Author: By Alistair Dawber
The accountants Grant Thornton are believed to have contacted clients offering
ways of cutting employees’ tax contributions by as much as 40 per cent.
There are other accountancy firms offering similar services and the fact
that the service is being touted in a year that will see some bankers
receive huge payments after a busy few months in the City is likely to cause
consternation at the Treasury.
The Chancellor said in an interview with The Independent last week that many
bankers needed to be “brought back down to Earth”. He followed
that comment over the weekend by saying that “we need to learn lessons
from the financial crisis in which banks behaved in a kamikaze manner and
the regulatory system failed.
“Far too many people in boardrooms did not know, nor understand what was
happening in their institutions.”
The remarks come ahead of Wednesday’s White Paper when the Government is
likely to call for greater curbs on excessive City pay, and adopt the
recommendations of Lord Turner, the chairman of the Financial Services
Authority (FSA), who has said that banks’ pay policy should be subject to
regulatory risk assessments.
There has been disquiet in the City, and many think that the Government is now
attacking the banking industry for political capital. Many believe the
process started with the introduction of the 50p upper rate of income tax to
be paid on salaries in excess of £150,000 from next April.
Grant Thornton’s proposals come as a number of banks and other City firms are
preparing to return to paying huge bonuses on the back of a surge in
As corporate clients have sought to shore-up balance sheets in the wake of the
recession, the banks have cashed in. Many are also trying to tie customers
into paying more fees by agreeing to refinance debt or confirm credit lines
on the condition that the banks act as advisers for any lucrative merger and
acquisition deals that follow in the future.
Bankers are typically paid a basic salary and in the past earned huge amounts
of money taking a cut from the fees the banks earn for advising on and
underwriting new deals. Goldman Sachs, which has now repaid the money it
borrowed under the US government Tarp support scheme for the American
financial services industry, is reported to be prepared to set aside as
much as $20bn to pay staff.
Sources close to Goldman yesterday suggested that reports of the scale of the
US bank?s bonus pool may be exaggerated and it was unlikely to engage the
use of accountancy firms to advise on tax-efficient ways of paying
The Treasury said yesterday that along withHerMajesty?s Revenue and
Customs(HMRC), it is cracking down on any tax avoidance schemes. Last week
the Government published its banking Code of Conduct, with Stephen Timms,
the Financial Secretary, warning it would not tolerate the emergence of tax
?While banks play a vital role in the UK and are important contributors of
tax, it is clear that many continue to be involved in tax avoidance that
goes well beyond reasonable tax planning. The code is part of the work to
minimise tax avoidance and ensure that large businesses such as banks have a
clear understanding of the behaviours the tax authorities expect from them,?
?As part of the consultation we will be talking directly with banks to develop
a shared understanding of the principles that underpin the code and, in
particular, what it will mean in practice for banks. This is vital to
ensuring that the code plays a part in changing the behaviour of banks and
in turn minimising the loss to taxpayers through tax avoidance.?
Francesca Lagerberg, the head of tax at Grant Thornton, yesterday said she was
unaware of the source of the 40 per cent saving claim and added that the
firm was not seeking to engineer tax avoidance schemes. ?These proposals,
from us and all the other accountancy firms, are not the aggressive schemes
that were sometimes employed a few years ago. There is no tax structure in
place that will help bankers avoid the top rate of the income tax and other
charges,? she said.
?We are offering bespoke solutions to companies that want to incentivise
employees. It often involves government-sponsored schemes such as salary
sacrifice practices. The last thing our clients want to spark is an
investigation by HMRC into clients? remuneration polices.?
A spokesman for BDO Stoy Hayward, another accountancy group, confirmed that
the firm was also offering similar services to banks but also stressed that
it was not trying to engineer tax avoidance schemes.
View full article here
Author: Ezine Article BoardThis author has published 5774 articles so far.