JP Morgan nearing settlement with UK government over taxes
08 December 2012
JP Morgan is nearing a settlement with the UK government in which the US lender as also its employees could pay close to £500 million in back taxes that were avoided through the use of an offshore trust for bonus payments, the Financial Times today reported.
The Wall Street bank, said to be in the final phase of winding up the Jersey-based arrangement had asked over 2,000 of its current and former employees to contribute to the settlement. Individuals who would choose to stay away from the settlement could end up footing a higher tax bill with the liquidation of their trust assets.
The case comes as relations between the UK tax authorities and foreign companies operating in the country are under growing strain. Starbucks on Thursday agreed to make a £20-million tax donation following a public outcry over its payment of only £8.4 million in UK corporation tax over a 14-year period.
The Financial Times report said trust schemes typically offered twin tax breaks by allowing companies and their employees to avoid paying, respectively, employer's national insurance contributions and income taxes.
The trust held bonus payments, which could not be availed without triggering a tax payment, though employees could take interest-free loans from the trust on an unsecured basis.
Such schemes were being closed after the introduction of new legislation last year that outlawed employee benefit trusts. The lender, Jersey trust, had earlier operated with the full knowledge and authorisation of UK tax authorities.