UK and International Tax news
Friday 22nd October 2010
In the June 2010 Budget the Chancellor announced the government’s intention to introduce a Bank Levy, effective from 1 January 2011, in respect of certain equity and liabilities on banks balance sheets [see UK Tax News item June 2010 Budget].
The government issued a consultation on 13 July 2010 which ran until 5 October 2010 with its objective to address a number of operational issues around design and implementation and to develop a targeted and workable design to meet the Bank Levy objectives, including where possible the minimizing of compliance costs.
Having considered the responses from all interested parties, the government has now announced its proposals on the final design of the Bank Levy in a Consultation Response Document together with draft clauses and explanatory notes, plus a technical note from HMRC.
The Bank Levy is to apply to all UK bank and building society groups, foreign banks and banking groups operating in the UK and UK banks in non banking groups from 1 January 2011 onwards.
The Bank Levy will be based upon the total chargeable equity and liabilities as reported in the relevant balance sheets at the end of a chargeable period. In determining the chargeable equity and liabilities the following amounts can be excluded: Tier 1 capital (insofar as it constitutes equity or liabilities), certain protected deposits, liabilities that arise from certain insurance business within banking groups, liabilities that back currency notes in circulation, FSCS liabilities, liabilities representing segregated client money, deferred tax liabilities, current tax liabilities, liabilities in respect of the Bank Levy, revaluation of property liabilities, liabilities representing the revaluation of business premises and defined benefit retirement liabilities.
It will also be permitted in specified circumstances to reduce certain liabilities, by netting against certain assets and by offsetting assets on the relevant balance sheets that qualify as high quality liquid assets (in accordance with the FSA definition).
The reduction for high quality liquid assets will apply first to long term liabilities with any balance applying to short-term liabilities.
The Bank Levy will not be charged on the first £20 billion of chargeable liabilities (i.e. those that are chargeable to the Bank Levy after all exclusions and deductions). The first £20 billion of liabilities not charged to the Bank Levy will be apportioned between long and short maturity liabilities in accordance to the proportion of each within total chargeable equity and liabilities for a chargeable period.
The government will publish consolidated draft clauses planned for Finance Bill 2011 towards the end of this year. This will include the final substantive draft legislation on the Levy, ahead of its implementation from 1 January 2011.
The government’s final decision on the Bank Levy rates will be announced at this stage.
If you would like further information on the above, please contact Keith Rushen on 0044 (0)20 7486 2378.Contact Us