HMRC has lost previous court cases against UBS and Deutsche Bank over the two schemes which operated in 2003 and 2004 but the tax authority has now been permitted to appeal to the Supreme Court in a hearing expected to take place later this year reports the FT.
The case comes at a time when various schemes used by companies and especially banks are being heavily scrutinised by the tax authorities.
HMRC has recently come under fire over its failure to prosecute hundreds of British customers who used HSBC’s Swiss bank to evade tax and is currently facing judicial review proceedings by campaign group Avaaz.
In the UBS and Deutsche cases, HMRC had claimed that the sums allocated to employees as bonuses at the start of each scheme were liable to income tax.
It was said that the employee benefit schemes, which have not operated since 2004, allowed the banks and employees to derive considerable tax benefits.
An earlier upper tribunal ruling had described both banks as adopting a “carefully planned tax avoidance scheme which was designed to enable the [banks] to provide substantial bonuses to employees in the tax year 2003/04 in a way that would escape liability to both income tax and national insurance contributions”.
The two schemes involved employees receiving shares as restricted securities which would escape income tax. The banks then paid the bonuses into the schemes without having to account to HMRC for income tax or for national insurance contributions for the relevant employees or their own liabilities on their earnings.
It had been claimed at an earlier tax tribunal hearing that UBS had devised schemes in 2003/04 to avoid paying £36.9m of tax and £12.7m in national insurance on £92m of bankers’ bonuses.
Some 426 employees agreed to participate — 10 of whom had a contractual right to be paid a minimum cash bonus whereas for the remaining 416 any bonus was discretionary.
UBS won its case against HMRC in the tribunal and HMRC failed to overturn the decision at the Court of Appeal.
