The court has ruled in favor of ScottishPower in a tax dispute amounting to £28 million.

Energy company ScottishPower has won an appeal permitting it to deduct £28 million in fines imposed by Ofgem for corporation tax reasons.

Investigations by the regulator Ofgem discovered that entities within the ScottishPower group violated regulations from 2013 to 2016 concerning mis-selling, cost-reflectivity, energy-saving, and handling complaints.

ScottishPower settled several agreements with Ofgem, agreeing to pay penalties totaling £28 million.

The group aimed to deduct this £28 million for corporation tax, but HM Revenue and Customs (HMRC) denied the request.

HMRC determined that ScottishPower incorrectly deducted the £28 million from their profits for corporation tax calculations and revised the corporation tax returns accordingly.

The group contested HMRC's decision at the First-Tier Tribunal in 2021, which sided with HMRC, stating that the majority of the payments were not deductible. However, the Tribunal did rule that one payment of £554,000 was deductible.

ScottishPower appealed this decision, while HMRC also contested the ruling permitting the £554,000 payment to be deductible.

In 2023, the Upper Tribunal ruled against ScottishPower's appeal and upheld HMRC's appeal concerning the £554,000 payment, declaring it non-deductible.

The group then escalated the matter to the Court of Appeal, which ruled in its favor on Friday.

Lady Justice Falk mentioned, "In this case, the FTT found that the payments were made in the ordinary course of business, were deducted when calculating profits as per standard commercial accounting practices, and (barring the penalty issue) were made solely for business purposes."

"Since these payments were not actually penalties, there is nothing preventing them from being deductible. Therefore, I would allow the appeal," she concluded.

A spokesperson for ScottishPower commented, "We acknowledge the judgment."