Banks try to deal away bonus tax

They've watched their buddies in the States do it - a $38Bn Tax Exemption for Citigroup and a select few others - so why not try it here?

"Ministers and officials are nonplussed.

They take the view that taxes are to be paid, rather than bargained away."

Is that why the Groran in the late 90's allowed the Capital Gains rule to be chained allowing MP's to have two main residances when assessing Capital Gains Tax.

Is that why MP's and HMRC have so far turned a blind eye to MP's not declairing fees office paid for items, like duck houses, planting of woods, BBQ's or mock tudor beams, in their ACA payments as benefits in kind thus incuring a tax liabiliy as laid out in their tax form guidlines.

Pots calling kettle black springs to mind.

A "democratically challenged" state? Is that one where the person in charge hasn't been elected by the general population?

Glad to hear it, Robert.

Next issue..... getting the Tobin tax implemented.

And the issue after that.... splitting the commercial banks from the so-called 'investment' banks.

Hopefully Brown and Darling will realise that it is to their own huge political advantage (quite apart from being the right thing to do to create a fairer society) to arrange a completely new compact between the 'people' and the 'money-lenders'.

robert - this sounds like BS. since you quote "impeccable sources" there are probably one or two people dumb enough to try bribing their way around the bonus tax, but you're insinuating large parts of the banking system are trying to do this - that's just leftie paranoia.

i realise the clowns who run this country aren't averse to bribery (remember BAE?) but if you spoke to more or better connected people at the big banks you'd realise most of these companies are in fact planning to take the tax on the chin. they are not taking any steps to avoid it since the Treasury would probably catch them. no shifting of payment dates into another tax year, no re-domiciling and certainly no bribes... most are just (reluctantly) planning on paying the tax. and thinking about where to relocate to of course!

Oh dear, oh dear.

There is one sure sign that people need to be brought down a peg or two - and that sign is when the believe the laws of the land and moral standards don't necessarily have to apply to them.
Still not getting it are they?

Can I have the number for these people they have been calling. If I promise to take my elderly relations out for a wee walk and buy them lunch, can I be let off my tax burden too?

Am I surprised at the absolute brass neck of these people? Nope. Will they get away with it? Well, Livni is considered a friend, isn't she!

WOTW, is a Tale of Two Cities remake on the way?

Well there we have it, if indeed there had been any doubts bankers phoning up their mates in Downing Street for a let off, quid per quo for what I wonder – Labour for the under classes the party of fair share? They count like bankers too. One for you one for me, one for you two for me, one for you three for me.

Speaking as a Chartered Accountant who acts for a number of MP's I have to point out that point Number 2 by Icewombat is completely wrong. It can, in fact, turn out that MP's can end up paying more tax just for being MP's because of the nauture of their expenses and the way in which they are taxed.

This whole populist rant against politicians has really gone too far now. As with so many things, people believe what suits them in the media and disbelieve what doesn't.

The whole point of having a government is for them to decide which rules and regulations get to be carried out to the letter of the law.

Presumably we will soon find out how much of a backbone this invertabrate government has.

"A "democratically challenged" state? Is that one where the person in charge hasn't been elected by the general population?"

A reference to Gordon Brown no doubt.
In this country we don't vote for a Prime Minister we vote for our local MP and I think you'll find Gordon Brown was voted in by the people of Kirkcaldy and Cowdenbeath.

Apparently Citi bank have "done a deal" in the US to avoid paying billions in taxes..

I find the (b)ankers lack of faith in fairness disturbing ..............

"8. At 6:16pm on 16 Dec 2009, Michael R wrote:
Speaking as a Chartered Accountant who acts for a number of MP's I have to point out that point Number 2 by Icewombat is completely wrong. It can, in fact, turn out that MP's can end up paying more tax just for being MP's because of the nauture of their expenses and the way in which they are taxed.

This whole populist rant against politicians has really gone too far now. As with so many things, people believe what suits them in the media and disbelieve what doesn't."

So as a charted accountant you will under stand the two TAX changes i'm complaining about

1) the change in the late 90 when Gordan was in charge of the treasurary that ment that BOTH the MP's main home AND there second home are for Capital Gains Tax purposes treated as main residance and as if they are lived in full time.

2) MP's are required to declare their FULL ACA payments and then make a decleration stating that they sums involved was soley and fully required as their role as MP's, if not then how much sould be treated as benefit in kind.

So can tell me why a job funded second home should be exempt for CGT and/or why an employer buying you a Duck House, spending thousands planting a wood or a BBQ set is NOT a benefit in kind? Or even why an MP needs a Duck House, some woodland or a BBQ set to complete their role as an MP?

Every other employee in the UK would be taxed so why are MP's above the law!

#8 Michael R - Why? Why has the populist rant against politicians really gone too far?

Do you really expect anyone to believe the garbage implied (but not stated) in your post? Namely; that there is a seperate tax code in place for MP´s which means that they pay more tax as a percentage of earnings than anyone else?

I really don´t want to believe that MP´s interfere with the judicial process by threatening to change the law just the because the law allows for one of their friends to be subject to an arrest warrant. But I do believe it because it is true.

Worth trying. Works often enough in most other banana republics.

Sounds almost Dickensian - Got to fill a pocket or two!

No other industry can dispense such amazing wealth to its employees for delivering socially useless services. At least premier league footballers are entertaining and don't foul up the economy in the course of their game.

this is quite clever by number 10....it keeps the story going about bankers. I don't believe anyone did phone them up, you have to hand it to them....is there an election coming up?

