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HMRC internal manual

Bank Levy Manual

HM Revenue & Customs
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Chargeable equity and liabilities: excluded equity and liabilities: clients' money

Paragraph 38 of Schedule 19

Liabilities recognised in respect of clients’ money on a balance sheet may be excluded.

To qualify as excluded equity and liabilities clients’ money must be held by an authorised person for section 31 of FISMA or where it would be so required to meet this definition if it was resident and carried on its activities in the UK.

Where the authorised person is UK resident, the meaning of ‘clients’ money’ is that given to the term by section 139(1) of FISMA 2000. If the holder is non-resident but falls within the legislation because it would be required to be an authorised person if it was resident and carried on its activities in the UK, the definition of ‘clients’ money’ also includes any money held by the authorised person outside of the UK subject to rules which are comparable with the rules under section 139 of FISMA 2000.

Deposits within Article 5(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI2001/544) but ignoring the exclusions in articles 6 to 9AB are not included within the definitions of ‘clients’ money’ and may not be excluded from the bank levy.

In determining whether clients’ monies held outside of the United Kingdom are comparable to monies held under the meaning given by FISMA 2000 the following criteria are examples of the factors to be considered, either alone or in combination:

  • the client money must not be able to be used to pay the general creditors of the firm in the event of its insolvency
  • the firm must be prevented from using the client money in its business
  • the client money must be held under a regulatory regime
  • the money must be held by the firm as a deposit.