Corporation tax deductions: What is a tax deductible company expense? asks MARIA KITT, Director Tax Insight UK
Its not often we have an interesting tax case to steer our attention away from our innovative companies. This case is an exception – Back in 2014, Scottish Power claimed a tax deduction of some £28m for the fines it paid to its Regulatory Body, GEMA, further to action taken against it for mis-selling tariffs and services and fuel supplies to consumers including charities, vulnerable customers and consumers/consumer groups. The numbers and time span speak for themselves but this is an interesting point of tax law – whilst ALL receipts potentially linked to a company’s business activities are taxable, not all of the payments a company makes are deductible.
In the case of Scottish Power it claimed a tax deduction on its fines – whereby the tax payer shares the burden of its penal costs for breaking the law/regulatory code, (some 25% of £28m)!
The taxation of companies can appear superficially puzzling at times, but hopefully this case highlights the fairness that underlines UK Corporate Tax law & policies and the appetite HMRC has for ensuring fairness is applied no matter the size and resource of its opposition. The full case can be read here…………https://assets.publishing.service.gov.uk/media/64f727cc9ee0f2000fb7bf02/Scottish_Power_Ltd_and_others_v_HMRC_final_decision.pdf