Taxman Delivers £2Bn Bill For Investment Banks' Benefit Trust Perks

[interestrateripoff]

http://www.guardian.co.uk/business/2011/apr/26/investment-banks-face-tax-bill-for-staff-perks

Revenue & Customs seeks to settle saga over investment bank staff perks such as 'loan and forget' cash and yacht usage

The taxman is seeking to strike deals with investment banks over long-running offshore tax arrangements in an attempt to recover £2bn in unpaid tax and national insurance contributions.

HM Revenue & Customs has announced the terms of a "settlement offer" for companies with employee benefit trusts (EBTs) as it seeks to resolve hundreds of outstanding investigations. The latest crackdown could result in some investment banks declaring one-off hits to their profits, if they have not made provisions.

The arrangements have been a long-running sore for the government with banks and small companies all employing the schemes. Companies typically pay cash into the trusts free of tax, which would then provide benefits such as loans to employees. HMRC believes it is just a way of paying staff and wants to ensure that income tax and national insurance contributions are paid on the full amount of the benefits received.

Bankers only have to pay tax on notional interest rates of 1%-2% on loans, which do not ultimately have to be repaid. The loans have other tax benefits, including not being part of an individual's estate on death.

Yet again one law for the elites and another for masses. The masses get threatened with TVs, laptops being sold on the cheap, the rich merely get an offer to pay up.

HMRC makes no threats to seize assets if they don't pay up.

[bogbrush]

You're wrong about this.

It's about the law. Legislation goes into force and it is the requirement of individuals and companies to comply with it. These systems are entirely legal and the problem for the Revenue is that the legislation didn't allow for what they did. EBTs are now no longer effective because the government has changed the law. Where they are borderline (in aprticular the use of assets) there is negotiation simply because the Revenue don't have the force of law to impose a solution.

Edited April 27, 2011 by bogbrush

[leicestersq]

You're wrong about this.

It's about the law. Legislation goes into force and it is the requirement of individuals and companies to comply with it. These systems are entirely legal and the problem for the Revenue is that the legislation didn't allow for what they did. EBTs are now no longer effective because the government has changed the law. Where they are borderline (in aprticular the use of assets) there is negotiation simply because the Revenue don't have the force of law to impose a solution.

What the law is is never clear until a judge decides. If it were me sitting on the bench, I would judge these schemes unlawful, as they havent been used as intended and full tax should be due. No doubt the judge's who are mates with this lot of kleptocrats will see it differently. What worries me though is why politicians put trapdoor exemptions in the tax laws for anyway?

There is no doubt that this money is being used to pay staff, just arguments over the weasel words.

By the way, what legislative change has been made to stop this?

[bogbrush]

What the law is is never clear until a judge decides. If it were me sitting on the bench, I would judge these schemes unlawful, as they havent been used as intended and full tax should be due. No doubt the judge's who are mates with this lot of kleptocrats will see it differently. What worries me though is why politicians put trapdoor exemptions in the tax laws for anyway?

There is no doubt that this money is being used to pay staff, just arguments over the weasel words.

By the way, what legislative change has been made to stop this?

What is intended is neither here nor there; the question will be whether the letter of the law is complied with. As for the shot at the judges, those would be the same ones who found against the banks interests the other week over mis-selling? The endless conspiracy theories on here don't help the arguments.

The "weasel words" as you called them are what was written as law. The politicians don't even draft the legislation, that's done by Civil servants including the Revenue; the problem is that it's an unequal battle because those drafting them put up the legislation and it's for others (who being far higher paid Barristers who are cleverer than the drafters) to find the holes.

The reason these gaps exist is because the more the state makes rules the more it creates loopholes. For instance, EBTs arise because the state wants people to make this kind of provision and gives allowances to incentivise; these guys just find ways to implement the incentives without having to execute all the things the drafters wanted them to. Remove all tax advantage to have pensions and all this will disappear. Try to tie it up in more and more complex legislation and guess what will happen.

It is not possible to legislate then cry foul because someone identifies gaps in what you've legislated.

As for your last question, Osborne made announcements in November which carry weight in law because they amount to clarification of the meaning of the legislation and which effectively closed off EBTs and the like for this kind of activity.

[leicestersq]

What is intended is neither here nor there; the question will be whether the letter of the law is complied with. As for the shot at the judges, those would be the same ones who found against the banks interests the other week over mis-selling? The endless conspiracy theories on here don't help the arguments.

The "weasel words" as you called them are what was written as law. The politicians don't even draft the legislation, that's done by Civil servants including the Revenue; the problem is that it's an unequal battle because those drafting them put up the legislation and it's for others (who being far higher paid Barristers who are cleverer than the drafters) to find the holes.

The reason these gaps exist is because the more the state makes rules the more it creates loopholes. For instance, EBTs arise because the state wants people to make this kind of provision and gives allowances to incentivise; these guys just find ways to implement the incentives without having to execute all the things the drafters wanted them to. Remove all tax advantage to have pensions and all this will disappear. Try to tie it up in more and more complex legislation and guess what will happen.

It is not possible to legislate then cry foul because someone identifies gaps in what you've legislated.

As for your last question, Osborne made announcements in November which carry weight in law because they amount to clarification of the meaning of the legislation and which effectively closed off EBTs and the like for this kind of activity.

On the subject and judges of mis-selling, that particular ruling hurts the bank shareholders, not the bankers. Not that it affects your main argument in anyway.

[easy2012]

What is intended is neither here nor there; the question will be whether the letter of the law is complied with. As for the shot at the judges, those would be the same ones who found against the banks interests the other week over mis-selling? The endless conspiracy theories on here don't help the arguments.

The "weasel words" as you called them are what was written as law. The politicians don't even draft the legislation, that's done by Civil servants including the Revenue; the problem is that it's an unequal battle because those drafting them put up the legislation and it's for others (who being far higher paid Barristers who are cleverer than the drafters) to find the holes.

The reason these gaps exist is because the more the state makes rules the more it creates loopholes. For instance, EBTs arise because the state wants people to make this kind of provision and gives allowances to incentivise; these guys just find ways to implement the incentives without having to execute all the things the drafters wanted them to. Remove all tax advantage to have pensions and all this will disappear. Try to tie it up in more and more complex legislation and guess what will happen.[

I am afraid civil servants seldom draft legislation. Tax laws are normally drafted by the big 4 accountancy firms who are the same ones (ok, different 'divisions' within

the organisation) who then 'advice' the banks regarding the loophole.

Totally agree with you that the more vested interest rules the more loopholes there will be. Things like Property taxes, license fees etc works much better.

Thinking about it, it is funny that the state has to tax so much and at the same time create incentive to 'save' in the pension...

[bogbrush]

Thinking about it, it is funny that the state has to tax so much and at the same time create incentive to 'save' in the pension...

It's all about attempts to engineer society to the states vision. As usual some people don't feel like playing along. They have my sympathy.