Banking Manual

BKM404150 - Banking surcharge: surcharge allowance: periods straddling 1 April 2023

FA2022/S6

From 1 April 2023, the surcharge allowance increased from £25 million to £100 million.

Where a company's accounting period straddles 1 April 2023, the period will be split on a time apportionment basis. The increased allowance will apply to the notional period commencing on 1 April 2023 and the Surcharge will apply at the relevant rate to the profits of each notional period.

Example

Company A has an accounting period from 1 January 2023 to 31 December 2023. Company A's surcharge profits for the period are £80m.

The accounting period straddles 1 April 2023, so is split into two notional periods:

• 1 January to 31 March 2023 (90 days)
• 1 April to 31 December 2023 (275 days)

As each notional accounting period is less than 12 months, the available surcharge allowance for each period is proportionally reduced.

Calculation

Apportioned profits:

• Profits for 1 January to 31 March 2023: £80m x (90/365) = £19.73m
• Profits for 1 April to 31 December 2023: £80m x (275/365) = £60.27m

Apportioned allowance:

• Allowance for 1 January to 31 March 2023: £25m x (90/365) = £6.16m
• Allowance for 1 April to 31 December 2023: £100m x (275/365) = £75.34m

Apply Surcharge to profits over the allowance:

• 1 January to 31 March 2023: Surcharge is charged on £13.57m (£19.73m profits - £6.16m allowance)
• 1 April to 31 December 2023: No Surcharge is due as the maximum allowance available (£75.34m) exceeds the surcharge profits (£60.27m)

Company A's total Surcharge liability for the accounting period ending 31 December 2023 is the amount due on £13.57m arising in the notional period 1 January - 31 March 2023, charged at the applicable rate for that notional period.

The unused allowance of £15.07m, from the notional period commencing 1 April 2023, cannot be carried back to use against profits of the first notional period which arose prior to 1 April 2023, nor can it be carried forward.