UK urged to en­sure bank fines not tax de­ductible

The Pak Banker - - COMPANIES/BOSS -

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."

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