Unions call for CT on 'mega-bonuses'

As the UK’s banks prepare to announce their bonus pools for employees, unions are calling for salaries and handouts above £250,000 to be liable to corporation tax.

As part of a series of demands on the government to reform the bonus culture of big business, the Trade Union Congress (TUC) has said that payouts of more than ten times the national average should be treated as company profit, and therefore levied at 28% (27% from 1 April).

‘City bonuses are effectively profit distribution, so classifying and taxing them as profits would force companies to consider whether it is in the interests of shareholders to pay such high levels of bonuses,’ said the TUC, which suggested that its proposed measure would be a ‘better long-term solution’ and ‘harder… to avoid’ than last year’s one-off bank payroll tax.

The organisation’s general secretary, Brendan Barber, remarked, ‘Making mega-bonuses liable for corporation tax could drive reform of boardroom bonus culture and raise revenues so that the tax burden does not fall so heavily on low- and middle-income families.’

John Cullinane, tax partner at Deloitte & Touche, said there was ‘no intrinsic reason’ why the TUC’s plan wouldn’t work, but it was extremely unlikely to become a reality.

He added that, given the bonuses would presumably be subject to personal taxes, applying corporation tax to the handouts would be little different from simply raising income tax to around 60%.

‘If you do the sums, the TUC’s suggestion is very much like last year’s bonus tax on banks, which came as something of a surprise. The only difference is that it would be permanent and expected, and companies may therefore begin to reconsider London as their base – although no one could say with any certainty where the tipping point would be in terms of tax leakage.’

Categories: News , bank payroll tax , John Cullinane , TUC , Companies