§ Miss HoeyTo ask the Chancellor of the Exchequer what amount of tax relief banks receive when setting aside money as a provision for non-payment of Third-world debts; what is the time limit on this tax relief; and whether banks can retain this relief indefinitely or use this money for purposes other than writing off debt payments.
§ Mr. LilleyBanks are entitled to make a deduction from their profits for tax for provisions they make against non-payment of loans, including loans to sovereign debtors, to the extent that the loan is estimated to be irrecoverable. The amount estimated to be irrecoverable has to be agreed with the Inland Revenue. Once a deduction has been agreed, there is no limit on the time a bank may retain the provision, but if the debt is repaid, or if prospects for recovery improve, the tax relief is clawed back. The making of provisions reduces a bank's profit or creates a loss, it does not provide money for other purposes.