Re 'Jake' number3 -
Prime Ministers have, in the recent past, been appointed without election to the post by the electorate. I seem to recall that Mr Major was elected as party leader by M.P.s of his party and then became P.M.

The Banking Brahmins are very uncomfortable with all this public knowledge of their doings. The untouchables, who they diminished retrirement accounts and then had taxed to fund their unethical behaviors, should know their place. We are pretending that the government runs the banks and when everyone knows it is the other way around. Banks will be public after the next revolution.

The excessive greed of top bankers (like Fred the Shred) caused the financial meltdown, that resulted in businesses closing and higher unemployment. They are paid vast salaries to do a job, so why do these greedy people need a huge bonus? If they cannot do the job properly, they ought to be sacked. A 50% tax on bonuses is not high enough, it ought to be 90%, bearing in mind that ordinary people will end up paying higher taxes whilst the bankers carry on as before. In my opinion, the bankers ought to be held personally financially liable for the damage they caused to this country.

As far as my friends family and I are concerned we all share the same view Robert.

The rot started when Banks wrongly sold 100% and 120% mortages, employees who were paid bonues and commissions clearly saw the opportunity of making mountains of money by selling them, with no personal checks on whether the applicant could afford it or not - so the seeds of disaster were sprinkled.

It is the greed of these employees and the Banks themseslves who are clearly responsible for the 'so called' credit crunch and therefore there is no doubt in our minds at all that BEFORE bonues are paid again the tax payer should be paid back in full. Only then should the bonus culture kick in again, but of course with different rules.

If the tax payer had not come to the rescue Banks would have folded and there would have been public unrest on the streets the like of which has never been seen before. Thank God the Government did what they did.

IF bonuses are paid without concideration for the public reaction, then I can only repeat the prospects of public unrest will be very high indeed.

Ray

#3 Jake

Baillie Vass served as UK Prime Minister for a time in 1963 when he had not been elected by any of the populace.

Only later did he become an MP.

8 Michael R
Are you by any chance related to an MP? are employed within an MP's office? and do the tax part time? did any of them claim on their allowance for your service?
I suspect you got renumerated so therefore have an interest in perpetuating myth that MP's have their own branch of HMRC with different rules and tax codes.

This reads like a puff piece.

Yeah great Robert. The government is really tough on greedy buggers. I guess I'll vote for them now.

"I have it from impeccable sources that several of them have rung up their mates and contacts in 10 Downing Street,............"

Robert, makes a good story, even more credible with the word impeccable. But it sounds too good to be true. What more could this wholly honourable and parsimonious Government want us to believe than these discredited Bankers are still trying it on! As Victor Meldrew would say "I don't believe it". We have had too many leaks, nods and winks, furtive phone calls etc over the last 12 years to believe impeccable sources! Still it must be worth another couple of percentage points for a MORI poll.

13. At 6:44pm on 16 Dec 2009, you wrote:
"8. At 6:16pm on 16 Dec 2009, Michael R wrote:
Speaking as a Chartered Accountant who acts for a number of MP's I have to point out that point Number 2 by Icewombat is completely wrong. It can, in fact, turn out that MP's can end up paying more tax just for being MP's because of the nauture of their expenses"

Second follow up.

Can you give ONE example where a MP pays more tax than a self employed busnessman / sole traider due the the nature of their expenses?

Second Homes are exempt from CGT, the rest of us only have this allowance applied to our main home and only if we have lived there all the time.

ACA are exempt fro Tax Unless the MP tells the Tax man that an item is not soley and exclusivily needed for their role as an MP

Travel and Hotel bills are exempt (sole traiders have to argue for every penny of any claim)

Car Millage is exempt for MP's sole traiders have an upper limit

Office costs, are exempt UNLESS the MP is using them for political purposes or goes above set limints, sole traiders have to prove all claims do not incure a benefit in kind.

IT, Web Site, EMail, Phones are/were all covered by the 10k tax free comunitations allowance.

Staff Salaries, are NOT MPS expenses but paid direct to staff from the fees office

Food and Drink at their place of wortk is heavily substized, where else can you get a pint of beer in London for less than £1!

Yes they are taxed on any Party Political items they claim for BUT then their parties should re-enburse them for those costs?

Postage and office Paper is free with little or NO pratical limits!

Just what else can MP's claim for and get TAXed ABOVE a sole traider?

If I found out there was an angstrom of truth in this, I'd mark the perps up in wikipedia before they could blink.

So, give me one angstom, please.

What people fail to realise is that the bankers will not get impacted. The bonus pool will be taxed the extra 50% then the money thats left will be distributed. Bankers will still get the large bonus and the back office staff will get next to nothing.

Very pleased to hear the french are talking about a similar tax - it will be more difficult for these parasites to threaten moving elsewhere if other countries are doing the same thing.

Also like the way it is 'one off' - will they actually incur all the costs of moving if there can be no financial gain from the move?

I used to have a bit of respect - you take the risk, you reap the profit - but these scammers were happy with the profit, passed us the risk, now they want the profit again.

I say: screw them good and proper.

If they do not pay there taxes lock them up or seize assets!
Interesting how many top bank bosses are now moving to Asia to avoid all this rumpus and carry on as normal!
They created this mess sack the lot of them if they refuse to pay, nobody I repeat nobody is above the law not even bankers, MP`s, or anybody else for that matter.

If the banks can afford to pay such large bonuses, aren't they overcharging their customers? Who agrees and signs the contacts about fees for services on behalf of the customers? More bankers, maybe, or their friends and associates?

A nice cosy relationship.

