UK urged to ensure bank fines not tax deductible
The head of a committee of UK lawmakers called on Chancellor of the Exchequer George Osborne to guarantee banks won't be able to offset the cost of fines against their corporation-tax bills.
Treasury Committee Chairman Andrew Tyrie wrote to Osborne asking him to clarify whether fines and other payments made to regulators at home or abroad -- such as being asked by the Financial Conduct Authority to hire someone externally to conduct a review -- won't be tax deductible.
"Banks should pay for the full cost of their misconduct," Tyrie said in the letter, published by his office on Sunday. "It is important to ensure that, when a U.K. bank reaches a settlement with a foreign regulator, any fines can not be structured to permit U.K. tax deductibility."
Investigations into misconduct have result- ed in fines and other costs for banks of almost 30 billion pounds (43 billion) since 2009, according to the Bank of England.
In October, the Treasury introduced a clause to the Finance Bill stating banks will no longer be entitled to tax relief for compensation payments made in relation to their misconduct and mis-selling.
While this bars lenders from claiming back compensation payments to customers, Tyrie said more clarity was needed on whether the same rules apply for fines incurred through regulators in the U.S. or the costs of FCA-commissioned reviews.
"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," Tyrie said in the letter. "Taxpayers shouldn't pay a penny of them."