Arrangements operated by investment banks to pay bonuses to employees in the form of shares were unsuccessful in their aim of avoiding income tax and National Insurance contributions.
The respondent investment banks entered into arrangements to provide bonuses to their employees with a view to avoiding income tax on the payments. Rather than paying bonuses directly to employees, each bank instead used the funds to pay for redeemable shares in a special purpose offshore company set up solely for the purpose of the scheme.
The shares were awarded to the employees in place of the bonuses. Conditions were attached to the shares, which were intended to enable them to benefit from income tax exemptions (under the restricted securities provisions in ITEPA 2003, ss 425(2), 429). Once the exemptions had accrued, the shares were redeemable by the employees for cash. The employees would potentially be liable to capital gains tax at 10%, if
