Corporation Tax Act 2009 section 133D

Excluded expenses

Section 133D identifies which compensation expenses are excluded from the restriction on tax deductions for banking companies, on the basis that they arise from circumstances not specific to banking misconduct.

• Compensation expenses arising from administrative errors or computer/electronic system failures are excluded from the deduction restriction and remain fully deductible.
• Compensation for loss or damage that is wholly or mainly caused by an unconnected third party is also excluded from the restriction.
• A third party is treated as "unconnected" unless they were connected to the company at the time of the relevant actions, or were acting under arrangements with the company when those actions occurred.
• The standard "connected persons" definition applies, extended so that directors and officers of a company are treated as employed by that company for the purposes of determining connection.