BKLM740360 - Double Taxation Relief: Single Resolution Fund: Restriction on credit

Regulation 13 of SI 2016/1212

Regulation 13 of the Bank Levy (Double Taxation Relief) (Single Resolution Fund Levy) Regulations applies to determine the amount of the bank levy attributable to a UK permanent establishment.

The amount of relief available for the Single Resolution Fund levy paid by the UK permanent establishment will be limited to the lower of the maximum credit calculated in accordance with regulation 6, and the amount of the bank levy attributable to the UK permanent establishment in accordance with regulation 13.

Foreign banking groups with both UK subgroups and UK permanent establishments

In cases where a foreign banking group operates in the UK through both UK based subsidiaries and a UK permanent establishment double taxation will arise in respect of the Single Resolution Fund levy paid by the UK permanent establishment only (as UK resident entities will not be subject to the Single Resolution Fund levy).

To ensure that relief is given consistently regulation 13 applies to determine the amount of the bank levy that is attributable to a UK permanent establishment.

Step 1

Determine the amount (“A”) of the chargeable equity and liabilities of the permanent establishment which is long term equity and liabilities, and the amount (“B”) which is short term liabilities.

Step 2

Determine the amount (“C”) of the chargeable equity and liabilities of the relevant group which is long term equity and liabilities and the amount (“D”) which is short term liabilities.

This is the full amount of equity and liabilities of the foreign banking group which are chargeable to the bank levy (i.e. all chargeable equity and liabilities of the UK subsidiaries and the chargeable equity and liabilities that have been allocated to the UK permanent establishment).

Step 3

Determine the weighted average amount (“E”) of chargeable equity and liabilities of the permanent establishment using the formula

A + 2B

Step 4

Determine the proportion (“F%”) of the weighted average of chargeable equity and liabilities of the relevant group that relates to the weighted average of chargeable equity and liabilities of the permanent establishment (determined at step 3 as E) using the formula

E / ( C + 2D )

Step 5

F% of the amount of the bank levy is the amount of the bank levy attributable to the chargeable equity and liabilities of the permanent establishment.

Regulation 13(3) SI 2016/1212

If application of the weighted average method specified in regulation 13 gives an outcome that would be unjust or unreasonable, then the legislation allows for an alternative method to be used.

As regulation 13(3) will only apply where the specified method gives an outcome that can be shown not to be either just or reasonable, use of an alternative mechanism should be discussed with the tax specialist or customer relationship manager of the bank.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Foreign banking groups with UK permanent establishments only

In these cases although regulation 13 still applies the chargeable equity and liabilities of the relevant group will only consist of the chargeable equity and liabilities of the permanent establishment.

This means that A=C and B=D, which will always give an outcome of F=100%.

This means that the full amount of the bank levy charge will be attributed to the UK permanent establishment, and in practice no further restriction will apply.