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HMRC internal manual

Bank Levy Manual

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HM Revenue & Customs
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Relevant entities and groups: banking groups: conditions to be met to be a banking group: the exempt activities condition: criteria and examples

Paragraph 13 of Schedule 19

Even where Condition A, B, C or D is met, a group will not be a banking group if it satisfies the exempt activities condition.

The exempt activities condition applies to the trading income of the group in the chargeable period. The group will not be a banking group if either of the following conditions is met:

  • at least 90% of the group’s trading income for the chargeable period derives from exempt activities (see BKLM242680), or
  • at least 50% of the group’s trading income for the chargeable period derives from non-financial trading activities (see BKLM242760).

For further information on how to calculate trading income see BKLM242640.

Exempt activities condition examples

Example 1 - At least 90% of group trading income derives from exempt activities

Group X has group trading income for the chargeable period of £8.0 billion.

The group trading income is comprised as follows:

Income from insurance activities £7.0 billion
   
Income from non-financial trading activities £0.6 billion
Income from financial trading activities £0.4 billion
Total group income £8.0 billion

As £7.6bn of the group’s £8.0bn trading income (that is 95%) comes from exempt activities the test at paragraph 13(1)(a) is met and so the exempt activities condition is met and the group is not a banking group.

Example 2 - At least 50% of the group trading income derives from non-financial trading

Group Y has group trading income for the chargeable period of £8.0 billion.

The group trading income is comprised as follows:

Income from insurance activities £0.4 billion
   
Income from non-financial trading activities £4.8 billion
Income from financial trading activities £2.8 billion
Total group income £8.0 billion

As only £5.2 billion of the group’s £8.0 billion trading income (that is 65%) comes from exempt activities the test at paragraph 13(1)(a) is not met. However, as £4.8 billion of the group’s £8.0 billion (that is 60% of the group’s trading income) comes from non-financial trading income, the test at paragraph 13(1)(b) is met and so the exempt activities condition is met and the group is not a banking group.

Example 3 - the exempt activities condition is not met

Group Z has group trading income for the chargeable period of £8.0 billion.

The group trading income is comprised as follows:

Income from insurance activities £ 0.56 billion
   
Income from non-financial trading activities £ 3.20 billion
Income from financial trading activities £ 4.24 billion
Total group income £ 8.0 billion

As only £3.76 billion of the group’s £8.0 billion trading income (that is 47%) comes from exempt activities the test at paragraph 13(1)(a) is not met. As only £3.2 billion of the group’s £8.0 billion trading income (that is 40%) comes from non-financial trading activities the test at paragraph 13(1)(b) is not met either. As neither test is met the exempt activities exclusion cannot apply to the group.