The scheme is not a "tax wheeze", says Grant Thornton
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A big accountancy firm has denied that it has been peddling a tax avoidance scheme to help rich people avoid paying the new 50% income tax rate from 2010. Newspaper reports have accused Grant Thornton of devising a scheme to save high earners 40% of their tax bills. HM Revenue & Customs (HMRC) said it might ask ministers to ban the scheme. But a Grant Thornton director said it was not aimed at bankers with huge bonuses and that no income tax would be avoided by those using it. "It doesn't fit HMRC's characteristics of a tax avoidance scheme," said Justin Rix, a Grant Thornton director. Amending the law Despite this, news of the scheme, called the Growth Securities Ownership Plan (GSOP), has clearly irked the tax authorities.
"We are well aware of this aggressive avoidance scheme and we're looking at it closely," said the permanent secretary for tax, Dave Hartnett. "If it works technically, then we will go to ministers to ask that the law is amended so that everyone pays their fair share of tax. "We are determined to create a fair and level playing field in which everyone pays the tax that Parliament believes it has legislated for," he added. Since August 2004, HMRC has required all accountancy firms to tell it about any tax avoidance schemes they may have devised to help their clients legally avoid tax. Official figures show that 1,859 such notifications were made between then and the end of the 2008/09 financial year. "They have to tell us about avoidance schemes they are trying to flog," said an HMRC spokesman. "They have to register it and we do close down lots of schemes we consider inappropriate," he added. Clive Fathers, a tax partner at Grant Thornton, said he had not yet been contacted by the Revenue's anti-avoidance group, but said he expected a phone call soon. "We shall explain how the scheme works, why we think we do not need to disclose it under the anti-avoidance rules and see how we take it from there," he said. "We have put an enormous amount of due diligence into this," he added. No "tax wheeze" The Grant Thornton GSOP scheme was devised a year ago, and has since been taken up by between 20 and 30 of its clients. It is aimed at allowing privately owned companies or partnerships to sell or award the equivalent of "phantom" shares to selected employees, to give them an economic stake in the business. "It is not a tax wheeze," said Mr Fathers, "it is a share based incentive arrangement to align employees' interests with those of the company." Any income or dividend from the "shareholding" is taxed as normal, while profits from the stake, if sold, will be subject to capital gains tax. Under the scheme, employees can buy their stakes in their firm, with its value liable to go down as well as up. If employees are simply given the stake instead, they have to pay income tax and national insurance on its full value, as if it had been normal income in the first place. Grant Thornton said its plan was different from a simple bonus scheme, because it related to the performance of the company, not the individual, and was not discretionary. "It revolves around the performance of the business," said Mr Rix.
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We will go to ministers to ask that the law is amended so that everyone pays their fair share of tax
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