Goldman Sachs share awards to partners to circumvent bonus tax

GOLDMAN Sachs awarded top London-based staff tens of millions of pounds of free shares in the wake of the Labour government's tax on bank bonuses, it was claimed yesterday.

It is thought that the partners who received the shares in August are unable to sell them for five years, even if they leave the firm, and are subject to "clawback" if performance targets are not achieved.

There was speculation in the City that the revelation would reignite the debate on banker bonuses.

Sky News claimed that Goldman felt compelled to hand out the free shares in order to retain key staff, with several London-based partners of the bank having left earlier this year after seeing their compensation capped.

Goldman Sachs yesterday declined to comment on the report but Sky said "people close to the bank" had said that the share awards were an unintended consequence of the bonus tax.

It was thought some politicians would be quick to denounce the share awards as little more than tax avoidance.

It is understood all of the London-based partners, around 60 to 80 people, received varying amounts of Goldman stock and that the awards had been cleared by the Financial Services Authority which recently imposed a 17.5 million fine on the bank for not keeping it informed of a US regulatory probe.

In January this year the partners had their total pay package for 2009 capped at 1m as the bank sought to minimise its Bank Payroll Tax liability.

Former chancellor Alistair Darling, had imposed a one-off levy of 50 per cent on discretionary cash bonus awards of more than 25,000. Goldman paid out about $600m in the tax, while figures released last month by the Office of National Statistics showed that the Treasury reaped a gross windfall of 3.5 billion from the tax. Goldman contributed around 2bn to the Treasury's coffers last year through corporate and income taxes.