HMRC, which has been fighting the case for 12 years, said it meant to challenge similar arrangements at other businesses.
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In the case of Deutsche Bank bonus shares were awarded to staff through a Cayman Islands company, known as Dark Blue Investments.
In November previous year, three judges at the Court of Session at Edinburgh ruled that Rangers broke tax rules when they used Employee Benefit Trusts (EBTs) to supplement the wages of players and managers from 2001 and 2010 using what they argued were loans.
“Shares awarded to bank employees as bonuses are liable to tax”, the court tweeted following the ruling Wednesday. “In our society, a great deal of intellectual effort is devoted to tax avoidance”, he noted. 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 50 million pounds each.
The case centred on bonus schemes worth £91.9m and £91.3m set up by Swiss bank UBS and Germany’s Deutsche at the end of the 2003/4 tax year.
They claimed the shares should be treated as “restricted securities” at the time of acquisition rather than normal securities, and a result the shares would not be subject to income tax.
Lord Carloway said, “The court is of the of the view that there is an arguable point in law of public interest which should allow the appeal to the UK Supreme Court to proceed”.
Robert Reed, one of the five senior judges hearing the case, referred to such schemes as “the most sophisticated attempts of the Houdini taxpayer to escape from the manacles of tax ” .
“It’s very bad news for the banks involved: they will need to pay the tax on employee bonuses which were delivered over a decade ago”, said Justin McGilloway, a lawyer at Wedlake Bell who wasn’t involved in the case.
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Meanwhile, a spokesperson for UBS added: “This matter concerns a disagreement over the interpretation of highly technical tax legislation and dates back to a one-off compensation plan for 2003”.
