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Deutsche Bank and UBS lose bonus tax case [awarded to staff through Cayman Islands]

_88656452_canary.wharf.gherkin.paFrom BBC

The UK Supreme Court has ruled Deutsche Bank and UBS should pay taxes on bonuses paid to their investment bankers.

The bonuses were paid to staff via offshore accounts in the form of shares to avoid attracting income tax and national insurance in 2004.

The banks had argued that restrictions placed on the payouts meant they were not liable for tax.

But a judge said the UBS restrictions were “completely arbitrary”.

Under tax rules at the time, shares attracted only a 10% capital gains tax rather than income tax and National Insurance contributions.

In the case of Deutsche Bank bonus shares were awarded to staff through a Cayman Islands company, known as Dark Blue Investments.

To qualify for the bonus payout staff only had to avoid being dismissed, or not resign within six weeks of receiving their bonus shares.

After a period of time had elapsed the shares could then be redeemed by the employees as cash.

Unlikely’ scenario
In the case of UBS, the restriction placed on the share payout involved “a specified rise in the FTSE 100 index” over a three week period.

That scenario was deemed by the Supreme Court as “unlikely to occur”.

The UBS scheme was described by Lord Justice Reed as “completely arbitrary” and “having no business or commercial rationale”.

UBS has already repaid £50m in taxes, with much of that retrieved from those who benefitted from the bank’s scheme.

Business Secretary Sajid Javid was a managing director at Deutsche Bank when the

Dark Blue Investments scheme was in operation, having joined the bank in 2000.

A spokesman for Mr Javid said: “This is a matter between Deutsche Bank and HMRC.

“Sajid Javid was paid with all tax deducted already. He received no benefit whatsoever from this scheme and all taxes due have been paid.”

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