The U.K. Supreme Court ruled that Deutsche Bank and UBS must pay taxes on two banker bonuses plans, saying the firms exploited loopholes to avoid payments in a decision that will affect a number of similar arrangements.
Bloomberg News reports that the 12-year-old dispute involved taxes on two $128m employee bonus plans set up in 2003 to reduce liabilities on some bonuses the following year. The British tax collection agency, Her Majesty’s Revenue & Customs, later found the plans amounted to tax avoidance and asked UBS and Deutsche Bank to pay about $71.1m each.
Supreme Court Judge Jonathan Mance said the schemes were “commercially irrelevant” and had no purpose other than to escape taxes, which is not what lawmakers intended when they created the rules.
“It is difficult to accept that Parliament intended to encourage, by exemption from taxation, the award of shares to employees, when the award of such shares has no purpose other than the obtaining of the exemption itself,” Mance said.
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