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Finance Act 2012

Section 211 Schedule 34: the Bank Levy


1.Section 211 and Schedule 34 make a number of amendments to Schedule 19 to Finance Act 2011.

2.The Schedule amends the rates at which the bank levy is charged from 1 January 2012 onwards.

3.It also makes amendments to paragraphs 43 and 44 of Schedule 19, Finance Act 2011 which deal with joint ventures. The changes to paragraph 43 ensure that joint ventures are treated consistently across different types of banking groups and relevant non banking groups. The changes to paragraph 44 ensure that no double taxation of joint ventures arises under the bank levy.

4.The Schedule also introduces two new provisions that relate to the relief from double taxation for equivalent foreign levies. Paragraphs 66(9A) which ensures that HM Revenue and Customs has the ability to restrict double taxation relief from the day it is given under a double taxation arrangement where excessive relief is given in respect of the equivalent foreign levy of another jurisdiction and paragraph 67A which allows for the exchange of information where an international tax enforcement arrangement has been entered into in respect of the bank levy.

Details of the Section

Rates 2012

5.Paragraph 1 introduces amendments to the bank levy legislation.

6.Paragraph 2 increases the bank levy rates from 1 January 2012.

7.Paragraph 3 replaces the rates for a chargeable period that falls partly before 1 January 2012. It increases the rates due on the proportion of chargeable short term liabilities and on the proportion of chargeable equity and chargeable long term liabilities for the part of the chargeable period that falls after 1 January 2012.

8.Paragraph 4 provides that the rate changes made by paragraphs 2 and 3 are treated as having come into force on 1 January 2012.

Rates 2013

9.Paragraph 5 increases the bank levy rates from 1 January 2013.

10.Paragraph 6 substitutes sub paragraphs 7(1) and 7(2) of Schedule 19.

11.New paragraph 7(1) provides that new paragraph 7(2) applies if some or all of the chargeable period falls before 1 January 2013.

12.New paragraph 7(2) substitutes a new Step 7, which explains how to calculate the amount of bank levy arising for a chargeable period, where some or all of that period falls before 1 January 2013. Where a number of rates of bank levy may apply during such chargeable periods, paragraph 6(2) inserts into paragraph 17 of Schedule 19 a table setting out the periods (“rate periods”) and rates in force for each rate period that are required to determine the amount of bank levy.

13.Paragraph 7 provides that the rate changes made by paragraphs 5 and 6 come into force on 1 January 2013.

Joint ventures

14.Paragraphs 8 to 10 amend paragraphs 43 and 44 of Schedule 19, which relate to the calculation of chargeable equity and liabilities where a relevant group has an interest in a joint venture.

15.Paragraph 8(1) introduces the changes that are being made.

16.Paragraph 8(2) replaces paragraph 43(1)(d) and (e) with a new paragraph 43(1)(d). The changes mean that paragraph 43 will now apply to both UK resident and non resident joint ventures, and will only apply where the liabilities of the joint venture have not already been taken into account when calculating the chargeable equity and liabilities of the relevant group.

17.Paragraph 8(3) substitutes a new paragraph 43(2). New paragraph 43(2)(a) requires the relevant group to determine its chargeable equity and liabilities on the basis that the joint venture is a member of the group, but only to the extent of the group’s interest in the joint venture’s assets and liabilities.  New paragraph 43(2)(b) ensures that the joint venture is treated as if it were not a member of the group in relation to the remaining liabilities and assets.

18.Paragraph 9 amends paragraph 44(7)(b) to ensure that when calculating the chargeable equity and liabilities of a joint venture in its own right, any amounts that are already charged in the venturer’s banking group under paragraph 43, are not charged for a second time.

19.Paragraph 10 explains that the amendment made by paragraphs 8 and 9 have effect for all chargeable periods ending on or after 1 January 2012.

Double taxation relief

20.Paragraph 11 of the Schedule adds a new paragraph and a subparagraph into Part 7 of Schedule 19 to the Finance Act 2011.

21.Paragraph 11(1) inserts new paragraph 66(9A) into Schedule 19.

22.New paragraph 66(9A) provides that where double taxation relief is allowed via arrangements entered into by the United Kingdom and another territory regarding relief from double taxation in respect of the bank levy and an equivalent foreign levy then regulations may be made that take effect from the same date that relief is allowed under the arrangements. However regulations under this sub-paragraph will only have this effect if they are made and come into force at the same time as the order giving effect to the arrangements.

23.Paragraph 11(2) inserts new paragraph 67A into Part 7 of Schedule 19. This paragraph allows for the exchange of information where international tax enforcement arrangements have been entered into in association with arrangements regarding relief from double taxation in respect of the bank levy.

24.New paragraph 67A(1) gives effect to arrangements that have been made with any territory or territories outside the UK relating to tax enforcement where the Treasury makes an Order in respect of those arrangements.

