Policy paper

Updating bank definitions

Published 8 July 2015

Who is likely to be affected

Banks and building societies within the charge to UK Corporation Tax and Bank Levy.

General description of the measure

The measure updates the definition of a banking company used in tax legislation to align the definition with the current regulatory code.

Policy objective

This measure maintains the alignment of the definition of banking company used in Bank Levy and bank loss restriction legislation with those used by the Prudential Regulatory Authority and the Financial Conduct Authority. This is to ensure that the legislation remains simple, certain and effective.

Background to the measure

This measure was announced at Summer Budget 2015.

Detailed proposal

Operative date

This change will apply from 1 January 2014 in respect of Schedule 19 Finance Act 2011 (the Bank Levy legislation) and from 1 April 2015 in respect of Part 7A of the Corporation Tax Act 2010 (the bank loss restriction legislation).

Current law

The definition of banking company used in the Bank Levy and bank loss restriction legislation, relies on reference to the old definitions from the Prudential Sourcebook for Banks, Building Societies and Investment Firms (BIPRU) which have now been superseded. Although the BIPRU definitions are obsolete they do still remain within the glossary of the handbook of the Prudential Regulation Authority so can still be used.

Proposed revisions

On 1 January 2014 the EU introduced the Capital Requirements Regulations (CRR), introducing a new regulatory code for credit institutions and investment firms. This replaced the BIPRU which until then had been the regulatory code for these financial institutions and firms.

From this point forward the financial regulators used the CRR as the regulatory code for banks and building societies rather than BIPRU. The Prudential Regulatory Authority implemented the CRR directly and the Financial Conduct Authority introduced a new Prudential Sourcebook for investment firms (IFPRU).

In order to maintain the existing application of the Bank Levy and the bank loss restriction legislation this measure acts to amend the existing legislation to refer to current definitions of firms that are supervised by either the Prudential Regulatory Authority or the Financial Conduct Authority.

This measure is a technical change to the wording of the legislation to ensure clarity. There is no change to the policy. The amended legislation will continue to apply to the same population and will continue to operate in the same manner.

Summary of impacts

Exchequer impact (£m)	2015 to 2016	2016 to 2017	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021
	nil	nil	nil	nil	nil	nil
	This measure not expected to have an Exchequer impact.
Economic impact	The measure is not expected to have any significant economic impacts.
Impact on individuals, households and families	This measure concerns banks. It has no direct impact on individuals or households and is not expected to impact on family formation, stability or breakdown.
Equalities impacts	This measure concerns the taxation of incorporated businesses, which have no protected characteristics in law. As such it is very unlikely that there will be any impact on equality.
Impact on business including civil society organisations	This measure acts to maintain the existing application of legislation so there will be no additional impact on business. There is no impact on civil society organisations.
Operational impact (£m) (HM Revenue and Customs or other)	This measure is not expected to have any significant operational impacts.
Other impacts	Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be subject to ongoing monitoring through the monitoring and evaluation processes in place for monitoring the bank levy and the bank loss restriction.

Further advice

If you have any questions about this change, please contact Anthony Fawcett on Telephone: 03000 585911, email: anthony.c.fawcett@hmrc.gsi.gov.uk.