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HMRC internal manual

Banking Manual

Bank compensation restriction: commencement: overview


CTA09/S133N applies to expenses incurred on or after 8 July 2015 which was the date the compensation restriction was introduced.  

For periods straddling the commencement date, the legislation requires expenses to be apportioned on a just and reasonable basis. 

Where there is evidence that an expense arises at a specific point in time (for example, the release of a regulatory decision) then that expense should be allocated entirely to whichever of the pre and post-commencement periods it belongs to. An expense arising as a result of a reporting event (for example, quarterly reporting) should equally be allocated to the appropriate period.

Where a bank only draws up a balance sheet at the year end and calculates its expense for the year at that point, HM Revenue and Customs would ordinarily expect time apportionment to be used as it is likely the expense reflects the full year’s exposure, unless the bank can demonstrate that this is not the case.