On 18 December 2009, HM Revenue & Customs published a document stating that the Government proposed a considerable reduction in the number of companies caught by the bank payroll tax announced in the Pre-Budget Report.

A tighter definition of bank is now proposed which will limit a bank to a deposit taker or a full scope BIPRU 730k firm dealing in investments etc (including those who are only outside this definition because their head office is outside the UK).

Banking group will be defined accordingly. Prime brokers will also not be banks and where the "banking" activity within the group is minor in relation to the group as a whole, then only the relevant bank or banks will be caught by the new tax – the rest of the group will not be caught. There are also a number of other changes. The 18 December announcement can be read by clicking here (www.hmrc.gov.uk/pbr2009/bank-payroll-18-12.htm).

The position may still appear slightly arbitrary as it still catches more than just banking activity for bank group companies. If a company is a stockbroker, for example, then discretionary bonuses to its employees will be caught if the company is part of a banking group, but not if it is an independent entity.

Which employees and what types of their remuneration are caught (including options and LTIPs awarded in the relevant period) still remain unclear in what must, by the Government's own concession, be one of the most loosely drafted and poorly scoped taxes in recent years. Unfortunately, although the Government says that representations are being received on these points too, it seems likely now that clarification will only emerge in the New Year.

Our revised article on the new tax (taking account of these proposed changes) can be accessed by clicking here (www.law-now.com/xc.asp?g=22730DC7-304A-41C4-9309-C847F88650A7).

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 22/12/2009.