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HMRC internal manual

Bank Levy Manual

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HM Revenue & Customs
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Chargeable equity and liabilities: relevant entities and groups: foreign banking groups: purpose and definition

Paragraph 17 of Schedule 19

The purpose of the bank levy is to ensure that the banking sector makes a fair contribution, which reflects the risks that the banking sector poses to the UK financial sector and wider economy. As such the bank levy applies to the UK operations of foreign banking groups and their subsidiaries.

For the purposes of the bank levy a foreign banking group is defined as a group:

  • that is a banking group (see BKLM240000), and
  • whose parent entity is a non-UK resident entity.

A foreign banking group may trade in the UK through entities within a UK sub-group, through UK entities that are subsidiaries, through a permanent establishment (a branch) of a foreign company or through a mix of these structures.

These UK subsidiaries and UK branches may be banks themselves or they may have other trading or non-trading activities. Also the UK branches and subsidiaries may in turn hold other subsidiaries which may be in the UK or may be abroad. All of these entities will be included as part of the foreign banking group within the charge to the bank levy.

The bank levy will be chargeable on the sum of the total chargeable equity and liabilities of these entities subject to certain intra-group adjustments.

Example - The scope of the foreign banking group (Word 34KB)

The various strands that make up the UK presence (and their foreign subsidiaries) of the foreign banking group give rise to four categories of chargeable equity and liabilities. The legislation refers to these as Type A, Type B, Type C and Type D chargeable equity and liabilities.

  • Type A (see BKLM322100) - relates to the chargeable equity and liabilities of any relevant UK sub-groups
  • Type B (see BKLM322200) - relates to the chargeable equity and liabilities of any UK resident entity (unless included in a relevant UK sub-group) regardless of their trade or activities
  • Type C (see BKLM322300) - relates to the chargeable equity and liabilities of any non-UK resident entity that is held by a UK resident entity (unless included in a relevant UK sub-group), regardless of their trade or activities, provided it is a member of the foreign banking group
  • Type D (see BKLM322400) - relates to the allocated chargeable equity and liabilities of any UK branches of a foreign bank (relevant foreign bank) that is not a member of any UK sub-group of the foreign banking group, but is itself a member of the foreign banking group.

The resulting Type A, Type B, Type C and Type D chargeable equity and liabilities for a chargeable period are added together (with certain adjustments) to give the overall chargeable equity and liabilities of the foreign banking group for that chargeable period.

Type A, Type B, Type C and Type D equity and liabilities may be ignored if they meet the de minimis conditions - see BKLM380000.