"No other industry can dispense such amazing wealth to its employees for delivering socially useless services. At least premier league footballers are entertaining and don't foul up the economy in the course of their game".
That is it in a nutshell. Why do so few people understand this?

I'm disappointed that bonus payments in shares are not allowed to bypass the supertax. Obviously, the tax would still need to apply unless the shares were held for a certain period, say 3 years. Surely the idea is to reward success that is sustainable and to discourage short term incentives and short term gains.

there is a terrible morality amongst the 'higher' echelons of our society, people pay themselves huge bonuses for 'advising' or facilitating mergers, which inevitably means the lowest earners in those companies lose jobs/livelihoods, 'asset strippers' cut costs (jobs to you and me) or wages, always of the lowest rungs, and giving themselves huge payouts as a 'prize' for reducing wage bills (others not thier own). isn't there something very morally wrong when the well off, get richer for reducing the standards of poorest, a sort of reverse robin hood mentality, sickening really.

when you talk about MP's bankers and the 'top' of our money obsessed society, they should remember that in a society the 'top' must lead by example, if the peple at the top cheat/steal/appropriate huge sums, who can blame the poorest (benefit cheats, etc) from following that example, my only suprise is how few people at the poorest end cheat, with the 'leaders' that we have, i'm suprised everybody isn't cheating the system

This comment was removed because the moderators found it broke the house rules. Explain.

Robert,

Have you ever stopped to consider that you are a bit of a patsy for these people in Whitehall ? They leak alleged rumours to you and you lap it up and keep the focus away from the government ??

just think, all this we are suffering and paying for, is the result of an 30 year economic policy that consisted of, the few in the city getting mega-rich, while the rest of the UK flipped burgers or manned the checkouts for them

22. At 8:16pm on 16 Dec 2009, Ray wrote:
As far as my friends family and I are concerned we all share the same view Robert.

The rot started when Banks wrongly sold 100% and 120% mortages, employees who were paid bonues and commissions clearly saw the opportunity of making mountains of money by selling them, with no personal checks on whether the applicant could afford it or not - so the seeds of disaster were sprinkled.

It is the greed of these employees.....

Where is the personal responsibility? Everything is always someone else's fault! I have yet to read or hear of a situation where someone had a gun put to their head and was made to take out that large mortgage that they knew they could'nt afford!

I think we should just tax you Mr Peston, you seem up for it.

the people looking for the mortgages didnt want to borrow huge sums for the purchase of houses, but since the cost of housing had rocketed, and social housing had all but dissappeared for anyone other than single mums/high dependency families, they had no choice, a 'debt' nation was created, presumably to prevent people striking/rocking the boat by heaping so much debt on them they had to work/work/work, where was the alternative? and now we are reaping the whirlwind, it was borrow to the hilt or stay with mum, till your 30/40/50, the sad thing is, most people in these high debt houses will never be able to move, killing the housing ladder of the 60's 70's 80's and early 90's

30 is pleased about tax.....................

Enough said?

Sounds like the court of Louis XIII. Venal - don't know the meaning of the word!

42. At 11:13pm on 16 Dec 2009, Andy wrote:

Exactly. What choices did people really have? I can not easily imagine a hotel receptionist holding onto a job, when their home is a tent! No law against it working while living in a tent, but the hairdryer required to look presentable just wouldn't work.

The vast majority of people in this country have no choice - if the did there wouldn't be too much to fear if you couldn't keep up the mortgage. There is real fear. My niece was signing on the dole for a while. At one of her appointments at the Job Centre last year, there was a young man, about 30 bawling his eyes out, really crying - he was having his home repossessed and the staff were helpless, sending a young man home to his soon-to-be-out-on-the-streets-family.

40. At 10:59pm on 16 Dec 2009, expatinla
It requires the ability to think, to understand what civilisation really is, what a society is and can be. You don't have to live it, you just have to observe and think. Really easy for most of us. It is a little bit like using your muscles. If you don't do it you get kinda neuronally flabby. But like all exercise, I'm sure you'll get the hang of it with just a little time and effort. One day.

Start with the film called 'Cathy Come Home.'

All the money collected in the bonus tax should be paid to the shareholders in Northern Rock who in practise are the only people to have actually suffered a financial loss. Northern Rock assets exceeded their liabilities and the government has made a killing by taking it without paying for it. Righting down assets after the event is patently dishonest but only to be expected of this administration.

The bankrupcy laws in the USA and Britain are at the heart of the problem. Allowing people to walk away from their debts just by filing for bankrupcy has left everybody else picking up the pieces.

Michael R(8) is half right, but unfortunately rather condescending towards the public in terms of its anger at what was a fraudulent activity, many issues of which have not been properly addressed, such as flipping homes. But the fact remains that at least something is being done to repair the way expenses are treated in Parliament, enough or not - well who knows. Precious little is being done to fix the huge anomalies and structural flaws in finance, bonuses aside. Less condescencion from lawyers, bankers and politicians would be welcome: remember that we are the ones paying the price for the folly of the "great and good" of the City and Parliament, they are still largely taking their "just" rewards. Read Martin Taylor's (ex-CEO Barclays) article in the FT if you believe the great unwashed, for that is how the public are still perceived, are alone in their emity of current banking practices.

https://www.ft.com/cms/s/0/fe462a30-e9af-11de-9f1f-00144feab49a.html

I don't find this much of a surprise really. They were bound (and probably still are ) to try to escape somehow.
I honestly believe the tax should be 100%. I mean, they've had their bonus haven't they.
They still have a job. Ask the 2.5 million people they caused to become unemployed, through their antics. Ask new pensioners like me, who've seen their pension values drop.
That band of merry men who threatened to resign should have been sacked immediately, as an example. Nobody but nobody is indispensable.
OK rant over, but this is how a lot of people feel.

