Part 3: Banking Section 18: Banking companies: expenses relating to compensation Details of the section Section 133A
New section 133A provides that no deduction may be made by a company in calculating corporation tax profits for expenses which relate to certain types of compensation.
	Subsection (1) contains the main operative provision, which ensures that there is no deduction available for relevant compensation expenses within the meaning of subsection (3), where the disclosure condition in new section 133C is met.
	Subsection (2) provides that subsection (1) does not apply to administrative expenses, expenses in respect of the failure of a computer or electronic system, or expenses which arise from loss or damage wholly or mainly attributable to a third party. These expenses are defined in new section 133D.
	Subsection (3) ensures that a deduction is denied both where the company making or liable to the payment is the company which has relevant conduct, and where a company associated with that company is making or liable to the payment, subject to subsection (4). It does not matter whether the payment is made or to be made directly or indirectly to the customer.
	Subsection (4) prevents a second disallowance where an associated company incurs expenses but there is an arm's length arrangement, such as a recharge of the expenses, in place. However, expenses incurred by the company with the relevant conduct (that is a party to the arm's length arrangement) will continue to be relevant compensation for the purposes of the provision.
	Subsection (5) provides that "qualifying company" means a company associated at the time that the expenses in question are recognised for accounting purposes.
	Subsection (6) provides that "relevant conduct" is any conduct which takes place at a time after 29 April 1988 when the company is a banking company within the meaning of new section 133E.
	Subsection (7) confirms that the expenses are disallowed whether the compensation is or is to be made by the company or by another person.
	Subsection (8) sets out further definitions.