25.New paragraph 67A(2) explains that arrangements relating to international tax enforcement may include provisions on the exchange of information and the service of documents in relation to the United Kingdom bank levy or an equivalent foreign levy.

26.New paragraph 67A(3) provides that any Treasury Order that replaces an existing Order made under this Schedule may include appropriate transitional provisions.

27.New paragraph 67A(4) ensures that sections 173(4) and (5) of Finance Act 2006 apply to arrangements which have effect under this paragraph and these in turn allow any Minister or officer in another Government department to disclose any information to the Commissioners for HM Revenue and Customs that may be disclosed to another territory under the arrangements. It also allows the Commissioners or any authorised Revenue and Customs official to disclose such information to the authorised officer of any territory or territories with whom arrangements have been made. Section 173(5) Finance Act 2006 provides that the Commissioners or any authorised Revenue and Customs official may not disclose any information to another territory under the arrangements unless first satisfied that the confidentiality rules applied in the other territory are no less strict than those applying in the UK.

28.New paragraphs 67A(5) and 67A(6) provides the rules regarding the making of the secondary legislation to give effect to the international tax enforcement arrangements.

Transitional provisions

29.Paragraph 12 provides transitional provisions for collecting the additional amounts of bank levy that arise from the amendments relating to the increases of the rates of the bank levy and to the paragraphs concerning joint ventures.

30.Paragraph 12(1) states that paragraph 12 applies where an entity (“E”) is charged to the bank levy for an accounting period in respect of a chargeable period that falls wholly or partly on or after 1 January 2012 and one, or more, of the instalment payments for the accounting period in question are due and payable before Royal Assent of Finance Bill 2012.

31.Paragraph 12(2) provides that the effect of the rate changes for 2012, rate changes for 2013 and joint venture amendments are to be ignored when determining the amount of any instalment payment that is due before Royal Assent (“pre-commencement instalment payments”).

32.Paragraph 12(3) provides that where there is at least one instalment payment for the accounting period of E which is due and payable on or after Royal Assent (“post-commencement instalment payments”), the amount of the first such instalment payment is increased by the adjustment amount.

33.Paragraph 12(4) provides that where E does not have any post-commencement instalment payments, the adjustment amount will be due and payable 30 days after Royal Assent.

34.Paragraph 12(5) explains how to determine the “adjustment amount” for the purposes of paragraphs 12(3) and 12(4). The adjustment amount is the difference between the pre-commencement instalment payments calculated firstly on the basis that the effects of the 2012 and 2013 rate changes and joint venture amendments are ignored and then on the basis that the effects of the 2012 and 2013 rate changes and joint venture amendments are not ignored.

35.Paragraph 12(6) ensures that references within the provisions of Corporation Tax (Instalment Payment) Regulations 1998 (S.I. 1998/3175) to regulations 4A to 4D, 5, 5A or 5B of those Regulations are to be read as including references to paragraphs 12(1) to (6).

36.Paragraph 12(7) ensures that section 59D of the Taxes Management Act 1970, which provides the general rule for the collection of corporation tax, is also subject to paragraphs 12(1) to (5).

37.Paragraph 12(8) provides definitions of terms used in this Schedule.

Background Note

38.The bank levy is an annual balance sheet charge based upon the chargeable equities and liabilities of all UK banks and building society groups, foreign banks and banking groups operating in the UK and UK banks in non-banking groups from 1 January 2011 onwards.

Joint ventures

39.A joint venture is an entity where two or more parties (“the venturers”) undertake an economic activity that is subject to joint control. International accounting standards currently allow joint ventures to be accounted for in two different ways, using either the equity method (where the investment in the joint venture is recorded at cost) or proportional consolidation where the consolidated balance sheet of the venturer includes its share of the assets and liabilities of the joint venture.

Double taxation relief

40.Part 7 of Schedule 19 to the Finance Act 2011 provides for double taxation relief to be given where a bank or banking group is doubly charged to the UK bank levy and an equivalent foreign levy.

41.Information regarding taxes is often exchanged by the United Kingdom with other territories using Exchange of Information articles in arrangements regarding Income Tax, Corporation Tax and Capital Gains Tax. However where such arrangements do not provide for Exchange of Information in respect of taxes of all kinds or the other territory does not consider their levy to be a tax then those arrangements cannot be used to exchange information relating to the bank levies.

42.The new provision is modelled on the legislation that enacts similar international tax enforcement arrangements for Income Tax, Corporation Tax and Capital Gains Tax.

Transitional provisions

43.Bank levy is treated as if it is corporation tax, and the relevant entity or, in the case of a banking group, the “the responsible member” (see paragraph 54, Schedule 19) is required to both make a return of the bank levy (as part of its company tax return) and to pay the bank levy.

44.Entities that pay the bank levy are required to do so under the provisions of The Corporation Tax (Installment Payments) Regulations 1998 (S.I. 1998/3175).

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