Belfast Telegraph

The rush is on to beat the 50% tax hike

In one sense, the revelation from pay analyst Incomes Data Services (IDS) yesterday that executives are seeking to make hay before the new 50% of top-rate tax arrives in April seemed like a statement of the obvious.

What did they expect? Still, IDS has put its finger on a trend that has gathered pace.

Earlier this month, for example, the financial advisory business Hargreaves Lansdown said it was paying a special dividend this year so that shareholders (including Messrs Hargreaves and Lansdown, who still hold big chunks of stock) could get more money out of the business ahead of the 50% rate.

Others have done the same, more quietly, while some have taken even greater liberties with the tax avoidance rules, bringing forward next year's bonuses, or even pay, to beat the hike.

TUC general secretary Brendan Barber is upset, complaining that “this kind of tax dodge is only available to higher earners”.

Still, the Treasury may not share that sentiment as fully as one might expect.

It is desperate for every penny of tax it can take during the current financial year, and this may give the 2009-10 figures an artificial boost.

One might also say that if there are enough businesses out there with sufficient cashflow to bring forward remuneration to the extent that it makes a material difference to the tax take, then maybe the economy is doing better than we thought.

Is the IDS warning something we should worry about? Possibly — but, in practice, any change to taxation prompts a rush by those affected to limit the damage they expect to suffer, and there's not much to be done about that.

Experience also suggests that damage limitation is rarely effective. Don't expect next year's tax take to be too badly hit.

Belfast Telegraph