Surcharge on banking companies for transferred-in losses
Published 11 March 2020
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Who is likely to be affected
Banking companies including building societies (banks) within the charge to UK Corporation Tax.
General description of the measure
The bank Corporation Tax surcharge (Surcharge) is a charge of 8% on the profits of banks, payable in addition to Corporation Tax. The Surcharge profits are calculated on the same basis as for Corporation Tax, but with some reliefs denied. The current Surcharge legislation disregards the effect of elections to transfer allowable losses from a non-banking company to a bank where they are used to reduce future chargeable gains. However, this disregard does not extend to transfers of allowable losses used to reduce in-year chargeable gains. This measure addresses this inconsistency and ensures that Surcharge profits are not reduced by allowable losses surrendered by non-banking companies in the same group.
Policy objective
Banks continue to make a fair contribution in respect of the potential risks they pose to the UK financial system and wider economy through the Surcharge and the Bank Levy.
The Surcharge is linked to a bank’s profitability. This measure ensures that banks are not able to reduce their Surcharge liability using allowable losses suffered in non-banking parts of their groups.
Background to the measure
This measure was announced at Budget 2020.
Detailed proposal
Operative date
This amendment will apply to allowable losses that are deducted from chargeable gains accruing on disposals made on or after 11 March 2020.
Current law
Current law is included in Chapter 4 of Part 7A Corporation Tax Act 2010 (CTA 2010).
Proposed revisions
Legislation will be introduced in Finance Bill 2020 to disregard, for Surcharge purposes, the effects of any elections to transfer allowable losses from a non-banking company. This new rule applies whether the transferred-in loss arose in the same period as the gain it is being used to reduce or arose in an earlier period from which it has been carried forward.
Summary of impacts
Exchequer impact (£m)
| 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 |
|---|---|---|---|---|---|
| negligible | 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 economic impacts.
Impact on individuals, households and families
This measure is not expected to impact on individuals as it only affects banks. There is expected to be no impact on family formation, stability or breakdown
Equalities impacts
It is not anticipated that there will be impacts on groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on the estimated 100 banks affected by the Surcharge.
One-off costs for these businesses will include familiarisation with the new rules. There are not expected to be any ongoing costs.
This measure is not expected to impact on civil society organisations.
Customer experience is expected to stay the same because this is a minor technical amendment to the Surcharge legislation.
Operational impact (£m) (HMRC or other)
There are no financial consequences for HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, contact Robby Wells on telephone: 03000 530 261 or email: robby.wells@hmrc.gsi.gov.uk.