46. At 11:37pm on 16 Dec 2009, lardeon

lardeon, Ok you lost money in Northern Rock and that is a shame. suppose the massive increase in unemployment and the consequent knock-on effects that has to their physical and mental well-being is a mere inconvenience to you.
Those on short-time are presumably be having a party... Behave. Please.

I know I'm going to get abused here, but I have to say that the whole bonus bashing thing is counterproductive in so many ways.

Yes, the bonuses should be reined in. But to do it this way, and unilaterally, is just plain dumb. Like it or not the bonuses contribute a huge amount into the economy (I can't remember the exact number - but it's huge). All that money props up so many businesses - and not just in the South East. Just think of all the small business that is funded by those bonuses.

Also, if there's no money this year, then house prices in London will be depressed. Which means that house prices across the country will be depressed. And when the house prices go down, so does confidence. And then we end up with a double dip.

Finally - you are dealing with the most creative and sneaky bunch of people in the world when it comes to money and tax. Yes, some tax will be paid, but a lot will be worked around. I can think of half a dozen ways of sailing close to the wind without actually running into the avoidance issues.

Take this as an example: The banks pay bonuses at a vastly reduced rate - most get the £25K to keep them under the limit. The government declares victory. Then the banks change their policy to pay bonuses twice annually and we see a much large dispersal in June after the election.

This whole super-tax thing is dumb and it is not an effective way to control the banks - there are far more creative and effective solutions than this. However, if you have an election to win and you don't care what you have to do, or who you trample on, to win it, then this is what you can expect.

We should not be taxing these bonuses. These incompetent and greedy fools should NOT be getting bonuses.
Of course then they would have to leave. Leave for where? Who would have them?
If they didn't leave of course there is another solution to it all.
Sack them because that is what they deserve.

What on Earth is going on when people like this believe they have 'special channels of communication' that allows them to believe they can circumvent legislation that all of us are governed by.
What state is our society in that some hold such special places as to be afforded such (misplaced) privelage?

As a CEO of a bank, or a senior executive, or a highly paid trader, or a highly paid investment banker, what ever, what is common to all of these is they are employees.
If they have holdings in the companies that they work for, all well and good, they are shareholders too, but, the fact remains they are still employees.
The problem with the current culture (and this extends beyond banks to all PLCs) is these people believe themselves to be business owners.

I believe that just as a minimum wage is a necessity to prevent exploitation of the masses by the few, for the very same reason we need a maximum wage.

If it is based on a clear ratio, say 20 times average earnings, then the only way these people can award themselves (and they do because they dominate and have ultimate influence on remuneration committees) a 10% increase in pay (which includes any bonuses or share options by value), then the average earnings of the employees must rise an equal proportion.

That would instantly set a natural affordability threshold that would make remuneration rises moderate.

I simply don`t believe you Peston.

I am insulted that you`ve tried to pawn this "story" off on us.

Anyone with a functioning logical machinery in their skulls knows that the bankers won`t be out of pocket,whatever El Gordo The Generous and the rest of the Troughminster boot-polishers say.

Supertax is a misnomer. This tax - which is to be applauded and should be higher - is, in reality, a 'morality tax'. It seem to be the only way some last semblance of morality can be brought into the inequality of slaries.

I am going to carry on banging on about this, because the more I think about it, the more sense it seems to make:

We need a state bank.

A state bank that provide a deposit and lending base for both individuals and companies, and sensible lending criteria for all banks.

Because the plain truth is that if the state (which is us) does not control ‘money’, the state (which is us) can only ever be at the mercy of those who do.

Following the MP expense scandals, I don't think any member of the government body will let that slip or being publicly viewed as the bankers' buddies.

@ 53,"What on Earth is going on when people like this believe they have 'special channels of communication' that allows them to believe they can circumvent legislation that all of us are governed by."

Right on the button!

I call it corruption, sadly many others would see such behaviour as only amounting to a phone call, asking a question and nothing more?

Frankly I'm not in the least bit surprised that these "people" have such a thing as a "hotline" straight into 10 Downing St. As an Ordinary Joe I can do the same, right? Can someone let me have the number?

I suppose it's no good asking everybody before the comment to read about who the PAYROLL TAX on bonuses applies to.

It is here from the tax man [Unsuitable/Broken URL removed by Moderator]

As I understand it the 'banks' are to pay a an amount equal to 50% of discretionary bonuses they pay up to April 2010

Bonuses of less than £25000 do not have to be included in the total.

Only bonuses paid to UK resident employees, and other (eg non doms) performing 'banking services' in the UK, in the relevant time period are included in the total on which they pay the 50% payroll tax

The 'banks'pay NOT the employees!

Banks CAN PAY WHATEVER BONUSES THEY LIKE to employees but have to pay a sum of equal to 50% of the total bonus they pay to relevant employees to the taxman.

So if a 'bank's' relevant bonuses total £2bn a 'bank' can pay £2bn to the employees and £1bn to the tax man.

Of course the UK resident employees will have to pay the personal 50% income tax a they would normally on the bonus (if paid in cash) but non doms would not pay this. (note you can be a UK citizen but arrange your life to be a non dom' in the UK )

It is no surprise such people believe taxation might not apply to them, or is a matter for discussion and negotiation, because every other aspect of their business that requires regulation or legislation, is then discussed and negotiated in their favour.

@ 57 we need a type of State (or Nationalised) bank?

