osborne’s budget, will be scrapped.
Companies had warned that staff could have been forced to pay tax even if they never ultimately receive the bonus, as many schemes are agreed subject to performance conditions.
However some of the so-called ‘disguised remuneration’ measures will no longer be included in the Finance Bill – the legislation used to enact the budget.
City firms welcomed last night’s change.
Tax partner at law firm CMS Cameron McKenna Nicholas Stretch said: “These arrangements have not been the basis for tax deferral and so should not have been caught in the first place, but there was a genuine fear that the legislation did catch them.”
He added: “Everyone is grateful that the revenue has listened to practitioners and that innocent arrangements are no longer caught by policy developments designed to target anti-avoidance activity.”
HMRC will still look to crack down on some staff rewards that don't immediately incur tax, such as long-term loans paid through offshore trusts and deferred bonus payments.