Goldman Sachs partners who are not resident or domiciled in the UK but work in London can exploit a lucrative loophole and avoid paying capital gains tax on shares worth up to $100m (#61.7m) each.
US citizens and other overseas partners in the 37-strong group of City directors, including international business deputy chairman Richard Hayden, are set to benefit after last month’s decision by partners to float. They will better UK partners who themselves will receive combined savings of #500m under the tapering effect in capital gains tax, if their shares are kept for over 10 years.
A spokesman for Goldman Sachs said the bank was not prepared to discuss the arrangements.
But Mike Warburton, a tax partner at Grant Thornton, said he expected the Americans to form the partnership into a limited company. ‘A company could be set up with registration outside the UK but with board meetings in the UK. By doing so UK assets would be turned into overseas assets avoiding CGT,’ he explained.
Patrick Stevens, a tax partner at Ernst & Young, said if they turned the shares into non-UK assets in a US company they would be hit by US tax but not CGT. ‘All they have to do is ensure they gift their shares into a non-UK asset and then benefit from rule 165 relief.’
He said they could then sell shares at any time rather than UK counterparts who must wait ten years to claim tapering relief from CGT.
Stevens said non-US or UK partners domiciled at Goldman Sachs will receive the best benefits: ‘London has a wonderful tax regime and they will probably be able to sell out tax free.’
A Revenue spokeswoman said the issue depended on whether the share pay-out was in the UK. She said: ‘We do not know where it is being paid.’
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