BDO’s Response to Today’s Pre-Budget report

Date 9 December For immediate release Subject BDO’s Response to today’s Pre-Budget Report BDO’s Response to Today’s Pre-Budget report Tax on Bankers’ bonuses As widely forecast the Chancellor announced a one-off tax on bankers' bonuses from Pre-Budget Report day until 5 April 2010. The measures are targeted at banks themselves rather than their executives. The targeted banks include certain financial businesses and holding companies in banking groups, building societies, financial businesses and holding companies in building society groups and UK branches of foreign banks that provide a bonus exceeding £25,000 to a banking employee directly or through an intermediary. There is an exception for contractual bonus entitlements where the payer has no discretion as to the amount of the bonus because of a contractual obligation existing at the time of the Chancellor’s announcement. The bank payroll tax will be payable on 31 August 2010. It should be noted that bank payroll tax will not be taken into consideration when calculating the bank’s profits or loss for corporation tax or income tax purposes. On balance, it is better that the banks themselves have been targeted rather than their executives but some banks might wish to restrict the proposed bonuses on the basis of the additional tax arising upon their payment; this may have similar overall effect in comparison to a tax paid by the executives. Although the tax is forecast to collect £500 million, the amount could be considerably less if bonuses are reduced or deferred. There will be anti-avoidance legislation but this can never be totally effective in situations such as this. Stuart Lisle, Tax Partner, BDO LLP Southampton commented: “Whilst widely expected it is perhaps surprising how potentially punitive it will be to pay a bonus in the short time-frame announced by the Chancellor when all the taxes are added together. There will inevitably be questions as to who is within the proposals but it appears that anyone working in the affected banking sectors will be caught. It is invariably bad practice to introduce legislation for motives other than tax collection. At the margin, this will discourage financial services executives from transferring to London as they may consider that a short term tax rate could be continued. Similarly, London's competitors in financial services such as Paris, Frankfurt and Switzerland will exploit the measure as a further example of an increasingly less-friendly tax regime in London for global financial services businesses. In essence, the £500 million forecasted tax revenues will not be worth the long term price paid for them." - Ends - Word Count: 368 Note to editors BDO LLP operates across the UK with some 3,000 partners and staff. BDO LLP is a UK limited liability partnership and a UK Member Firm of BDO International. BDO in Northern Ireland is a separate partnership operating under a licence agreement. BDO International is a world-wide network of public accounting firms, called BDO Member Firms. Each BDO Member Firm is an independent legal entity world-wide and no BDO Member Firm is responsible for the acts and omissions of another member. The network is coordinated by BDO Global Coordination B.V., incorporated in the Netherlands with its statutory seat in Eindhoven (trade register registration number 33205251) and with an office at Boulevard de la Woluwe 60, 1200 Brussels, Belgium, where the International Executive Office is located. The combined fee income of all the BDO Member Firms was $5.14 billion in 2008. The global network has 1,095 offices in 110 countries and more than 44,000 partners and staff provide business advisory services throughout the world. BDO LLP and BDO Northern Ireland are both separately authorised and regulated by the Financial Services Authority to conduct investment business. BDO is the brand name for the BDO International network and for each of the BDO Member Firms. Contacts Tel: 020 7983 3590/2761 Email: Charlotte.freeman@bdo.co.uk Joy.frascinella@bdo.co.uk Gill.carson@bdo.co.uk http://www.bdo.uk.com/news.html http://twitter.com/BDOaccountantPR