Author Archive

Bank Payroll Tax: Example

December 9, 2009

Assuming no exemption is available then it seems to work like this:

Bank pays £100,000 bonus.

Bank is required to pay £37,500 in “supertax” to HMRC (the first £25,000 of the bonus does not attract the supertax).

The bonus of £100,000 is then subject to tax and NICs in the usual way. Employer’s NICs of £12,800 (at 12.8%) and income tax (40%) and employee NICs (1%) of £41,000 (assuming the higher rate to apply) are payable.

Our banker receives £59,000.

The cost of delivering this net £59,000 is £150,300. So in this example the effective tax rate is 60.7%.

Clearly, the £25,000 has a significant impact on the calculation of the effective rate. If this is ignored then the cost of delivering the net £59,000 is increased to £162,800 so the effective rate is 63.7%.

Also the bank cannot deduct the supertax in calculating its corporation tax profits – to the extent the bank has profits (or perhaps a reasonable prospect of making some) and therefore is tax paying, the effective rate needs to be increased to take account of the corporation tax cost of not getting a deduction.


Bank Payroll Tax

December 9, 2009

Two important points to keep in mind:

1. It is temporary –  The bank payroll tax will have effect from the time of the announcement on 9 December 2009 until 5 April 2010 for all discretionary and contractual bonus awards.

2. There are exemptions – There is an exception for contractual bonus entitlements where the payer has no discretion as to the amount of the bonus because of a contractual obligation existing at the time of the Chancellor’s announcement.

On the basis that most people will be prepared to wait (perhaps) then it seems to me that few cheques to HMRC will be written.

Stamp Duty Land Tax (no news is mostly good news)

December 9, 2009

There has been widespread speculation concerning increases in rates as well as anti-avoidance measures to close such planning opportunities as remain. But no such changes have been announced today. This can only be good news for the property sector.

One proposed measure is the extension of the Disclosure Rules on SDLT avoidance (which requires scheme details to be given to HMRC) to high value residential buildings. This will come into efffect from 1 April 2010.

Green Taxes

December 9, 2009

The Chancellor announced:

  • £400 million additional support for offshore wind projects.
  • doubling the funding commitment to support four Carbon Capture and Storage demonstration projects, enabling £14 billion of investment;
  • ensure the UK is ready to face the challenges of the transition to a low carbon economy by creating Infrastructure UK;
  • £140 million of additional venture capital for innovative low-carbon businesses.
  • the Greener Boiler Incentive scheme offering £400 to households with the least efficient working boilers to upgrade to the highest efficiency models, saving households around £230 a year in energy bills;
  • £200 million more for Warm Front and increasing energy company support for the poorest from £150 million to £300 million each year by 2013-14.
  • In addition enhanced capital allowances are announced for electric vans, as well as reduced company car tax for electric vehicles.