Finance Act 2011

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

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. U.K.

(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.

22 (1) This paragraph applies for the purposes of paragraph 21(2) if— U.K.

(a) the relevant entity has liabilities to another entity F1 . . . (“the relevant entity's liabilities”),

[F2 (b) the relevant entity recognises, as assets, amounts due from that other entity (“N”) to the relevant entity (“N's liabilities”),]

(c) there is in place an agreement between the relevant entity and N which makes provision for there to be a single net settlement of all the relevant entity's liabilities (so far as covered by the provision) and all N's liabilities (so far as covered by the provision) if the netting event occurs, and

(d) the provision mentioned in paragraph (c) is legally effective and enforceable.

(2) For the purposes of sub-paragraph (1)—

(a) “ agreement ” includes an agreement which forms part of a multi-lateral agreement, arrangement or trading facility,

[F3 (b) references to amounts due from N include securities provided by the relevant entity to N as collateral, but only where the relevant entity recognises those securities in its balance sheet or statement of financial position, and]

(c) F4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) “the netting event occurs” if the insolvency or bankruptcy of the relevant entity or N gives rise to the termination of any arrangements under which any liability covered by the provisions mentioned in sub-paragraph (1)(c) arises.

[F5 Section 556 of CTA 2009 (meaning of securities and similar securities) applies for the purposes of this sub-paragraph as it applies for the purposes of Chapter 10 of Part 6 of that Act.]

(3) F6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The amount of the relevant entity's net settlement liabilities is to be reduced (but not below nil) by the amount of the relevant entity's net settlement assets.

(5) The relevant entity's “net settlement liabilities” are the relevant entity's liabilities so far as they—

(a) are covered by the provision mentioned in sub-paragraph (1)(c), and

(b) are not excluded liabilities.

(6) The relevant entity's “net settlement assets” are its assets so far as corresponding to N's net settlement liabilities.

(7) “ N's net settlement liabilities ” means N's liabilities so far as they are covered by the provision mentioned in sub-paragraph (1)(c).

(8) If the relevant entity's net settlement liabilities exceed the entity's net settlement assets, and a proportion (A%) of those liabilities is long term liabilities and a proportion (B%) of those liabilities is short term liabilities, under sub-paragraph (4)—

(a) the long term liabilities are reduced by A% of the entity's net settlement assets, and

(b) the short term liabilities are reduced by B% of those assets.

Textual Amendments

F1 Words in Sch. 19 para. 22(1)(a) omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 6(2)(a)

F2 Sch. 19 para. 22(1)(b) substituted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 6(2)(b)

F3 Sch. 19 para. 22(2)(b) substituted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 6(3)(a)

F4 Sch. 19 para. 22(2)(c) and following word omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 6(3)(b)

F5 Words after Sch. 19 para. 22(2)(d) inserted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 6(3)(c)

F6 Sch. 19 para. 22(3) omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 6(4)