UK Banks, Specialists Lenders Face Off Over £2bn Tax Loophole in Car Finance Scandal
A major tax loophole is set to hand UK banks and specialist lenders a £2 billion windfall as they avoid paying corporation tax on compensation payouts to motor finance scandal victims. The loophole allows non-bank entities to deduct compensation payments from their profits before calculating their corporation tax, which has been blocked for banks since 2015.
High street names like Barclays and Santander UK, as well as Lloyds Banking Group, are set to benefit from the rule change, with Honda and Ford also included in the list of non-bank entities. The scheme is part of a broader motor finance compensation plan worth £11 billion, which aims to compensate borrowers who were overcharged on their car loans.
Critics argue that the loophole will result in taxpayers losing out on billions of pounds in corporation tax over the next two years. Liberal Democrat MP Bobby Dean has called for ministers to close the loophole, saying it "is not right that the taxpayer is set to lose out on billions due to a loophole in compensation rules".
The Office for Budget Responsibility (OBR) has confirmed that the forecasts show taxpayers will lose £2 billion in corporation tax takings due to the scheme. The FCA's proposed motor finance compensation scheme, which is currently out for consultation, aims to provide redress to borrowers who were unfairly charged on their car loans.
Industry experts have welcomed the potential tax relief, with the Financing and Leasing Association (FLA) pushing for the scheme terms to be narrowed to focus on losses. The FLA's director of motor finance, Adrian Dally, argued that this would reduce the impact on profits and ensure lenders pay more corporation tax.
In a move seen as counterbalancing the loss in corporation tax, Chancellor Rachel Reeves has been pushing for government support in the car finance scandal. However, the FCA's proposed scheme terms have faced scrutiny from industry groups, with some claiming they could lead to customers being compensated for no losses.
The UK government has yet to comment on the loophole directly, but a spokesperson said it was "vital that consumers have access to motor finance" and wanted to see the issue resolved in an "efficient and orderly way".
A major tax loophole is set to hand UK banks and specialist lenders a £2 billion windfall as they avoid paying corporation tax on compensation payouts to motor finance scandal victims. The loophole allows non-bank entities to deduct compensation payments from their profits before calculating their corporation tax, which has been blocked for banks since 2015.
High street names like Barclays and Santander UK, as well as Lloyds Banking Group, are set to benefit from the rule change, with Honda and Ford also included in the list of non-bank entities. The scheme is part of a broader motor finance compensation plan worth £11 billion, which aims to compensate borrowers who were overcharged on their car loans.
Critics argue that the loophole will result in taxpayers losing out on billions of pounds in corporation tax over the next two years. Liberal Democrat MP Bobby Dean has called for ministers to close the loophole, saying it "is not right that the taxpayer is set to lose out on billions due to a loophole in compensation rules".
The Office for Budget Responsibility (OBR) has confirmed that the forecasts show taxpayers will lose £2 billion in corporation tax takings due to the scheme. The FCA's proposed motor finance compensation scheme, which is currently out for consultation, aims to provide redress to borrowers who were unfairly charged on their car loans.
Industry experts have welcomed the potential tax relief, with the Financing and Leasing Association (FLA) pushing for the scheme terms to be narrowed to focus on losses. The FLA's director of motor finance, Adrian Dally, argued that this would reduce the impact on profits and ensure lenders pay more corporation tax.
In a move seen as counterbalancing the loss in corporation tax, Chancellor Rachel Reeves has been pushing for government support in the car finance scandal. However, the FCA's proposed scheme terms have faced scrutiny from industry groups, with some claiming they could lead to customers being compensated for no losses.
The UK government has yet to comment on the loophole directly, but a spokesperson said it was "vital that consumers have access to motor finance" and wanted to see the issue resolved in an "efficient and orderly way".
. I mean, can you believe how much money banks are making off of people who were scammed out of their car loans? It's just not fair that they get to keep all that cash while taxpayers take a hit on corporation tax 
. And it's not like the government is doing anything to stop them either... I guess you could say they're just letting the banks have a free pass 
. Anyway, this whole thing just feels really dodgy to me 
.
I'm so fed up with these UK banks and specialist lenders exploiting loopholes like this! £2 billion is a crazy amount of money, and it's just unfair that taxpayers are going to lose out on all that corporation tax. 
It's not right that they get to keep more of their profits while we're left footling over the fact that some people were unfairly charged for their car loans. 
The FCA needs to get its act together and make sure lenders are held accountable. 
but it seems like some people only care about their own interests 
just saw this news about uk banks & specialist lenders getting £2 billion tax break from car finance scandal... cant believe its true, all these big companies are just lining their pockets while regular people get screwed over again 
. and to make matters worse, its a £2 billion loss for taxpayers, thats billions that couldve gone towards helping people out in real need instead of just padding the bank balance 
?
