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HMRC internal manual

Bank Levy Manual

Chargeable equity and liabilities: relevant foreign banks: attribution of chargeable equity and liabilities to a branch: calculation of branch liabilities: GAAP differences: considerations

Paragraph 24(2) of Schedule 19

Paragraph 24(2) requires that branch equity and liabilities are determined by reference to amounts prepared under IAS or UK GAAP.

Where those amounts have been determined using a local GAAP that differs from IAS and UK GAAP, adjustment will be required for significant differences that could otherwise distort the levy base.

Set out below are some practical considerations, and an assessment of some of the adjustments that, depending on the circumstances, may be required, as well as some areas where we consider it unlikely adjustments will be necessary.

This guidance provides a high level overview of our understanding of certain GAAP differences that may be relevant to banks. Banks will however have to consider the extent to which adjustments may be required to their reported figures based upon their individual circumstances.


Steps 1 and 2 of paragraph 24(1) require consideration of the assets of the bank and its UK permanent establishment to determine the proportion of equity and liabilities to be attributed to the UK permanent establishment. Except in some rare circumstances (for example where under local GAAP derivatives are not recognised on balance sheet, or are not held at fair value), we would not normally expect any adjustment to be required to the assets in making this calculation.


Steps 3 and 4 of paragraph 24(1) provide for the calculation of the UK allocated equity and liabilities of the bank. Where these amounts are determined using local GAAP, and where there are significant differences between those local GAAP amounts and the amounts which would be reported under IAS or UK GAAP, adjustments for those differences will be expected.

No adjustment will generally be expected for the following:

  • GAAP differences relating to excluded liabilities, such as current tax, deferred tax, insurance liabilities, and defined benefit pension liabilities
  • GAAP differences which may result in a different classification between equity and liabilities, as all such amounts should remain within the levy base
  • small measurement differences arising on liabilities where an amortised cost basis of accounting is used which is broadly consistent with IAS/UK GAAP
  • small measurement differences arising on liabilities where a fair value basis of accounting is used which is broadly consistent with IAS/UK GAAP.