Banking companies: excluded entities
Published 16 March 2016
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This publication is available at https://www.gov.uk/government/publications/banking-companies-excluded-entities/banking-companies-excluded-entities
Who is likely to be affected
Banks and building societies within the charge to UK Corporation Tax (CT) and Bank Levy.
General description of the measure
This measure amends the exempt entity test, which forms part of the definition of a bank used in tax legislation.
Policy objective
This measure amends the excluded entities test ensuring that banking taxes are appropriately targeted at banks and that legislation remains simple, certain and effective.
Background to the measure
This measure was announced at Budget 2016.
Detailed proposal
Operative date
The change will apply for accounting periods beginning on or after:
- 1 April 2015 in respect of Part 7A of the Corporation Tax Act 2010 (the bank loss restriction legislation)
- 8 July 2015 in respect of section 133F of CTA 2009 (bank compensation payments)
- 1 January 2016 in respect of section 269DO of CTA 2010 (the banking surcharge legislation)
- reporting periods beginning on or after 1 April 2015 in respect of section 285 of Finance Act 2014 (the Code of Practice on taxation for banks)
Accounting periods that straddling the above dates will follow the commencement provisions within the bank loss restriction legislation, bank compensation legislation and banking surcharge legislation.
Current law
The exempt entities test is included at:
- section 269BA of CTA 2010 (which provides the definition of a bank for the bank loss restriction and via section 269DO of CTA 2010 the definition of a bank for the banking surcharge)
- paragraph 73, of Schedule 19 to FA 2011 (which provides the definition of a bank for the bank levy and via section 285 of FA 2014 the definition of a bank for the Code of Practice on taxation for banks)
- section 133F of CTA 2009 (which provides the definition of a bank for the bank compensation restriction)
Proposed revisions
Legislation will be introduced in Finance Bill 2016 to amend the excluded entities test within the three places mentioned above.
The proposed revision will make undertaking a second activity possible, providing that the entity:
- undertakes one of the specified regulated activities within the excluded entities test
- the other activity, when considered by itself (ie without taking into account the regulated activity that is specified in the excluded entities test) would not require the firm to be both an IFPRU 730K investment firm and a Full Scope IFPRU investment firm (as defined by reference to the FCA Handbook)
The changes will ensure that the banking taxes are appropriately targeted at banks.
Summary of impacts
Exchequer impact (£m)
| 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 |
|---|---|---|---|---|
| negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This measure is not expected to have any impact on individuals, households and families. The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
This measure is not expected to impact on any of the groups with protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses. There will be a negligible one-off cost to businesses that need to familiarise themselves with the changes, and negligible on-going savings to the businesses that are being taken out of banking taxes by the amendments to the exempt entity test. There is no impact on civil society organisations.
Operational impact (£m) (HM Revenue and Customs (HMRC) or other)
This measure ensures that banking taxes are appropriately targeted at banks. As this was the original policy intention there will be no significant additional impact on HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review using the processes in place for monitoring banking taxes.
Further advice
If you have any questions about this change, please contact Anthony Fawcett on Telephone: 03000 585911 or email: anthony.c.fawcett@hmrc.gsi.gov.uk.