Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Deductible definition

What does Deductible mean? In insurance and reinsurance practice, a deductible is the agreed self‑insured amount that the insured (or reinsured) must bear before the (re)insurer’s liability attaches. It is a contractual term rather than a statutory concept; its operation depends on the policy or reinsurance wording and general principles of construction. A deductible is a specified sum applied to a covered loss or claim. Claims are payable only to the extent the loss exceeds the deductible, or are settled net of the deductible. It may operate per claim, per loss/occurrence, or as an aggregate for the policy period. Wordings should state whether...

UK corporation tax (CTA 2009 ss 133A–133N): banks’ customer compensation—non-deductibility and 10% notional trade receipt; scope, disclosure condition, exclusions, entities affected and 2015 commencement

Published by a LexisNexis Tax expert

Practice notes

This Practice Note sets out the Rules that, with effect from 8 July 2015 (or 15 July 2015 for corporate partners):

bar banking companies from deducting specified compensation outgoings for tax purposes, and
require an amount equal to 10% of the non-allowable compensation to be brought into the banking Company’s taxable Profits

This Practice Note does not address the recipient’s tax position on bank compensation. That question has been examined in cases including O’Neil v HMRC and Hackett v HMRC. For further detail, see Practice Note: Direct tax treatment of damages and compensation payments.

Reasons behind the rules

The government introduced measures denying relief for banks’ compensation payments and treating banks as receiving a notional trade receipt of 10% of the disallowed amount, in order to:

‘protect the Exchequer from banks’ past management failures’, and
‘ensure the [banking] sector makes an appropriate contribution to restoring the public finances’

This was considered necessary due to an ‘unprecedented’ (and rising) volume of compensation paid by banks to customers for the banks’ own misconduct, including mis-selling payment protection insurance (PPI), interest rate hedging and card...

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Abigail McGregor

Pinsent Masons

Abigail is a Legal Director in the Tax Disputes team. She specialises in tax matters of actual and potential dispute with HMRC, and has a background in transactional tax. She works with clients and the wider tax teams to identify areas of tax risk in new taxes as they are developed and introduced, which has included the introduction of Plastic Packaging Tax, the Electricity Generator and Oil and Gas levies, as well as the impact of the notification of uncertain tax treatment rules. Abigail’s role has a broad remit, providing technical assistance to clients and members of the team on all areas of contentious tax including interpretation of tax law, tribunal procedure and HMRC collection and enforcement powers. She regularly writes thought leadership pieces in the tax press, including Tax Journal, Taxation and LexisPlus. Abigail was appointed as a fee paid judge in the FTT in 2015 and...

Jake Landman

Pinsent Masons

Head of the Tax Disputes and Investigations team, Jake has specialised in tax disputes in our market leading team since qualification and was promoted to Partner in 2021. He impresses clients by citing extensive practical experience of dealing with HMRC and all aspects of the tax litigation process. Clients trust his knowledge of the tax disputes process and he receives consistently great feedback. He has worked on the team’s most high-profile cases involving both direct and indirect tax. He is highly rated by Counsel from the leading tax chambers as a result of their positive experiences in working with him on those cases....

Web page updated on 21/05/2026

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