Corporation Tax: extending carried forward loss allowance to savings banks established under the Savings Bank (Scotland) Act 1819
Published 8 July 2015
© Crown copyright 2015
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Who is likely to be affected
Savings banks established under the Savings Bank (Scotland) Act 1819.
General description of the measure
At Autumn Statement 2014, the government announced a restriction on the amount of profit that banks and building societies can offset by carried-forward losses. This restriction took effect from 1 April 2015.
The restriction included a £25 million allowance for the building societies sector which applies when working out the amount of taxable profit that can be offset by carried forward losses.
This measure extends this allowance to savings banks established under the Savings Bank (Scotland) Act 1819, in the same way as it currently applies to building societies within the meaning of the Building Societies Act 1986.
Policy objective
The government believes that the arguments for introducing an allowance for building societies are also relevant to savings banks established under the Savings Bank (Scotland) Act 1819. These banks have many of the same characteristics to building societies in that they do not have shareholders, are restricted in their ability to issue capital instruments, and are not profit-maximising.
Background to the measure
The bank loss-relief restriction was announced by the government at Autumn Statement 2014. It was legislated in Finance Bill 2015 following a period of technical consultation on the draft legislation.
Detailed proposal
Operative date
The measure will have effect on and after 1 April 2015 so that savings banks covered by the measure are not affected by the restriction without an allowance.
Current law
The current law is contained in Part 7A of the Corporation Tax Act 2010. Within this Part, Chapter 2 defines ‘banking company’ and ‘building society’ for the purposes of Part 7A and Chapter 3 contains provisions restricting the amount of certain deductions which a banking company may make in calculating its taxable total profits for an accounting period. Within Chapter 3, S269CH establishes the carried forward loss allowance subject to amendment by this measure.
Proposed revisions
The legislation will be introduced in Summer Finance Bill 2015 to amend Part 7A of the Corporation Tax Act 2010 so that savings banks established under the Savings Bank (Scotland) Act 1819 benefit from the allowance on the same basis as building societies.
A definition of ‘savings bank’ will be inserted in Part 7A of that Act.
Summary of impacts
| Exchequer impact (£m) | 2015 to 2016 | 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 |
| negligible | negligible | nil | nil | nil | nil | |
| This measure is expected to have a negligible impact on the Exchequer. | ||||||
| Economic impact | The measure is not expected to have any economic impacts. | |||||
| Impact on individuals, households and families | This measure will only impact on companies. The measure is not expected to impact on individuals or households, and is not expected to impact on family formation, stability or breakdown. | |||||
| Equalities impacts | This measure will only impact on companies. The measure is not expected to have any equalities impacts. | |||||
| Impact on business including civil society organisations | This measure is expect to have a negligible impact on business. This measure is expected to have no impact on civil society organisations. | |||||
| Operational impact (£m) (HM Revenue and Customs (HMRC) or other) | HMRC will not incur any operational costs implementing this measure | |||||
| Other impacts | Other impacts have been considered and none have been identified. | |||||
Monitoring and evaluation
This measure will be monitored through information on the loss allowance used by savings banks.
Further advice
If you have any questions about this change, please contact Jason Woodward on Telephone: 03000 585797 email: jason.woodward@hmrc.gsi.gov.uk.