Yes we do!

Sadly things would go downhill from there. The politicians would be in charge. Rather than make the place work, for example keeping queues to manageable levels on a day-to-day basis, (i.e the hard work,) they would instead do the easy stuff and disappear up to the Board Room for long (easy) free lunches every day! The resulting lack of attention to the actual detail needed to run such an organisation like this, on a daily basis, would cause the whole thing to descend into chaos. That's the trouble with politicians - doing solid, routine, attention-to-detail like work, that most ordinary people manage perfectly well, is something that they are quite incompetent at! And to make the embarrassment of the failed state bank disappear, they would sell it off privately!

It is about time surely to name some names.

If they were politicians their names would be headline news by now.

I for one would enjoy a Christmas with them in the stocks and the media with the egss.

The key to this story, if true, is that of 'principles' and individual responsibility.

By leaving the bonus distribution fund untaxed the employer is accepting the collective responsibility, and admitting ownership of the cause of the desire to tax 'banking' bonsues - excess and irresponsible management. This then does two other things: allows the employee to get the contracted bonus; absolves them of particular reponsibility.

If the bonus tax avoidance through an above the line 'contribution' were just that then it would be tempting to go with it.

Say the bonus tax was £400m on an 800m fund. If on behalf of HM I negotiated a £500m upstream 'contribution' then the maximum total tax for HM would be 500+400=900m (400 is the 50% income tax due)as opposed to £600m via the bonus tax (I've excluded the losses in income tax due to 'avoidance' activities).

What is more there would be increased VAT take direct from the recipients of the bonues

so this all looks very good for the taxpayer

But, I suspect there are side-effects that affect the upstream corporate taxes, and maybe the returns to the shareholder, and probably the end result is revenue neutral.

In which case.... well it just looks like greed.

But I do like the principle - corporate admittance of guilt

47. At 11:42pm on 16 Dec 2009, lardeon wrote:
The bankrupcy laws in the USA and Britain are at the heart of the problem. Allowing people to walk away from their debts just by filing for bankrupcy has left everybody else picking up the pieces.
--------------------------------
There are many reasons for personal bankruptcy, for example overstretched unsustainable consumer credit, loss of job perhaps due to long term ill health, directors' guarantees called upon in a company insolvency.

All these scenarios will happen in a recession or depression to many people who thought they had no problem when times were good.

Do you want to go back to the days of debtors prison?

"Second Homes are exempt from CGT, the rest of us only have this allowance applied to our main home and only if we have lived there all the time."

This isn't entirely true. The private residence exemption includes provisions that are available to every adult subject to CGT that make it perfectly possible (and legal) to effectively make two or more properties CGT exempt assets (and HMRC publishes guidance on how these rules work, with examples in the Revenue Manuals - see CG64510). If you have two (or more) residences available to you, you can elect which is your main residence - and this applies irrespective of how much time you spend in each residence.

It's also true that the UK taxes acts include provisions that only apply to MPs, but HMRC’s own guidance for MPs asks (and answers) the main residence question:

“Can more than one residence qualify for exemption at the same time?
There are two sets of circumstances when this might happen.
• First, if you have used a property as your only or main residence at some time during your period of ownership, there may be a period leading up to the sale of that property during which it is unavoidable that you will stop using it as your main residence. To cover this possibility, the final 36 months of ownership is always treated as if you had occupied it as your only or main residence. Relief from capital gains tax may be due for this overlapping period on both the old and the new properties.
• Second, where you provided a residence for a dependent relative before 6 April 1988 you may be entitled to relief from capital gains tax on that property as well as your own.”

However, it is important to realise that these exemptions apply to EVERYONE (even bankers) – not just MPs.

Bash MPs if you want, but let’s start from the facts...

I don't think that we need be surprised that, with an election looming, politicians play to the gallery. The public dislike bankers, so a bonus tax makes a vote-winning headline.

However, my understanding is that taxes should apply equally to everyone - on the basis of income, not on the basis of the sector in which they work. If, say, an energy company or a utility were to pay a bonus, should not that company, too, be equally affected by this tax?

Victimising one industry seems strange, not least when that industry has been - and might be again in the future - a significant contributor to the economy.

It is unpleasant to see government pandering to what is - let's face it - envy. Of course, banks which received taxpayer bail-outs should NOT be paying bonuses - but, surely the way to stop that is simply for the government to vote its majority shareholdings in those banks to forbid the payment of bonuses? NO bank in receipt of taxpayer support should pay any bonuses at all.

So the banks pay 50% of the bonuses in tax. This is a benefit in kind to the bonus recipients who should pay income tax on it as well as 50% tax on what is left.

So HMRC gets the entire bonus? Yes?

Nice one!

57. we have a state bank called RBS already. and it's a POS.

the banking system reflects some implicit (recently explicit) guarantee from the state for losses, but if a bank is fully owned by the state it will not care in the least who it's lending money to and will thrown caution to the wind.

if you want to see properly crappy banks look at china's state banks or germany's landesbanks. you wouldn't want to be underwriting those with your taxes....

#66. i'm not a fan of our current lot of MPs for a number of reasons (expenses isn't one), but I think your comments are some of the most sensible and well-informed that i've seen on this subject. thanks.

If this true, then it is hardly unpredictable.

Bankers want to preserve their lavish lifestyles and hold the country to ransom at the same time so it's really hard to believe that the government would allow the financial national security of the country to be left in the hands of such self-centred individuals.

Can't help thinking that if this scenario was being played out in that wonderful BBC series "Spooks", Harry Pierce and his team would be dispatched to bring errant bankers into line by any means necessary.A sobering thought.

