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HMRC internal manual

Bank Levy Manual

From
HM Revenue & Customs
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Anti-avoidance: relevant arrangements that can be ignored when applying the anti-avoidance rule: example

A hedge fund has made a £15bn deposit with a bank that is within the charge to the bank levy. Interest is paid on this deposit at a rate of 5% per annum. The bank has asked the hedge fund to transfer the £15bn deposit to a special short term money market fund which pays interest of only 1% for the period 24 December 2016 to 4 January 2017. This period covers the end of the bank’s chargeable period. After the 4 January 2017 the £15bn would once again be deposited back with the bank at 4% interest rate.

To compensate the hedge fund for removing this £15bn deposit over the balance sheet date the bank will provide various other services to the hedge fund at a below market price as compensation for the lost interest.

The above arrangements are not a genuine attempt to reduce the risk profile of the bank’s funding on an ongoing basis. The main purpose or one of the main purposes of the arrangements is to avoid or reduce a charge or assessment to the bank levy. In such a situation, the anti-avoidance rule at paragraph 47 would apply and the bank levy will be charged or assessed on the bank as it would have been in the absence of these arrangements.