A Jersey-based scheme designed to allow UBS to avoid paying tax on £91 million worth of bonuses to 426 employees has been struck down by Britain’s highest court.
The Supreme Court has backed an appeal by the UK tax authorities and ruled that the share scheme was “designed to avoid the payment of income tax on bankers’ bonuses” and has ordered that the bank pays tax and national insurance on the shares, worth an estimated £37.3 million.
The case before the court related to shares awarded to employees of UBS in 2003 – the bank has emphasised that the scheme was a one-off, and has accepted the judgment.
The Supreme Court heard that a Jersey company was established by UBS to hold the shares in January 2004 and then awarded the shares to employees. But they attached conditions to the distribution of the shares that allowed the scheme to claim the benefit of an exemption under UK Income Tax law which meant they didn’t have to pay any tax on them, which they would have had to do if it had been a cash bonus.
The Supreme Court has ruled that the condition was a naked attempt to avoid paying tax on the shares – and that the effective tax and national insurance contribution on the bonuses would have reduced the bonuses by 41%.
The court’s judgment stated: “In the UBS case, the condition - whether the FTSE 100 rose by a specified amount during a three week period - was completely arbitrary. It had no business or commercial rationale beyond tax avoidance.”
Comments
Comments on this story express the views of the commentator only, not Bailiwick Publishing. We are unable to guarantee the accuracy of any of those comments.