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Tied and multi-tied adviser firms to be hit by bonus tax

Tied and multi-tied advice arms of banks are expected to be hit by the bank payroll tax, introduced in this week’s pre-Budget report.

Chancellor Alistair Darling announced a one-off levy of 50 per cent on any individual discretionary bonus above £25,000, to be paid by banks rather than individual employees.

According to HMRC technical notes employees who carry out regulated activities, including dealing in investments on behalf of clients or safeguarding and administering investments for clients, will be affected.

A Treasury spokesman says: “The bank payroll tax can apply to financial advisers if they are deemed to be supporting banking activities and are directly linked to the services of a bank.”

In his speech Darling said it is only fair to impose this tax on banks who pay out more than £25,000 in individual bonuses because all UK banks have benefited from the taxpayers’ bailouts and fiscal measures. The move is expected to raise £0.5bn.

Syndaxi Chartered Financial Planning managing director Rob Reid says: “I don’t see how you can pick just one section of an industry, like banking, and apply a tax like this. It will be very difficult to enforce.”

St James’s Place and Lloyds Banking Group say it is too early to judge what impact this will have on their firms.

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