Summer Budget 2015: Restricting tax relief for banks’ compensation payments

A corporation tax deduction is available for expenditure incurred wholly and exclusively for the purposes of a trade carried on by a company unless the expenditure is specifically excluded by statute or by case law.

Currently banks are able to claim a deduction for compensation payments and associated expenditure relating to misconduct issues.

Compensation expenditure arising on or after 8 July 2015 will not be deductible for corporation tax purposes.

The objective of this measure is to ensure that corporation tax receipts are not affected by large compensation payments made in respect of banks’ misconduct and management failures.