Taxpayers Face £2 Billion Hit as Car Finance Loophole Exposed
A growing scandal over car finance mis-selling has taken another hit, with UK banks and specialist lenders set to avoid paying a whopping £2 billion in tax on payouts to victims. The loophole, which was introduced five years ago to prevent similar companies from dodging taxes after the PPI scandal, now appears to be being exploited by those involved in the motor finance crisis.
Under current law, any operation that is not a bank can deduct compensation payments from their profits before calculating corporation tax, reducing their bill. However, UK banks have been blocked from claiming this relief since 2015. But with lenders operating "non-bank entities" – essentially spin-off companies – they are able to exploit the loophole.
Barclays and Santander UK, as well as Lloyds Banking Group, which has the biggest car loan operations in the country through its Black Horse division, will benefit from this tax break. Specialist lenders like Honda and Ford also fall outside of the taxation rule.
The Office for Budget Responsibility (OBR) has confirmed that taxpayers will lose out on £2 billion in corporation tax over the next two years due to this loophole. This is a significant blow, particularly when considering the UK's growing budget deficit.
Liberal Democrat MP Bobby Dean has been urging the government to intervene and close the loophole, stating that it "is not right that the taxpayer is set to lose out on billions" due to it. The Liberal Democrat party has long argued that the current rules were introduced to prevent similar companies from dodging taxes after previous scandals.
The Finance and Leasing Association (FLA) lobby group has also weighed in on the issue, arguing that the scheme's terms are "so broad that they will compensate customers who suffered no loss". However, this move appears to be more about protecting the interests of lenders rather than ensuring fairness for victims.
As the consultation period for the FCA's motor finance compensation scheme comes to a close, it remains to be seen whether the government will take action to address this issue. With banks and specialist lenders continuing to push for government support, and the Treasury remaining tight-lipped on the matter, it seems that taxpayers may continue to bear the brunt of this tax break.
A growing scandal over car finance mis-selling has taken another hit, with UK banks and specialist lenders set to avoid paying a whopping £2 billion in tax on payouts to victims. The loophole, which was introduced five years ago to prevent similar companies from dodging taxes after the PPI scandal, now appears to be being exploited by those involved in the motor finance crisis.
Under current law, any operation that is not a bank can deduct compensation payments from their profits before calculating corporation tax, reducing their bill. However, UK banks have been blocked from claiming this relief since 2015. But with lenders operating "non-bank entities" – essentially spin-off companies – they are able to exploit the loophole.
Barclays and Santander UK, as well as Lloyds Banking Group, which has the biggest car loan operations in the country through its Black Horse division, will benefit from this tax break. Specialist lenders like Honda and Ford also fall outside of the taxation rule.
The Office for Budget Responsibility (OBR) has confirmed that taxpayers will lose out on £2 billion in corporation tax over the next two years due to this loophole. This is a significant blow, particularly when considering the UK's growing budget deficit.
Liberal Democrat MP Bobby Dean has been urging the government to intervene and close the loophole, stating that it "is not right that the taxpayer is set to lose out on billions" due to it. The Liberal Democrat party has long argued that the current rules were introduced to prevent similar companies from dodging taxes after previous scandals.
The Finance and Leasing Association (FLA) lobby group has also weighed in on the issue, arguing that the scheme's terms are "so broad that they will compensate customers who suffered no loss". However, this move appears to be more about protecting the interests of lenders rather than ensuring fairness for victims.
As the consultation period for the FCA's motor finance compensation scheme comes to a close, it remains to be seen whether the government will take action to address this issue. With banks and specialist lenders continuing to push for government support, and the Treasury remaining tight-lipped on the matter, it seems that taxpayers may continue to bear the brunt of this tax break.
£2 billion is a massive amount, you feel? It's crazy that these big companies are exploiting a loophole like this. I'm not surprised, though - it's all about lining their own pockets. The OBR is saying taxpayers will lose out on billions over the next two years, and it's just not right. 
so theres this £2 billion loophole and its basically just a way for big lenders like barclays & santander 2 avoid paying taxes lol theyre making bank off victims who were scammed in the first place 
and its not even like theyre "non-bank entities" cuz thats just code 4 exploiting the system 
anyway, im all 4 liberal democrat mp bobby dean saying the gov needs 2 step in & close this loophole or we'll be paying for their mistakes 
£2 billion is a lotta $$$ 
? We need more rules and less loopholes 
! 
. The government needs to step in and close this loophole ASAP 
. £2 billion is just too much 
? The law should be the same for everyone 
! 
to prevent these exploitation cases from happening in the future 
. More transparency and accountability are needed 
. Let's not let our tax money go up in smoke 
! We deserve better 
I mean, £2 billion is a huge chunk of change that could be used to fund vital public services instead of lining the pockets of greedy lenders. 
The government needs to step in ASAP and close this loophole before more people get taken advantage of. 
. But let's be real, it's just unfair to the victims who have already suffered losses from car finance mis-selling. We need our government to step in and close this loophole ASAP 
.
. The fact that taxpayers are losing out on billions is just unfair 
. Banks and lenders need to start thinking about fairness here instead of just looking out for their own profits 
.
.
. I was wondering why car finance companies were getting off scot-free on their taxes? It's not right that they get to keep £2 billion and we're left with a bigger deficit. What's going on here is just another example of big businesses looking out for themselves at the expense of ordinary people. The loophole needs to be fixed ASAP! 
! Those big banks are just exploiting a loophole that was meant to prevent them from dodging taxes in the first place. It's like they're playing by their own rules, not following the same laws as everyone else. £2 billion is a lot of money, and it's coming straight out of our pockets 
[GIF of someone trying to take money from an ATM but getting their hand stuck in the slot 
]
.