Virgin Media delays bonuses to avoid top tax rate
Goldman Sachs also considered delaying some staff bonuses until after April 6, but the investment bank was forced to row back on the proposals following a public outcry. Mervyn King, the former Governor of the Bank of England, said its proposed move was “depressing”.
Broker Tullet Prebon and insurance company Aon have also said they plan to delay bonuses to take advantage of the April tax cut.
Virgin claimed that by offering staff “flexibility” in this respect, it was behaving “like thousands of companies up and down the country”.
“HMRC have made it clear in their guidance that this is entirely legitimate, so we leave it to our employees to choose based on the rules set by the Government,” it added.
The Treasury would not comment on Virgin’s tax arrangements, or those of any other single company, citing legal reasons. However, in a report published in Spring last year, it predicted that it would lose between £16bn and £18bn because of companies delaying staff bonuses in this fashion. It added that doing so was a “behavioural response [that] is entirely legitimate”.
News of Virgin Media’s decision to delay staff pay outs until the next tax year comes less than a week after it struck a $ 23.3bn deal with Liberty which will trigger five-figure payouts for thousands of staff.
More than 4000 employees will receive a windfall of some kind, including 2,600 workers who will make a £13,320 profit on money they have invested in shares. However, their payouts pale in significance next to those for chief executive Neil Berkett, who will take around $ 65m off the table, and billionaire Richard Branson, who will walk away with $ 316m for his less than 3pc stake.
Liberty Global is headed by US media chief John Malone, who is renowned for his reluctance to pay tax if he can legally avoid it. He wanted to get his hands on Virgin to help him expand Liberty’s presence in Europe, but it is thought that he was also attracted to the company’s historical losses, which mean Virgin will not have to pay any corporation tax in Britain for years.