Just a thought. If banks are to have their High Street operations ring fenced from their investment banking divisions can we treat the two as separate for tax purposes, and only allow their tax losses from 2008 to be offset against the merchant banking profits in future?
That way we'd stand to get some of our money from the banks back sooner.
As I said, just a thought.
But one potentially worth billions in enhanced revenues.
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Richard
Unlikely – it would take a complete re-write of the laws relating to the taxation of groups.
When has a potential re-write of tax laws stopped Richard from lobbying? 😉
What worries me is what this flaky government intends on spending those enhanced revenues on? Fighting in Libya? no thanks!
Identifying an aspect of a groups business for different loss treatment has been done before – the taxation of oil revenues subject to the supplementary charge is “ringfenced”.
The ring fence is designed to ensure that corporation tax on profits from oil extraction activities are paid in full as the profits accrue, undiluted by any losses or any other form of relief arising from any other business activities whether in the UK or elsewhere. The ring fence imposes restrictions, for example on excessive interest payments, to achieve this. The policy reason for differing treatment is that oil is resource owned by the UK and the higher taxation is essentially the economic rent for extraction. Arguably the banking sector also benefits from economic rents e.g. implicit and explict government guarantees so it would be possible justifying a specialist regime.
I’m not saying this is a perfect model only flagging up that it would theoretically be possible to provide something that could differentiate loss treatment for different banking activities without needing to amend the CT regime for other CT payers.
Clearly this is doable. But ministers would have to want to do it and doing it would upset their mates.
Couldn’t you simply not allow retail banking entities in the same group relief group as investment banking entities?
That would seem to be a fairly easy fix to prevent losses from “risk taking” (i.e. gambling) in the investment banking part of the business being used to offset profits in the retail banking side?