Restricted securities for bonuses

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Two cases covering similar issues were heard by the Upper Tribunal: USB AG v HMRC and Deutsche Bank Group Services v HMRC.

Both taxpayers were investment banks that had entered into arrangements to provide bonuses to employees. The aim was to avoid income tax and National Insurance (NI) on the payments.

For the UBS scheme a Jersey-registered company ESIP Ltd was incorporated from which UBS awarded restricted shares to its employees claiming they were within ITEPA 2003 s 423.

UBS did not control ESIP. A similar arrangement was used by Deutsche Bank with an offshore company called Dark Blue Investments Ltd.

The First-tier Tribunal determined the sums used to buy the shares were in effect payments to which the...