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HMRC internal manual

Banking Manual

Bank compensation restriction: excluded expenses: single errors with compensation payable to a single customer - examples

Example 1

Company L is a banking company which agrees to pay compensation to a corporate customer (Company M). The compensation relates to a single transaction entered into between Company L and Company M. A disclosure in a relevant document indicates that Company M and one or more shareholders of Company M may be entitled to make a claim against Company L. 

The shareholders are customers of company L, but use services which are unrelated to the transaction which has given rise to the compensation. Their only interest in the compensation derives from their shareholding in Company M. 

HM Revenue and Customs would not consider the shareholders to be “customers”, in respect of this transaction, for the purposes of CTA09/S133C(2), and would accept that the compensation is to, or for the benefit of, one (and only one) customer. This disclosure would not meet the disclosure condition.

Example 2

Company N is a banking company which has entered into transactions with companies O and its 100% subsidiary P. The transactions both relate to the same type of service provided by N. It is found that N has made an error in the service it has provided, and as a result N discloses in a relevant document that both O and P may be entitled to make a claim against company N. 

Here, although O may have an interest in the compensation paid to P, and may ultimately have a claim to compensation in respect of P’s loss, O also has compensation deriving from its own customer relationship with N in respect of the same error. HM Revenue and Customs would not accept that CTA09/S133C(2)would disregard this disclosure.