Pre-Budget Report – Bank Payroll Tax
The Chancellor, in a widely anticipated move has introduced a one-off 50% stealth tax on bankers’ bonuses of more than £25,000. The tax known as the ‘Bank Payroll Tax’ will be payable by banks on any bonuses to employees which exceed £25,000.
The tax will be payable by all Banks, financial businesses and holding companies in banking groups, building societies, financial businesses and holding companies in building society groups and UK branches of foreign banks that pay bonuses either directly or through intermediaries.
The enabling legislation will be included in Finance Bill 2010 and will be effective for bonuses paid between 9 December 2009 and 5 April 2010. There is an exception in place where the bank has no discretion as to the amount of the bonus where there was a contractual obligation in place at the time the Pre-Budget Report was delivered. It remains to be seen how many bonuses are actually caught by this measure which seems to have been designed more to capture headlines than to collect tax.
The Bank Payroll Tax will be payable on 31 August 2010.