Christmas bonuses paid in platinum

Britain's City traders and merchant bankers have found a new hole in the tax system: bonuses paid in the rare metals of platinum sponge and rhodium.

These are the latest in a string of innovative measures designed to prevent the City's big-hitters from paying National Insurance contributions on their bonuses. They have tried it with gold, diamonds, fine wines and even racehorses but found their measures stamped on by the Government.

This year, tax experts say several institutions will pay bonuses in platinum sponge, the pure, powder form of the metal used in the manufacture of catalytic converters. Others will be paid in arsenic sponge or rhodium. With some City bonuses expected to top pounds 1m and with National Insurance contributions set at about 10 per cent, there is a lot at stake.

It works like this. If employees receive a bonus of pounds 100,000, they will not take delivery of 10 jars of platinum sponge. They will be given a certificate saying the platinum has been bought and that the dealer awaits instructions. Unless the worker has a desire to hoard the powder, which is 99.95 per cent pure platinum, it will be sold.

One accountant said: "I know some bonuses are being paid in platinum sponge. But the bigger bonuses cannot be paid in this way as they would exhaust the supply."

The Department of Social Security has been getting tough on bonus payments saying they should be taxed as earnings.