Andrew Tyrie MP, Chairman of the Treasury Committee, has written to the Chancellor seeking clarification on whether banks can offset any of the payments they make to regulators, against their corporation tax bill. Mr Tyrie asks for confirmation that all payments imposed on banks by regulators, other than those excluded by s.133D of the Corporation Tax Act 2009, cannot be deemed to be “compensatory” and therefore deductible under current tax legislation. He argues against their being deductible on the basis that the taxpayer should not bear any of the burden of regulatory payments. Mr Osborne’s response confirms that financial penalties imposed by regulators are non-deductible for UK corporation tax purposes. Mr Tyrie’s next main concern surrounded whether costs incurred by banks in producing s.166 FSMA reports are tax deductible if they do not lead to subsequent fines or remedial actions. Mr Osborne confirmed that these costs are deductible for corporation tax purposes and are not directly impacted by the changes in Finance (No 2) Act 2015. Finally Mr Tyrie asked about the deductibility of payments made to bank regulators in respect of their compliance costs. Mr Osborne’s response noted that such costs are deductible for corporation tax purposes by virtue of being expenses of doing business. He also noted that the Finance Act (No 2) 2015 seeks to ensure that the administrative and regulatory costs associated with banks’ misconduct and mis-selling are disallowed for tax purposes. (Source: Treasury Committee questions Chancellor over tax deductibility of bank fines)