Lord Taylor of Warwick – 2016 Parliamentary Question to the HM Treasury

The below Parliamentary question was asked by Lord Taylor of Warwick on 2016-02-09.

To ask Her Majesty’s Government what steps they plan to take to clarify the tax rules relating to fines imposed on banks.

Lord O’Neill of Gatley

Fines imposed as a punishment by regulators are non-deductible for UK Corporation Tax purposes, while compensation expenditure arising from trading activity is in principle deductible.

However, the government took steps in Finance Act (No2) 2015 to make compensation associated with bank misconduct and mis-selling non-deductible and offset the deductibility of administrative costs associated with this compensation through a taxable receipt. This action is forecast by the OBR to increase banks’ tax payments by around £1bn over the next 5 years.