"However, the Guardian revealed last month that banks will be able to exploit a loophole when they start paying compensation to victims of the 11bn car finance scandal this year. Their motor finance divisions are registered as non-bank entities, even though they are part of the larger banking groups, placing them outside the scope of rules. Specialist lenders involved in the scandal, including the finance arms of car manufacturers such as Honda and Ford, are also exempt."
"The Office for Budget Responsibility has confirmed that this would cost taxpayers 2bn over the next two years, prompting Bobby Dean, a Liberal Democrat member of the Treasury committee, to write to ministers calling for urgent intervention. But Rigby's response, dated 29 December and seen by the Guardian, confirmed that lenders caught up in the car loans scandal would fall outside the 2015 rules."
Lucy Rigby, City minister and economic secretary to the Treasury, was urged to intervene over a 2bn tax loophole benefiting lenders involved in the car finance scandal. Rules introduced in 2015 prevent banking companies from deducting compensation payouts when calculating corporation tax. Motor finance divisions and specialist lenders are registered as non-bank entities, placing them outside those rules and allowing them to sidestep the restriction. The Office for Budget Responsibility estimates a 2bn cost to taxpayers over two years. A Treasury committee member sought urgent action, and Rigby replied that the restriction does not apply to non-banking companies and expressed a desire for an efficient redress resolution.
Read at www.theguardian.com
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