Thu, 2 Sep 2010

Banker bonus tax collects £2.5bn more than expected

An estimated £3bn is expected to be received from the tax of banker’s bonuses – over £2bn more than forecasts from last year’s pre-Budget Report initially suggested.

Initial forecasts indicated the one-off bonus tax would raise £550m when introduced by the previous Labour Government.

But this figure was revised in April by the Office for National Statistics (ONS) which estimated the figure to be closer to £2bn.

Figures quoted in HMRC’s 2009/10 accounts revealed that £2.5bn will be collected.

The Wall Street Journal, undertaking its own analysis of company reports and press statements, revealed that the figure is closer to £3bn.

It estimates that the highest contributions will come from US banks, with Goldman Sachs the largest contributor reportedly paying $600m (£381m) in tax.

JP Morgan was the second biggest contributor, owing $550m (£349m), while Deutsche Bank was the biggest European contributor after paying out £335m.

Largely Government-owned Royal Bank of Scotland is set to be the UK’s highest contributor at £277m, with Barclays coming in second with £276m.

While estimated amounts were recorded in the Government figures in April, HMRC is set to collect the actual funds at the end of this month.

A spokesperson from HMRC declined to comment on the expectation that the one-off tax will yield more than originally anticipated and expressed uncertainty over when the final figure would be published.

The bank payroll tax (BPT) was effective from the time of the announcement on 9 December 2009 until 5 April 2010 for all discretionary and contractual bonus awards, and applies to retail and investment banks (including building societies) and to banking groups.

It does not apply to non-banking companies otside of banking groups.

Financial institutions seeking information about whether the BPT applies to them should refer to the HMRC guidance on
the BPT (accessible through the HMRC website), or consult their customer relationship manager or the tax office that eals with their tax affairs.

The previously quoted estimate of £550m is net of losses from other taxes, but the latest figure is gross.