Business website Bloomberg.com reports that Alex Gerko, founder of algo trading and marketing firm XTX Markets, has lost a UK court case against HM Revenue & Customs over the taxation of deferred payments at the former high-frequency trading firm and amount. , GSA Capital.

According Bloomberg, a UK appeals court ruled that Gerko and other traders, while still implementing high-frequency trading strategies at GSA Capital from 2010 and 2015, should pay income tax on their share of trading profits from the fund. The total size of the tax bill is estimated at £22.5 million (US$29 million).

The appeal revolved around the structure of a deferred payment plan at GSA Capital, whereby profits were allocated to an internal investment unit before being ultimately distributed to marketers, coders and developers over a three-year period. The dispute was that the payments should be treated as income eligible for corporation tax or a higher income tax bracket.

The payment plan was to ensure that GSA traders would eventually be paid up to 50% of the company’s profits over a three-year period. The deferred payments were designed to ensure the retention of traders (better known in the business as “golden handcuffs”) as well as to punish bad behaviour, according to a statement by Mr Gerko at an earlier hearing.

The plan allowed the GSA to recoup funds if regulatory fines were imposed, according to a lower court ruling that said a $100,000 fine was once reimbursed from a dealer’s bonus by the GSA.

According to Mr. Gerko’s court filing, the plan was not structured for tax purposes. He said he would prefer not to defer payments at all, saying he “didn’t find it very attractive to work 60-70 hour weeks and have essentially the entire bonus deferred.”

“I chose to litigate rather than settle many years ago for a much smaller amount because I believe the HMRC case was based on an interpretation of complex and ambiguous tax law that led to a highly unreasonable result,” Gerko said according to Bloomberg. “I fundamentally disagree with the crisis leading to massive double taxation and wider implications for the financial industry.”

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