UK Banks Lined Up to Miss Out on £2 Billion in Tax Over Car Finance Scandal
A loophole allowing UK banks and specialist lenders to avoid paying £2 billion in tax on their payouts to motor finance scandal victims is sparking outrage among lawmakers. The current law permits non-bank operations to deduct compensation payments from their profits before calculating corporation tax, a provision that was introduced in 2015 but now appears to be being exploited by the industry.
The loophole has significant implications for taxpayers, who are set to lose out on £2 billion in corporation tax over the next two years. Big high street names such as Barclays and Santander UK, as well as Lloyds Banking Group's Black Horse division, are among those that can take advantage of this rule due to their motor finance arms being classified as "non-bank entities".
The situation has been described as a "loophole in compensation rules" by Liberal Democrat MP Bobby Dean, who is now urging the government to intervene. "It's not right that taxpayers are set to lose out on billions due to a loophole in compensation rules," he said. "Those caught up in the motor finance scandal are going to dodge their responsibilities by operating through spin-off companies."
The Finance and Leasing Association (FLA) lobby group has been pushing for the FCA's compensation scheme terms to be narrowed, but its director of motor finance, Adrian Dally, has stated that the current rules will result in lenders paying more corporation tax. Meanwhile, Labour is set to push for action on the issue before the FCA's consultation on the compensation scheme closes this week.
The scandal, which involves car manufacturers such as Honda and Ford, has seen 1.5 million car finance victims receive payouts of up to £11 billion. The industry has been keen to avoid paying out, but lawmakers are now turning their attention to the tax implications of the loophole.
A loophole allowing UK banks and specialist lenders to avoid paying £2 billion in tax on their payouts to motor finance scandal victims is sparking outrage among lawmakers. The current law permits non-bank operations to deduct compensation payments from their profits before calculating corporation tax, a provision that was introduced in 2015 but now appears to be being exploited by the industry.
The loophole has significant implications for taxpayers, who are set to lose out on £2 billion in corporation tax over the next two years. Big high street names such as Barclays and Santander UK, as well as Lloyds Banking Group's Black Horse division, are among those that can take advantage of this rule due to their motor finance arms being classified as "non-bank entities".
The situation has been described as a "loophole in compensation rules" by Liberal Democrat MP Bobby Dean, who is now urging the government to intervene. "It's not right that taxpayers are set to lose out on billions due to a loophole in compensation rules," he said. "Those caught up in the motor finance scandal are going to dodge their responsibilities by operating through spin-off companies."
The Finance and Leasing Association (FLA) lobby group has been pushing for the FCA's compensation scheme terms to be narrowed, but its director of motor finance, Adrian Dally, has stated that the current rules will result in lenders paying more corporation tax. Meanwhile, Labour is set to push for action on the issue before the FCA's consultation on the compensation scheme closes this week.
The scandal, which involves car manufacturers such as Honda and Ford, has seen 1.5 million car finance victims receive payouts of up to £11 billion. The industry has been keen to avoid paying out, but lawmakers are now turning their attention to the tax implications of the loophole.
so basically these big bank names r gonna get away w/ paying less tax on their payouts 2 victims of the car finance scandal it's not right at all they're just exploiting a loophole in the law to save themselves £2 billion it's like they think taxpayers are made of money lol and the fla lobby group is saying they'll pay more tax but that's not true its all about how they r wording things 
this is so messed up
. I mean, they're basically saying that if they set up their car finance arms as separate companies, they don't have to pay out all that cash and then only pay tax on the profits left over 
. It's not right, especially when there are 1.5 million people affected by this scandal who were left with huge debts 
.
. It's not like they're doing anything to help those who were affected in the first place, just moving the problem around 
. The Finance and Leasing Association should be pushing for changes that benefit everyone, not just lining their own pockets 
this is just another example of how big corporations get away with exploiting loopholes in the system! I mean, £2 BILLION? That's a huge chunk of money that should be going towards helping people who were unfairly affected by the motor finance scandal. It's not right that these banks and lenders are getting to keep it all for themselves 
santander, barclays, lloyds... all the big names r in on this. its like they think they r above the law or something 
. i mean who needs that kind of money, right? and now the gov is stuck between a rock and a hard place because all these lawmakers are going crazy about this loophole. lol i guess some people are just really good at finding ways to avoid paying taxes! 
I'm so fed up with these big banks exploiting loopholes like this! 
Labour should really look into this ASAP, it's not fair to the victims of the motor finance scandal or taxpayers in general. 
meanwhile these 1.5 million car finance victims who got screwed by manufacturers are still waiting for their payouts 
. We need some serious regulation here, pronto! As the saying goes, "you can't cheat an honest man," but in this case, it's the other way around - they're trying to cheat everyone 
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. I'm all for companies wanting to make a profit, but come on! This is about fairness and making sure those who need help get it.
. Labour should totally be pushing for action on this, and I'm loving that they're making a statement before the FCA's consultation closes this week 
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, can't believe this is happening... Banks raking in all that cash and avoiding £2 billion in tax 
. I mean, isnt it just unfair 2 taxpayers who r supposed 2 pay corporation tax on the banks' profits? 
. I mean, what's next? Taxing our taxes? It's just not right 
I mean, I get that corporations have to follow rules and all, but £2 billion is a lot of money... what's the difference between them keeping it or giving some to the government? 
This is getting ridiculous... UK banks are literally exploiting a loophole in the law to avoid paying £2 billion in tax? That's just not right! I mean, I get it, they're trying to make ends meet after all the car finance payouts, but come on, they can't just take advantage of a technicality like this. It's like they think they're above the law or something.
about this whole thing! It's like, these big banks and lenders think they're above the law or something? They get away with exploiting a loophole and screwing over taxpayers for billions?! £2 billion is not chump change, guys! And what really gets my goat is that they're using spin-off companies to avoid paying their fair share of tax. It's like they're playing some kinda corporate game of hide-and-seek 
right now. How else can we hold them accountable?! The fact that the FCA is even allowing this loophole to exist is just ridiculous