Finance Act 2011

Chargeable equity and liabilities of UK resident banks and building societies which are not members of groups

21 (1) This paragraph applies where the bank levy is charged as provided for by paragraph 5 and the relevant entity is a UK resident bank or a building society.

(2) To determine the amount of the relevant entity’s chargeable equity and liabilities—

(a) determine the amount of the entity’s equity and liabilities (other than excluded equity and liabilities) as at the end of the chargeable period,

(b) adjust that amount in accordance with paragraphs 22 and 44 (so far as applicable), and

(c) finally, reduce that amount (but not below nil) by—

(i) the amount of the entity’s high quality liquid assets as at the end of that period, other than any asset which for the purposes of an adjustment under paragraph (b) is an asset to which paragraph 22(4) applies, and

(ii) where sub-paragraph (4) applies, the amount determined under that sub-paragraph.

(3) Sub-paragraph (4) applies where—

(a) as at the end of the chargeable period, the assets of the relevant entity include a financial asset in respect of an advance of cash made by the entity,

(b) that financial asset is not an asset which, for the purposes of an adjustment under sub-paragraph (2)(b), is an asset to which paragraph 22(4) applies, and

(c) underlying that asset, as collateral, is an item (“the collateral”) owned by the entity which would form part of the entity’s high quality liquid assets as at the end of that period were the collateral, rather than the financial asset, an asset of the entity.

(4) The amount within sub-paragraph (2)(c)(ii) is—

(a) the amount of the financial asset as at the end of that period or, if lower, an amount equal to the fair value of the collateral as at that time, or

(b) if this sub-paragraph applies in relation to more than one financial asset, the total of the amounts determined under paragraph (a) in respect of each of those assets.

(5) For the purposes of this paragraph and paragraph 22 the relevant entity’s assets, equity and liabilities are to be determined by reference to the amounts recognised in the entity’s financial statements for the chargeable period as prepared under international accounting standards or UK GAAP.

(6) In reducing the amount of any equity or liabilities under sub-paragraph (2)(c), long term equity and liabilities are to be reduced before short term liabilities.