George Osborne has been urged to clarify how banks offset the costs of fines such as PPI mis-selling and other regulatory costs against their corporate tax bill.
The chair of the influential Treasury Select Committee Andrew Tyrie has written to the chancellor asking him to make clear whether banks can offset the costs associated with regulatory penalties.
“It is important to ensure that, when a UK bank reaches a settlement with a foreign regulator, any fines can not be structured to permit UK tax deductibility," said Tyrie.
“When a bank is asked by the FCA to employ a ‘skilled person’ - under Section 166 - to conduct a review, the costs of that review should be tax deductible unless the review leads to enforcement. The government has not clarified whether this will be the case."
New rules brought in by the Finance Act 2015 restrict the tax deductibility of compensation payments made to customers, however, this does not go far enough he argues.
“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. Taxpayers shouldn’t pay a penny of them," he added.