Don't bank on it

Banks will pay either way for gaming UK tax change

Banks will need to face the consequences if they circumvent changes to UK tax law by fiddling with bonus payout dates. It’s easy to see why Goldman Sachs and others are considering delaying the day they dole out share awards for previous years. Doing so would enable UK staff to benefit from the reduction in the top rate of income tax from 50 to 45 per cent, due to take effect from April 6.

True, companies have long sought tax boons for staff by pushing back or advancing payout dates. But tax is a contentious topic in the UK right now. Amazon, Google and Starbucks have all been hauled in front of politicians to explain how it is such titans of industry have paid so little to the exchequer in recent years. A new principle is establishing itself: companies, and individuals, are expected to pay the appropriate rate.

Rescheduling payments that were due in the current tax year isn’t just bad corporate citizenship. It would look too clever by half. Banks’ reputations would suffer and the brand damage would probably cost more than paying staff more to compensate them for the “extra” tax burden arising from paying out on time.

That’s because tax is an especially toxic issue for the banking industry. Even foreign banks that received no direct state aid are viewed by the public as indirect beneficiaries of bailout cash. And, while banking pay has fallen, it is still hugely out of kilter with other industries. Even if banks were not to pay staff an adjustment to offset the tax, employees shouldn’t grumble. Bankers may be thick skinned, but they will not want another reason to be shunned in polite society.