Goldman Sachs attempt to defer bonus payments

It first emerged on January 13 2013 that the banking giant Goldman Sachs would defer the payment of  Goldman’s UK bonuses from the last three years (2009-2011) from February until early April for their top rate tax staff. Income tax on people earning an annual salary of more than £150,000, like these bankers, is set to drop from 50p to 45p on April 6 2013, allowing banks the opportunity to pay less tax by delaying payments. In such a calculated tax plan a banker who earned £1million in deferred bonuses would save £50,000 in tax.

Goldman’s bonuses are typically paid 40% in cash during the year they are earned and 60% in shares which are deferred over the next three years. At the end of December last year, the bank paid out around $40 million (£24.8 million) of such deferred share awards to US employees just ahead of the “fiscal cliff” vote in the United States to help them benefit from lower income taxes.

However, Goldman later did a ‘U’ turn and abandoned the plan for deferral payments of UK bonuses under the huge pressure from the public backlash. The Goldman’s tax plan was perfectly legal although the news triggered a mountain of ctitisism from the media and even from within the banking industry.

In the meantime, London-based insurance broker Aon is going ahead and helping 250 of its highly paid staff save 50% income tax by deferring bonus payments until the new tax year. The Aon bonuses relate to the 2012 financial year and were due to be paid in March. They will now be paid in April after the beginning of the new tax year.

If you are a contractor or run a small business, Belsize Accountancy will advise you on your tax planning using UK approved methods. Please contact us on 0207 043 0052 or at info@belsizeaccountancy.co.uk.