COMMONS

Chairman asks Chancellor for clarity on tax deductibility of fines

07 February 2016

Rt Hon. Andrew Tyrie MP, Chairman of the Treasury Committee, has written to the Chancellor asking him to clarify whether banks can offset the costs of fines, and other payments they make at the behest of regulators, against their corporation tax bill.

Chair's comments

Commenting on the correspondence, Mr Tyrie said:

"Banks should pay for the full cost of their misconduct. It would be wholly unacceptable if taxpayers, having bailed out the banks in 2008, were to find themselves partly responsible for paying the banks’ fines.

A restriction on the tax deductibility of compensation payments to customers has been reinforced by the Finance Act 2015. This is a big step forward. But uncertainty remains on a number of points. 

It is important to ensure that, when a UK bank reaches a settlement with a foreign regulator, any fines can not be structured to permit UK tax deductibility.

When a bank is asked by the FCA to employ a ‘skilled person’ - under Section 166 - to conduct a review, the costs of that review should be tax deductible unless the review leads to enforcement. The government has not clarified whether this will be the case.

Clarification by the Chancellor is needed to ensure that the good intentions of the statutory change, announced in his summer Budget, are fully reflected in the tax treatment of fines for misconduct. Taxpayers shouldn’t pay a penny of them."

Further information

Image: iStockphoto

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