The Daily Telegraph reports that the Inland Revenue has commenced an investigation into a Barclays Capital bonus scheme and is believed to have already contacted some of the firm's staff advising them that they may be liable to pay more tax.
There is no suggestion that the scheme is in any way illegal. Like many schemes designed by creative tax and compensation experts in recent years, the scheme was designed to avoid the payment of National Insurance contributions. It also seeks to spread what tax liability there is over a 10-year period.
The newspaper has managed to get hold of a form letter which is believed to have been sent to certain Barclays Capital employees. The letter says, in part: 'The Revenue are enquiring into whether the income received by your participation in Barclays Capital Adjustable Options is assessable to income tax under Schedule E and National Insurance.....Matters are being discussed between the revenue and your employer and their advisers'.
The scheme itself would appear to be pretty standard and, if the Revenue does manage to extract more tax from employees, the implications for other City staff paid out under similar bonus schemes are not good. Just the thing the City needs in these difficult times.
A spokesman for Barclays has said: 'Barclays Capital is confident that it has fulfilled its obligation to provide competitive compensation in keeping with applicable rules and commonly accepted practices'.