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HMRC internal manual

Bank Levy Manual

Chargeable equity and liabilities: relevant entities and groups: UK banking groups or buildings society groups

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Where the relevant group is a UK banking group or building society group (see BKLM241000) the bank levy is based upon the worldwide group’s chargeable equity and liabilities. Accordingly, the starting point for the bank levy will be the equity and liabilities that are recognised (see BKLM820000) in the group’s consolidated financial statements (prepared under IAS or UK GAAP) for the chargeable period.

If consolidated financial statements are not prepared under IAS or UK GAAP, or if no consolidated financial statements are prepared at all, then the chargeable equity and liabilities are those amounts that would have been recognised had accounts been prepared for the chargeable period under IAS. This is set out in Paragraph 15(5) of Schedule 19.

The following steps should be followed to determine the amount of chargeable equity and liabilities from the total equity and liabilities arising in the group’s consolidated financial statements:

  1. ignore excluded equity and liabilities (see BKLM330000)
  2. adjust the remaining equity and liabilities to take into account any liabilities that may be netted under the netting arrangements (see BKLM350000
  3. adjust for any joint venture liabilities (see BKLM323500), and
  4. reduce the remaining equity and liabilities (but not below nil) by the amount of the group’s relevant high quality liquid assets (see BKLM360000).

For chargeable periods ending on or before 31 December 2014, any high quality liquid assets should be set against long term equity and liabilities before short term liabilities.

For chargeable periods ending on or after 1 January 2015, there is no prescribed order of set off for high quality liquid assets, but where high quality liquid assets are set against short term liabilities, the reduction is halved.

It is possible that some high quality liquid assets could also be:

  • available for netting, or
  • related to the removal of double counted joint venture liabilities.

To prevent any double relief being given, the deduction for high quality liquid assets must be restricted by any amounts that also fall into these categories.