The case for nationalising the banks grows daily because then the government will control what is happening and can ensure that the taxpayers' money gets to the businesses that need it.Financial services dominate our economy at the expenses of other sectors and this needs to change. That won't happen with bankers in charge.

It's possible some bankers and indeed some banks will leave the UK but then their new hosts will have to foot the bill for their bonuses.This may be a good thing given that bonus-hungry bankers take the greatest risks with other people's money.However, given the recession and national awareness of the financial dangers you do wonder where these bankers will go for a new job. America for example will not want another Bernie Madoff.

Less dependence on international banking may actually mean that individual economies are safer and cannot be brought down by financial collapse in another country. Investing money in the UK may be safer and wiser than investing abroad as the Iceland fiasco proved.

40. At 10:59pm on 16 Dec 2009, expatinla wrote:

Where is the personal responsibility? Everything is always someone else's fault! I have yet to read or hear of a situation where someone had a gun put to their head and was made to take out that large mortgage that they knew they could'nt afford!

"Where is the personal responsibility?" The hypocrisy of this criticism leaves me gaping! Sauce for the goose is sauce for the gander. Why is it that only the individual must take responsibility? I didn't get myself in trouble with a loan I couldn't afford. Nor did I lend to someone who is likely to default. Yet I am the one who suffers in paltry savings returns, reduced public services, higher taxes and job insecurity, while both parties of these dubious transactions are bailed out by the Government.

Anyone who tries to defend either party in these shady deals, while having the unmitigated gall to condemn the other, is a hypocrite of the highest order. The banks come in for the greatest criticism simply because it was in their power to say no, and because they could see the cumulative effect of their actions. There are 4 banks barring minor players, and millions of customers. Do the math.

@ FriendlyCard, you perpetuate a common misunderstanding about majority shareholders.

The Board of RBS are saying that the interests of all of their shareholders would be harmed by withholding bonuses. A majority shareholder may not abuse its majority position to pass a resolution that benefits themselves at the expense of the minority (unlike politicians!)

The Board's argument is patently absurd - all shareholders would benefit from not having their holding diluted by £1.5bn, not just HMG. The idea that the contribution of these individuals justifies such payments, or that, even in the medium term, they could all walk away and find employment elsewhere, is equally laughable. However, it's not an argument that HMG can win simply by pushing through its majority vote.

Post 69. POS? Is that a banking acronym?

If so is it the UK equivalent of the American FUBAR?

p.s. I do know what you mean but obviously the mods don't!

#66
You seem to forget that while these rules are available to everyone, everyone has to pay to get the advice from a tax advisor except MP's who can claim the advice on expenses.

When i studied management in the 1980s i seem to remember the advice from the American Management gurus of the tim ewas "incentivise, inccentivise, incentivise" but in the small print it was also recomended that for optimum results any bonus should not excede 30% of the basic pay.Ignoring this principal in a manufacturing industry allways caused problems. Seems to me that the small print has become overlooked in the financial sector with resulting chaos.
An additional problem in the financial industry would appear to one of risk taking. By all means reward risk but if the risk is to my shareholders funds or my taxpayers pocket i want the reward not the clown pressing the computer keys

#75
It seems that there are two points here. First, do you have to be able to afford a tax advisor to find this information out? Secondly, should an MP be able to claim for the costs of employing such an advisor?

Paying a tax advisor is one way to find such matters out, but it’s certainly not the only way.

This information is available online at the HMRC website (in layman’s language and technical guidance) and in books (like the Zurich Tax Handbook) in layman’s language. It’s now even available on this BBC blog!

For the record, I am not a tax advisor, have no tax training and found this information by reading a book in a bookshop. Sadly for them, the explanation was so clear that I didn’t end up buying the book!

MPs may (or may not, for all I know) be claiming for the costs of obtaining tax advice as part of their allowance. If they are, this may be legal or not – I don’t know. If it’s legal, you might think it’s a good thing or a bad thing (I suspect the latter).

It may put your mind partly at rest to know that even if they are claiming such amounts, they are not deductible for income tax purposes (so I believe they should be taxable as a benefit in kind). Once again, the HMRC website is admirably clear:

“What sorts of things are allowed as tax expenses?
Not allowed…
• Accountancy fees incurred in the preparation of the Self Assessment return or related expenses claims…

The only point I was trying to make is that if we want to debate these matters, we are probably better starting with some facts, rather than speculation.

#68
The Bank Payroll Tax is chargeable on “taxable companies” – the employer. Like employer’s NI, this amount is not paid on behalf of the employee, it is a tax on the employer which happens to be calculated by reference to amounts paid to employees. As such, it is not a benefit in kind for the employee.

The current draft of the legislation would suggest that only bonuses awarded (as defined) or paid before 6 April 2010 are taken into account. The new 50% tax band comes into force on 6 April 2010, so in theory a bonus might trigger the Bank Payroll Tax or be subject to the 50% band, but should not fall into both regimes.

This position may change when the relevant legislation is finalised, particularly considering the indications given by the government regarding extensions of the Bank Payroll Tax period at the time of its announcement.

#70
Thank you very much – I appreciate your comments.

It's not just the bonus money itself - some of the recipients of these bonuses to be taxes do not wish the HMRC or any other tax authorities to know anything about their financial/personal affairs or what they are doing.

What is their official workplace in their contract of employment - Is it in the UK or overseas? Where are these bankers resident and/ or domiciled for UK tax purposes (if anywhere)?

OUCH!

