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Tax deductibility of banking fines

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Chairman of the Commons Treasury Committee Andrew Tyrie MP is concerned that taxpayers are still ‘on the hook’ for the costs of banks’ misconduct. He has been in correspondence with the chancellor to try and establish whether banks are still able to obtain a corporation tax deduction for payments made to banking regulators to cover the costs of their investigations.

Finance (No. 2) Act 2015 introduced changes to ensure that compensation paid to customers for mis-selling is not deductible. However, the chancellor’s letter states: ‘payments made to bank regulators in respect of their compliance costs ... are considered to be expenses of doing business and are therefore deductible for corporation tax purposes’.

Tyrie’s response is clear. ‘This should change,’ he said. ‘UK regulators should ensure that any payments required from banks for misconduct are either compensation payments to customers, falling within the scope of last year’s changes, or are clearly set out as fines and not as “compensatory” payments.’ See