HM Revenue & Customs (HMRC) will exclude a large number of financial companies that were unexpectedly within the scope of the new bank payroll tax. The bank payroll tax announced at PBR 2009, which is the 50% tax on bonuses above £25,000 payable by banking employers, applies to retail and investment banks (including building societies), and to banking groups. It does not apply to non-banking companies outside of banking groups (for example, insurance companies, asset managers, stockbrokers, etc)
PricewaterhouseCoopers (PwC) welcomes this step towards clarity, but warns that uncertainty remains over the type of middle and back-office roles covered by the legislation and that an unlevel playing field may develop between people performing similar roles in different organisations.
Jon Terry, partner and head of reward, PwC, said: “The scope of the draft legislation was wider than the government intended as it caught companies that were not commercially or legally banks so this clarification will be well-received by the many brokerage businesses, private equity houses, commodities firms, asset management and hedge fund companies that should now be excluded from the tax.
“In the absence of further clarity, an unlevel playing field could develop as people performing similar roles in different organisations are subject to different payroll tax treatment – for example, asset managers in businesses which are part of a banking group are currently still within the scope of the tax. Organisations will obviously be concerned about the impact this will have on their ability to compete effectively.
“HMRC has said it will continue to work with representative bodies and others to clarify the scope and effect of the proposed legislation. There is particular uncertainty about the type of middle and back office roles caught and, until the revised draft legislation is published, this and other grey areas are making it difficult for firms to make commercial decisions.”
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