So now we have to trust the banks to decide whether one of their employees is legally resident and/or domiciled for tax purposes and pay the tax on their behalf?

If I am right and thinking that this must apply - surely this is quite ridiculous for the employer to be deciding whether their employee is resident and/or domiciled for UK 'bank bonus' tax.

Presumably, if a non dom bank employee receives a bonus then the tax will not apply as they are not liable to UK income tax.

This would explain why the bonus tax is to bring in less revenue than expecetd as those earning a banking bonus desperately manouvre to alter their tax status to avoid paying the UK banking bonus tax.

AM I right Dr Watson? Can anyone shed more light on this as it sounds like a complete a messy and ineffective tax fudge that is based on tax that is very much 'avoidable and evadable' depending on how bent one's bank employer is?

Why isn't a 'negotiation' like this illegal - and I mean a form of bribery? I can imagine anyone who tried to negotiate their way around the laws and regulations of this land with a police officer being handcuffed.

I've just been listening to this programme: Thinking Allowed - White Collar Crime - Punishment.

Part of a short (27 minutes) Radio 4 series, it is very thoughtful.

Any thoughts on this by Sir Ken McDonald, formerly Directpr of Public Prosecutions:
"The FSA's own detection software estimates that in no less than 25% of all mergers and takeovers there is insider dealing activity. 25% and yet in the last 30 years we have managed in total less than 50 prosecutions for market-related crime in England and Wales."
"The FSA in th eentire 10 years of its existance, has not succeeded in prosecuting a single market professional. That sends a very strong message to the city and the message it sends is that if you are careful... you can get away with it, and you can make money from it. "

And then there is:
800 million a year for benefit fraud.
13 Billion a year for tax evasion!
Is it any surprise the City boys think all they need to do is pick up the phone for a chat?

Dear Mr Peston, why do you write in the style of some ex-criminal professional cockney on a creative writing course (e.g. "pay over a wodge of money")? I know you hail from Crouch End, but even there, although undoubtedly North London, it was hardly Hoxton, and anyway you went on to Bailliol, so you must have learned to write in a more even style than you use today, even while still at Highgate Wood. Perhaps you think it makes you come across as a man of the people (nothing worse than being seen as an Oxford educated toff these days I suppose)...ummm wonder how much public wonga is finding its way into your commodious back pocket?

As a Hornsey man myself, good luck you, and I hope it is a lot.

INDIVIDUAL 'BANKERS' will NOT pay the Bank Payroll Tax! It is Banks as organisation who will pay.

The relevant document from the HRMC is "BANK PAYROLL TAX;A TECHNICAL NOTE....."

I suppose it's no good asking everybody before they comment to read about who the PAYROLL TAX on bonuses applies to.

As I understand it the 'banks' are to pay a an amount equal to 50% of discretionary bonuses they pay up to April 2010

Bonuses of less than £25000 do not have to be included in the total.

Only bonuses paid to UK resident employees, and others (eg non doms) performing 'banking services' in the UK, in the relevant time period are included in the total on which they pay the 50% payroll tax

The 'banks'pay NOT the employees!

Banks CAN PAY WHATEVER BONUSES THEY LIKE to employees but have to pay a sum of equal to 50% of the total bonus they pay to relevant employees to the taxman.

So if a 'bank's' relevant bonuses total £2bn a 'bank' can pay £2bn to the employees and £1bn to the tax man.

Of course the UK resident employees will have to pay the personal 50% income tax a they would normally on the bonus (if paid in cash) but non doms would not pay this. (note you can be a UK citizen but arrange your life to be a non dom' in the UK )

I agree with #57: some form of state bank is needed. To #62, I don't think #57 mentioned nationalization: there are other ways of bringing about a State Bank - a public corporation, rather like the BBC, might be in order. It would be a good idea if the other banks existed alongside it so that # 69 (or myself for that matter) isn't forced to use it.

This is a problem the treasury will be experiencing next year with our own banks.....

https://news.bbc.co.uk/1/hi/business/8418170.stm

It's very hard to sell such a large stake into the market and maintain a 'profit' (because I can guarantee HMG don't take into account the opportunity cost of these stakes) - when your holdings are as 'undiversified' as the HMG's are then it's even more difficult not to flood the sector.

I suspect AD's statement this morning about being 'in no rush to sell' is an admission of the position we're in rather than a statement to the markets.

"16. At 7:24pm on 16 Dec 2009, watriler wrote:
Sounds almost Dickensian - Got to fill a pocket or two!

No other industry can dispense such amazing wealth to its employees for delivering socially useless services. At least premier league footballers are entertaining and don't foul up the economy in the course of their game."

Don't be so ignorant. There are so many things wrong with what you've said. Premiership footballers get paid large salary the same reason bankers do - there is a lot of money in the industry. If a banker got paid £30k a year wen he's earning his clients £50m, thats called extortion. The same with footballers. Premiership football generates a huge amount of money and if the players got paid next to nothing that would be unfair. It has absolutely nothing to do with the effect it has on society. If it was the case, then people working in soup kitchens would earn £2m a year - but they don't, because money dosn't grow on trees - the salaries have to come from somewhere.

Come on Robert - get writing - the 'law' has taken it's side in this crisis by siding with the Capitalist in the BA dispute.

Oh how the state gathers together to ensure it will be the workers who pay for this crisis and not the Bourgoisie. I hope you are all paying attention because when you're wondering why you were uncerimoniously dumped by your employer - with a mortgage and bills to pay - then you can reflect on this event as the point when sides were chosen.

