The second highest paid director at the FTSE 100 investment giant Schroders has quietly ended a controversial dual employment contract after The Independent revealed that the unusual structure could save him huge amounts of tax.
Massimo Tosato, executive vice-chairman at the fund manager, was paid a total of £4.1m last year and £3.3m in 2012.
The London-based Italian had two employment contracts: one for his UK and international duties, and one for his international duties alone. Such dual employment contracts can allow foreign executives to claim some of their earnings in countries that levy a lower rate of income tax. The Treasury closed the loophole last month in a move that it hopes will raise £270m a year.
According to Schroders’ recent annual report, Mr Tosato’s contract “covering certain of his international duties” has been ended after nearly 12 years. The report states that the contract ended “during 2013”, although when The Independent first disclosed his unconventional arrangements two weeks before Schroders’ financial year end on 31 December, the company confirmed that the two contracts were still operating.
A spokesman said last week: “Schroders’ remuneration committee reviews remuneration arrangements for senior employees at the end of the year. Mr Tosato’s contract related to his international duties ended as a result of the changing nature of his role as he has dedicated more time to group activities and strategy and not in response to any matters external to the company.”
The company, and Mr Tosato, have never commented on his tax affairs, or how much of his £3m to £4m a year pay has been going through his first or second employment contract. It has also never disclosed in which jurisdiction his second contract is held.
Coincidentally, Mr Tosato became embroiled in a minor political scandal in Italy over tax in 2012 when details emerged of a property deal involving him and the government minister in charge of clamping down on tax avoidance. It appeared the minister had registered in official documents a far lower purchase price than the mortgage he took out. The minister denied this was to reduce his tax bill on the purchase, saying he had made an extra payment to a member of the Tosato family for work done on the property.
There was no suggestion of wrongdoing on Mr Tosato’s part. A Schroders’ spokeswoman said on his behalf that the transaction had been “legal and above board”.