Restrictions made to bankers’ bonus tax

The scope of the bank payroll tax is to be restricted.

While it will apply to retail and investment banks (including building societies), and to banking groups, it will not apply to non-banking companies outside banking groups: insurance companies, asset managers, stockbrokers and so on.

HMRC have made the change because they have received a number of representations concerning the definition of a bank.

As a result, the draft legislation is being amended so that the definitions of ‘UK resident bank’ and ‘relevant foreign bank’ are limited.

Thus, for a non-deposit taker, they only apply to a organisation which is a full scope BIPRU 730K firm investment firm (and whose activities consist wholly or mainly of relevant regulated activities).

In addition, the following have been added to the list of ‘excluded companies’:

• A company in a group that is not a deposit taker and is only carrying on relevant regulated activities on behalf of an insurance company in the same group.
• A company that does not carry on any relevant regulated activities otherwise than as a manager of a pension scheme.
• A company whose activities consist wholly or mainly in acting as the operator of a collective investment scheme (within the meaning of Part 17 of FISMA 2000).
• An exempt BIPRU commodities firm.

Changes will also be made to:

• remove prime brokers who are full scope BIPRU 730K firms from the scope of the tax; and
• exclude non-banking financial service groups that are incorrectly characterised by the rules as ‘banking groups’ because the group structure includes a company with banking activity, even though that is a minor activity within the group as a whole.

Richard Saunders, chief executive of the Investment Management Association, said: ‘We welcome this further clarification by HMRC of the scope of the proposed bank payroll tax, which addresses the issues we have raised with the Government.

'The additional guidance clearly indicates that the final legislation will ensure that asset and fund management firms will not be liable to pay this tax.’

Issue: 4238 / Categories: News , Income Tax