Billionaire trader Alex Gerko loses UK tax appeal
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Alex Gerko, the billionaire founder of British trading firm XTX Markets, has lost a legal appeal over the tax on a deferred payment plan in the latest case against a trading firm.
Gerko, the UK’s biggest individual taxpayer, has challenged HM Revenue and Customs’ stance on deferred trading profits he and other traders earned while working for hedge fund GSA Capital between 2010 and 2015.
The payout plan is built so that traders will be paid up to 50 percent of profits within three years.
The judgment said the “desirable tax analysis” was that traders, who operate as separate entities, would be taxed at the corporate tax rate, rather than being taxed as individuals at the higher income tax rate.
However, in a judgment delivered at the Court of Appeal on Friday, judges ruled that traders must pay income tax on their share of the trading profits.
“I fundamentally disagree with this ruling, as it results in a significant double taxation situation and has broader implications for the financial industry,” Gerko said in a statement, adding that he was considering options “to continue down the litigation path.”
According to the Sunday Times tax list, Gerko is the UK’s top taxpayer, paying £664m last year and £487.4m in 2022.
“The amounts involved are minuscule compared to the billions of pounds in tax I have paid and happily paid over the years,” Gerko said.
He left GSA Capital in 2015 to build XTX Markets, which has grown into one of the world’s largest trading firms, processing $250 billion in daily trading value across stocks, bonds, currencies and commodities, and competing fiercely with firms like Ken Griffin’s Citadel Securities.
The ruling makes Gerko and others who left GSA to join XTX the latest high-profile traders to lose tax cases. In December, partners at billionaire Michael Platt’s BlueCrest Capital were found to be liable for income tax under a payroll scheme dating back to 2008 after the investment firm lost a lawsuit.
The judgment said the GSA case had “many material similarities” to the BlueCrest case.
“I chose to litigate rather than settle years ago for a much smaller amount because I believed that [the] HMRC’s case is built on a complex and ambiguous interpretation of tax law that leads to a completely unreasonable result,” Gerko said.
