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HMRC internal manual

Bank Levy Manual

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HM Revenue & Customs
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Introduction: structure: steps for determining the amount of the bank levy: step 5

Paragraph 6(2) of Schedule 19

The first £20 billion of chargeable equity and liabilities does not attract a bank levy charge.

Where the chargeable equity and liabilities are greater than £20 billion, the first £20 billion is to be allocated against chargeable equity and long term liabilities and short term chargeable liabilities in the same proportions as calculated in Step 4.

This requires that:

  • the amount of the equity and long term liabilities are reduced by an amount equal to A% of £20,000,000,000, and
  • the amount of short term liabilities are reduced by an amount equal to B% of £20,000,000,000.

Once the calculation has been undertaken proceed to Step 6 (BKLM154600).

Example: Bank Z

Step 1  Bank Z determines in accordance with Part 4 of Schedule 19 that for the period of account ended 31 December 2014 that it has chargeable equity and liabilities of £500 billion.
   
Step 2  The chargeable equities and liabilities exceed £20 billion so Bank Z proceeds to step 3.
Step 3  Bank Z determines that of its £500 billion chargeable equity and liabilities £200 billion are long term and £300 billion are short term.
Step 4  Bank Z must then determine the proportion of its chargeable equities and liabilities that are long term (‘A%’) and the proportion that are short term (‘B%’).
  * A% is calculated as 200/500 which means that 40% of its chargeable equity and liabilities are long term equity and liabilities.
  * B% is 300/500 which means that 60% of its chargeable liabilities are short term liabilities.
Step 5  Bank Z must therefore reduce the amount of equity and long term liabilities by A% of £20 billion and reduce the amount of short term liabilities by B% of £20 billion.
  Long term (£bn)
   
Chargeable equity and liabilities 200
40% of £20 billion allowance 8
Total chargeable equity and long term liabilities 192
  Short term (£bn)
   
Chargeable liabilities 300
60% of £20 billion allowance 12
Total chargeable short term liabilities 288
Step 6  As the chargeable period in this case is 12 months Bank Z proceeds to step 7.
   
Step 7  The charge on total equity and long term liabilities is at 0.0525% and the charge total short term liabilities at 0.105%.
    Levy Rate Bank Levy
       
Total chargeable equity and long term liabilities £192bn 0.0525% £100.8m
Total chargeable short term liabilities £288bn 0.105% £302.4m
Total bank levy chargeable     £403.2m

So total bank levy due from Bank Z will be £403.2 million.