Deutsche Bank and UBS lose tax bonus case

March 10 03:20 2016

Britain’s top court on Wednesday ruled against Deutsche Bank and UBS in a long-running case over taxes on bonuses that has opened the door to back taxes by the banks and which could ding other companies that have engaged in similar schemes.

The German and Swiss banks set up bonus pools that relied on offshore vehicles to reduce taxes on bonuses awarded during the 2003 to 2004 tax season. The offshore vehicles were set up explicitly for the purpose of reducing employees’ taxes on bonuses and often later wound down, according to the court.

The UK Supreme Court on Wednesday blasted the efforts as “sophisticated attempts of the Houdini taxpayer to escape from the manacles of tax.” “Shares awarded to bank employees as bonuses are liable to tax,” the court tweeted following the ruling Wednesday.

The banks had argued that the bonus schemes, which have not been repeated, didn’t break rules in part because conditions were attached to the bonuses that made more like restricted securities. But the court Wednesday called some of the restrictions “arbitrary.”  “We note today’s decision and can confirm that all tax and national insurance due as a result have already been paid,” said Alison Moody, a spokeswoman for Deutsche Bank. The bank paid taxes on the bonuses after it lost the first case. Wednesday’s decision was just the latest appeal in the on-going dispute between the banks and the U.K. government.