HMRC confirms which organisations are affected by new super tax

| December 21, 2009 | 0 Comments
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HM Revenue & Customs (HMRC) has confirmed that the bank bonus tax will not apply to staff of non-banking firms such as insurers, assets managers and stockbrokers.

There were queries about which organisations would be affected by the 50% tax, which was announced the Pre-Budget Report, but it has been confirmed that it will apply to retail and investment banks, including building societies and to banking groups.

“We have received representations that the definition of a bank inadvertently catches companies which would not be regarded as a bank from a commercial or legal perspective,” said the HMRC.

“The original definition of a bank did not effectively exclude all the groups we intended to exclude.

“This resulted in a number of corporate groups inadvertently being brought within the definition of a banking group, and therefore within the scope of the bank payroll tax,” added HMRC.

In the recent Pre-Budget Report, UK Chancellor Alistair Darling confirmed there would be a one-off 50% tax on bankers’ bonuses paid above £25,000.

The Chancellor said the banks, rather than the bankers, will pay the tax and the temporary measure will come into effect immediately and will be used to claw back some of the bailout funds used to rescue the banking industry.

Last week, French Finance Minister Christine Lagarde unveiled details of a 50% tax on bankers’ bonuses.

Ms Lagarde told reporters that a bill detailing the new tax would be presented to parliament early in the New Year.

Any bonus above €27,500 (£24,000) will be taxed at a rate of 50% on payments given out in 2010, said Ms Largarde.

However, the new measures have met with criticism and it has been warned that the tax would harm the City’s reputation as one of the world’s largest financial centres.

Last week, Barclays chief John Varley told the BBC that London may be “damaged” by the new bonus tax.

“Banks are competing globally - this bank, Barclays, competes with banks all around the world and we have to be able to compete on a level playing field,” Mr Varley told the BBC.

However, in response, a Treasury spokesman told the BBC: “The Government said it does not believe the long-term competitiveness of the UK financial services sector will be harmed by this one-off tax.”

“The bonus tax will ensure banks think twice before paying large bonuses on the back of taxpayer support,” it added.

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