Section 133A | Compensation payments: restriction of deductions

(1)In calculating the profits of a trade carried on by a company (“company A”) no deduction is allowed for expenses incurred by the company if and so far as—

(a)the expenses are in respect of amounts of relevant compensation (see subsection (3)), and

(b)the disclosure condition is met in relation to the expenses (see section 133C).

(2)Subsection (1) does not apply to expenses which are excluded by section 133D.

(3)In relation to company A, “relevant compensation” means compensation which is paid or payable—

(a)to or for the benefit of a customer of company A in respect of relevant conduct (see subsection (6)) of company A, or

(b)to or for the benefit of a customer of a qualifying company in respect of relevant conduct of that qualifying company (but see subsection (4)).

(4)Compensation paid or payable as mentioned in subsection (3)(b) is not relevant compensation so far as it is paid or payable under arrangements entered into between company A and the qualifying company on arm's length terms.

(5)“Qualifying company”, in relation to company A, means a company which is associated with company A (see section 133L) at the time when the expenses in question are recognised for accounting purposes.

(6)For the purposes of this section conduct of a company is “relevant conduct” if the conduct occurs—

(a)on or after 29 April 1988, and

(b)at a time when the company is a banking company (see section 133E).

(7)For the purposes of subsection (1) it does not matter whether the compensation is paid, or to be paid, by company A or another person.

(8)In this section—

“compensation”, “payment” and references to compensation “paid or payable” in respect of relevant conduct of a company, are to be read in accordance with section 133K;

“conduct” includes any act or omission;

“customer” has the meaning given by section 133J.