Mmmm, the men in bowler hats round at Somerset House must be thinking.Bonuses regardless at MorganMany in the City will have a deep and weary understanding of why Deutsche Morgan Grenfell will need to pay millions of pounds in bonuses to its fund management staff early next year.Like Barings, where ING had to pay bonuses regardless of Nick Leeson's losses, the value of a company such as Morgan Grenfell Asset Management rests not just on brand name and client lists, but on the expertise and contacts of the employees too. As a result ordinary tax-paying shareholders will share in the benefits of non-taxpayers. When traded, this share can thus be expected to reflect the value of the dividends to a non-tax-paying fund; they ought to trade somewhere between the gross and the net value of the dividends. What Reuters is doing is securitising the extra dividends in a special dividend share. The other point of the special dividend share is that the extra income becomes divorced from the company, like an annuity or a split capital trust. All very eloquent.But the real eloquence seems to lie in an area which Reuters is none too keen to trumpet - the way it allows all shareholders, taxable and tax-exempt alike, to benefit from the tax credit.

Reuters claims it would have done a share buy-back but for the fact that American securities law is incompatible with a buy-back that would allow institutions the tax benefits. So it has chosen this route, which has the added attraction of allowing the 37.5p-a-share special distribution to be spread over three years. But you can bet your boots they wouldn't be paying out their cash on quite this scale were it not for the fact that the only loser in the process seems to be the poor old Inland Revenue. The law was surely never designed with this eventuality in mind.The Reuters scheme has added a new dimension to the debate. While many of us might think the pensions industry a rather better home for the money than the politicians, the Revenue must none the less be getting mighty pissed off Sure, the law allows companies to do this.

Over the past three years the Revenue must have lost out to the tune of well over pounds 1bn as a result of the various wheezes the City has dreamt up to enable big tax-exempt shareholders like pension funds to claim a tax credit on any corporate distribution over and above ordinary dividends. First we had the off-market tender offer (Reuters again, that one), then the enhanced scrip dividend, then the share buy-back, or "on-market agency cross" to use the technical jargon. Now there is an even newer technology to add to the armoury, the special dividend share. All these schemes vary a little in their underlying commercial purpose, but the effect is always the same; they enable the big pension funds to claim a 20 per cent tax credit on all the extra money paid out. You can argue about the morality, the pros and cons, and the mechanics of this until the cows come home, but the basic point remains the same - well over pounds 1bn that would otherwise be lying in the public purse to be spent on such obviously deserving national causes as the Eurofighter and Britain's burgeoning social security budget, has ended up with City pension fund managers. Whether the Inland Revenue finds it quite so clever is another thing.