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HMRC internal manual

Bank Levy Manual

Double Taxation Relief: Single Resolution Fund: how relief is calculated

Relief is given based upon the residence of each individual entity subject to the bank levy. That is the UK will give relief for any Single Resolution Fund levy charged upon the balance sheet of entities that are not resident in the UK.

As the bank levy is charged upon the group balance sheet and the Single Resolution Fund levy is charged on a single entities balance sheet the rules will operate differently depending on whether relief is being given to a UK group who is charged to the Single Resolution Fund levy on their EU subsidiaries, or an EU bank being charged to the bank levy on their UK permanent establishment.

Relief is given separately in relation to the imposition of the Single Resolution Fund levy by the law of different foreign territories.

This means that calculations will need to be undertaken separately for each incidence of double taxation, one each for every time that the Single Resolution Fund levy is applied by Germany, Ireland, Spain etc.

Overseas subsidiaries: Regulation 5 of SI 2016/1212

Regulation 5 of the Bank Levy (Double Taxation Relief) (Single Resolution Fund Levy) Regulations calculates the maximum amount of relief due for EU subsidiaries of UK banking groups, UK sub-groups or UK banking sub-groups.

To determine the maximum amount of relief under Regulation 5 the bank must calculate the amount of bank levy which each entity would be subject to were it a stand-alone chargeable entity in the UK.

To undertake this calculation the bank must identify the chargeable equities and liabilities of the overseas subsidiary on a solo basis.

Once this has been done the proportion of the whole group’s chargeable equities and liabilities that are represented by the overseas subsidiary can be calculated.

 

CEL(overseas subsidiary) = Y%

CEL(whole group)        

 

The amount of bank levy that would be charged to the overseas entity is then calculated as provided for by paragraph 5 of Schedule 19 to FA 2011, but in the computation the £20,000,000,000 allowance is reduced in both places to (Y% of £20,000,000,000).

UK permanent establishments: Regulation 6 of SI 2016/1212

Regulation 6 of the Bank Levy (Double Taxation Relief) (Single Resolution Fund Levy) Regulations calculates the maximum amount of relief due for UK permanent establishments of relevant EU foreign banks.

Step 1

Determine the assets (‘A’) that underlie the Single Resolution Fund levy. Normally this figure will come from the consolidated balance sheet of the ultimate parent for the chargeable period.

However if the ultimate parent is outside the state where the relevant foreign bank is based then the assets figure will come from the financial statements for the chargeable period of the entity that is subject to the Single Resolution Fund levy.

Step 2

Determine (‘B’) the UK assets as at the end of the chargeable period of the entities subject to the Single Resolution Fund levy. UK assets are defined in Regulation 7 of SI 2016/1212 and are essentially the assets of any entities that give rise to Type D liabilities (BKLM322400). This ensures that relief is limited only to entities that fall both within the charge to the UK bank levy and the Single Resolution Fund levy.

Step 3

The Single Resolution Fund levy paid in relation to the chargeable period is then calculated (‘C’).

In most cases this calculation is straightforward as the period to which the Single Resolution Fund levy relates will be the same as the chargeable period, as both charges are levied in relation to a specific balance sheet which will be based upon the period of account of the relevant foreign bank.

Step 4

The amount of credit is then calculated using the formula (B/A) x C.