This clarification has been a delayed response to requests in 2012 by magazine Taxation, suggesting that the Government organisation was still considering the tax implications.
The HMRC have confirmed that FFI payments will be governed by guidance on fines and administrative charges, according to Health and Safety at Work magazine. This guidance states:
“Where a trader incurs a liability to a regulatory body on revenue account that is broadly intended to cover the regulator’s costs of performing its duties in relation to the trading activities, such costs will normally be allowable even where the trader has committed a breach of regulations.”
This implies that FFI charges are a means of covering administrative costs of identifying and sorting breaches of the law or serving enforcement notices in contrast with the belief these charges are to penalise businesses. This would seem to suggest that they can be used offset tax bills.
At the moment, the average bill after confirmed breaches is around £500. The FFI charge for an hour of inspectors’ time is around £124 when identifying a breach. Inspectors find chargeable breaches on around 60% of their visits.
This could be subject to change as the FFI has been under scrutiny by a panel, after the Government accepted recommendations that the charging scheme should be overhauled.