BKLM310000 - Chargeable equity and liabilities: background

For chargeable periods ending prior to 1 January 2021

Once it has been established under Part 3 of Schedule 19 that an entity falls within the remit of the bank levy, the equity and liabilities that will be chargeable must be identified.

The bank levy is chargeable on certain equity and liabilities that arise on relevant balance sheets. See BKLM320000 for the calculation methodology for different entities and groups.

Certain equity and liabilities are excluded from the bank levy (see BKLM330000) and there are certain rules relating to:

  • aggregation (see BKLM340000) of certain equity and liabilities
  • netting (see BKLM350000) of certain groups of assets and liabilities, and
  • deduction from chargeable equity and liabilities of certain high quality liquid assets (see BKLM360000).

The bank levy can encompass a range of entities within groups which may have different accounting policies, as well as differing levels of interaction and interdependence depending upon the particular group structure. It is therefore a necessary design feature of the bank levy to have different bases on which to establish the equity and liabilities to be charged to the bank levy. The methods adopted ensure a consistent, level playing field treatment across the different banking structures while minimising as far as possible the compliance burden.

The identification and calculation of the chargeable equity and liabilities depends upon whether the relevant entity or group is a:

  • UK banking group or building society group - see BKLM321000
  • foreign banking group - see BKLM322000
  • relevant non-banking group - see BKLM323000
  • UK resident bank or building society (not member of a group) - see BKLM324000
  • relevant foreign bank (not a member of a group) - see BKLM325000

See BKLM323500 for rules relating to joint ventures.

For chargeable periods ending on or after 1 January 2021

Once it has been established under Part 3 of Schedule 19 that an entity or sub-group falls within the remit of the Bank Levy, the equity and liabilities that will be chargeable must be identified.

The Bank Levy is chargeable on certain equity and liabilities that arise on relevant balance sheets. See BKLM315000 for the calculation methodology for different entities and groups.

Certain equity and liabilities are excluded from the Bank Levy (see BKLM330000) and there are rules relating to:

  • equity and liabilities issued intra-group (see BKLM315611 and BKLM315612);
  • netting of certain groups of assets and liabilities (see BKLM315613); and
  • deduction from chargeable equity and liabilities of certain high quality liquid assets (see BKLM315630 and BKLM360000).

The Bank Levy can encompass a range of entities within groups which may be resident (or have permanent establishments) in the UK or elsewhere, or have different accounting policies, as well as differing levels of interaction and interdependence depending upon the particular group structure. It is therefore a necessary design feature of the Bank Levy to have different bases on which to establish the equity and liabilities to be charged to the Bank Levy. The methods adopted are intended to provide a consistent, level playing field treatment across the different banking structures while minimising as far as possible the compliance burden.

The identification and calculation of the chargeable equity and liabilities depend upon whether the relevant entity or sub-group is a:

  • chargeable UK resident entity (whether or not a member of a sub-group) - see BKLM315400;
  • UK sub-group. The precise treatment then depends on whether there are any non-UK resident members, designated Foreign Permanent Establishment (FPE) entities, and any applicable entity-by-entity election - see BKLM315500; or
  • relevant foreign bank (whether or not a member of a sub-group) - see BKLM325000.