Taxman closes in on star bankers' bonuses

The government has set a deadline of December for City firms to hand over hundreds of millions of pounds of tax they allegedly avoided when paying bonuses to star bankers earlier this year.

Several leading banks are thought to be facing demands for payment following a recent court ruling which makes it easier for the tax authorities to clamp down on employee benefit trusts (EBTs). Many firms use EBTs to avoid National Insurance contributions when rewarding top employees, but officials at HM Revenue & Customs have long regarded them as potentially abusive tax loopholes. Banks have until 9 December either to pay their back-tax bills or to appeal to the Revenue's commissioners. National Insurance payments on an estimated £1.5 billion of bonuses are thought to be at stake.

Chancellor Gordon Brown has promised to crack down on avoidance, which together with illegal evasion costs the public purse tens of billions of pounds annually, according to some estimates.

Premiership football clubs could also be affected by the clampdown since many are thought to have used EBTs to reward their star players.

The Revenue's anti-avoidance effort is likely to be scrutinised by the House of Commons Treasury select committee this week.