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HMRC internal manual

# Chargeable equity and liabilities: relevant foreign banks: attribution of chargeable equity and liabilities to a branch: steps for allocating equity and liabilities to a relevant foreign bank

The legislation sets out a 6 step process: 4 steps that allow the chargeable equity and liabilities of a relevant foreign bank to be determined and 2 steps that classify the liabilities as either long or short term.

## Step 1

Determine the amount of assets held by the foreign bank at the end of the chargeable period to give an amount ‘A’. Further guidance on how to calculate the assets held by the foreign bank is at BKLM377000.

## Step 2

Determine the amount of assets held by the UK branch of the foreign bank to give an amount ‘B’. Further guidance on how to calculate the assets held by the UK branch is at BKLM378000.

Calculate the proportion of the foreign bank’s assets that are held by the UK branch to give ‘X%’, that is calculate the proportion that B is of A.

## Step 3

Determine the amount of chargeable equity and liabilities held by the foreign bank to give an amount ‘C’. Further guidance on how to calculate C is at BKLM379000.

## Step 4

The amount of chargeable equity and liabilities to be allocated to the UK branch is X% of C. Further guidance on how to calculate the chargeable equity and liabilities of the UK branch is at BKLM379000.

## Steps 5 and 6

These steps determine the proportion of the chargeable equity and liabilities that are to be treated as long term liabilities (chargeable to the bank levy at half rate) and those liabilities that are short term liabilities (charged at the full bank levy rate).

Example 1:

If foreign bank’s assets (A) are 200 and UK branch assets (B) are 40,

Then branch assets are 40/200 = 20%

The chargeable equity and liabilities of the foreign bank (C) are 125.

Therefore the chargeable equity and liabilities to be allocated to the UK branch are 20% of 125 = 25.