The public backlash against celebrities and big firms managing their tax to pay less is gathering pace as US investment bank JP Morgan is reportedly paying £500 million in taxes due from a scheme set up to help staff keep more of their pay.
The bill could be closer to £1 billion, but negotiations with HM Revenue and Customs (HMRC) may only see half of that amount being paid.
At stake is whether an Employee Benefit Trust (EBT) is a legal method to manage paying employees for big companies.
The JP Morgan EBT let the company pay less employers’ national insurance contributions and tax.
But after new laws were passed to clamp down on EBTs, many are now being wound up – an HMRC is looking for a share of any taxes they believe were unfairly withheld.
EBTs outlawed by new rules
JP Morgan used a Jersey-based trust for 2,000 current and former staff and they have asked them to make a contribution to the HMRC settlement. Those who choose not to settle will face a bigger tax bill once their assets in the EBT have been liquidated.
The scheme they used was authorised by HMRC , but new laws mean it can no longer operate.
An EBT generally holds unpaid remuneration, like a bonus, and puts back the deadline for the employer paying national insurance and other taxes on the money – but the employee could take out an interest-free loan from the trust without paying tax.
A JP Morgan spokesman said: “Our employee trust has always been transparent and its independent trustee has always paid taxes according to the UK’s tax law.”
HMRC said: “There is now legislation to remove any doubt over arrangements involving third parties, such as EBTs, are ineffective as a way to avoid tax.
Starbucks stir up a storm
“A large number of EBT schemes didn’t work under the previous legislation and we will continue to challenge them.”
The news follows on from Starbucks announcement to ‘voluntarily’ pay £20 million to the Treasury coffers in a bid to head off a customer boycott after revelations that they had paid only £8 million in taxes on sales worth many more millions since 1998.
Protests have taken place outside many of their coffee stores across the country.
And some of the UK’s biggest names are facing hefty tax bills if the taxman wins an upcoming tribunal involving film scheme provider Ingenious Media.
HM Revenue and Customs (HMRC) has reportedly told the firm that its schemes are not designed to promote films but to avoid tax.
Some of the people involved in the scheme include footballers David Beckham, Steven Gerrard and Wayne Rooney, along with TV presenters Jeremy Paxman and Anne Robinson, and pop star Robbie Williams.