At least all those moaning people out there who have been forced to take a pay cut because they are 'de-unionised' will feel better because we've all taken a step closer to slavery (and not just them).

Every man for himself - until there are no men left.

Destroyed society, destroyed planet, destroyed species. The first in history to knowingly commit self-extinction through pure greed and selfisness.

I often wonder if there is intelligent life on other planets - and then I realise that if there is they won't be visiting here as we are really the 'dullards of the universe'.

I bet the Earth is watched by aliens like we watch reality TV - in pure aghast at how stupid a species can be.

Depressing.

P.S. Bankers are essential for this country to thrive. The fact that you can even enjoy Premiership football is because our economy is so well developed without bankers and others in the financial services there would be no money to spend on anything, even football...

In the local authority area where I live, if you report anything other than a serious crime on matchday - the police reponse is, we do not have enough manpower at the moment to respond to the incident (i.e. as it is matchday with the police getting time and half and/or double time at the match, subsidising the football club and largely paid for by the local authority idiot council tax).

The football agent/brokers are a further 'tax on society' - hence we all pay for football agents!

87. At 4:40pm on 17 Dec 2009, MacLe wrote:

"P.S. Bankers are essential for this country to thrive."

Absolute poppycock - banking is supposed to handle resource allocation by the analysis of risk and through the medium of money.

Why don't you pop down to your local trading estate and see how well this is happening with the SME's down there - I think you'll find it's not going to well and the prime responsibility of bankers have failed dismally.

P.s. Your football comaprison is wrong - it too is based on 'money' and not 'value' and it will have it's own crisis in the near future - just as banking has had.
If you don't believe me ask yourself why Portsmouth players have been paid late twice already this season and why Watford are about to go bust.

It's all monopoly money - worthless paper.

88 nautonier

I've recently had that experience too.

Two very young children suffered an extra beating and one was whipped and found with strangulation marks on his neck due to the 12 hour delay. Their reason for not being able to respond immediately was because they didn't have any officers free to accompany Social Care to attend when we reported this due to a big match being on that evening.

Priorities seem a bit skewed to me....especially after the "baby P" situation.

<RICHPOST>"54. At 05:59am on 17 Dec 2009, Joseph Postin wrote:<BR />I believe that just as a minimum wage is a necessity to prevent exploitation of the masses by the few, for the very same reason we need a maximum wage."<BR />Bingo!<BR />I've been saying this since I was about ten. I overheard some adults discussing the situation, and as a child it seemed like so obvious a solution that I wondered why it wasn't in use. <br> "Oh we can't have that. If it wasn't possible to earn hundreds of times the average wage then people wouldn't be motivated."<BR />Erm, what sort of people were we intending to motivate to these top positions? Did Einstein only learn maths for the opportunity to be a multi millionaire? Did Van Goh give up and stop painting when he wasn't making money?<BR />I think that with the way a plc works- ie that there is no single owner- all such companies should cap the wages of their executives based on the average wage of their employees <b>and</b> contractors. So no sacking everyone then rehiring them as sub contractors!<BR />This would also end the constant stream of British jobs being offshored so that a few quid a year can be saved by the plc (whilst putting the cost of those unemployed onto the nation as a whole).<BR />"Certainly we can outsource that department to India Mr CEO, but your salary will drop by £15k a year. What do you mean you no longer think it is in the companies best interests?"<BR /><BR /><BR /></RICHPOST>

Here's the deal . If any one of these people leave the country for tax reasons , we don't let them back in .......for any reason !

There is an extreemly easy way to aply this TAX say the bonus is 1 million pounds then £750000.00 is the TAX BILL no getting out of it they have NOT earned a single cent of it so they need/MUST be taxed to the EXTREEME on it this Country is in the state it is in because of bankers now they think they should get huge bonus payments scuse me but no on your nellie and in fact if the banks can afforf to pay these bonuses then they can afford to be taxed at source for them so for every 1,000,000.00 bonus paid out we will have 750,000.00 tax direct from the bank AS WELL
they can also drop the stupid bank charges in fact move over bosses i am comming to sort this lot out for the Country not the bankers ( i would love to change the first letter )

i am sick of bankers complaining about their problems. If it was not for the government, there would be thousands out of work and the economy would be in serious trouble, it still is of course but they are still in jobs, Head of RBS, get real

This comment was removed because the moderators found it broke the house rules. Explain.

Mr Varley should really stop whinging. His argument for paying vast salaries and bonuses to "attract and retain the best" is pathetic. If they had been the best, and ensured that good banking practice had been followed, they would not have required huge bailouts by the government. Mr Varley should thank his lucky stars that he still has a job and a bank to run. Come down to earth Mr varley and apologise publicly for your greedy behaviour.

Some very good posts here, Andy in particular, post 35. 'something very morally wrong when the well off, get richer for reducing the standards of poorest'

Could never have put it better, you seem like a person who can experience empathy for those who struggle with life at the hands of others, empathy is a good gauge of spiritual growth, I believe this is an important part of why we experience life, long ago life was such that even those at the top stuggled for survival and through this stuggle they gained empathy for those around them, in todays world a lot of those at the top are so far removed since birth from the realities of everyday life, that empathy is not a part of their awareness, their souls are running on empty, which would explain a lot...

41. At 11:05pm on 16 Dec 2009, Dempster wrote:

I think we should just tax you Mr Peston, you seem up for it.

I don't think Mr Preston would be posting blogs on the beeb or even working for them for that matter if he didn't pay his taxes, this man works harder than any Bankster I've heard of and most MPs too, if anyone has earned a bonus it's Mr Preston his blogs alone are worth it.