Goldman's thinking of going and the bonus tax clarifications haven't clarified anything at all
It may be a new year, but the issues haven't changed.
Following on from earlier rumours that Goldman was thinking of moving some of its European businesses to Spain, The Telegraph reports today that Goldman's now considering moving prop trading and other of its businesses out of London and into Geneva.
Is this really necessary, particularly as Q&A clarifications posted on the Revenue's website on Christmas Eve, appear to suggest the bonus tax is less onerous than thought?
The Times, for example, interpreted the clarifications as saying that shares which both vest after April 2010 and are subject to a clawback won't be caught.
Sadly (and somewhat predictably), the tax may not be that easy to avoid. "The Q&A was intended to add clarity, but has just added another layer of complexity," says Chris Sanger, head of tax policy at Ernst & Young. He adds: "The Q&A appears to say that if there is a discretionary award of shares between now and April, it will be caught by the payroll tax. However, if the award is based on criteria that take effect after April, it may not be included."
On one hand, this sounds promising. Graham Muir, a tax partner at law firm Nabarro, says market value options issued between now and April, which allow individuals to purchase shares at today's prices in future, probably won't be covered by the tax.
However, Muir points out that the issues raised in the Revenue's Q&A document are subject to alteration: "The Q&A isn't legislation, and it's subject to change - the Revenue's already added some more points between Christmas and New Year." Equally he points out that, anti-avoidance legislation allows the government to extend the tax to cover long term performance incentive plans retrospectively if they're thought to have been concocted with the aim of escaping the tax.
In the meantime, the uncertainty is as damaging as the bonus tax itself. As Ted Burke, chief executive of Freshfields, told the Financial Times, for a financial centre to succeed banks operating there need a reasonable degree of certainty as to the rules they will be playing under. At the moment, the British government simply isn't providing it. Until it does, expect more threats to move overseas.
