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Finance (No. 3) BillPage 330

(4) Sub-paragraph (5) applies for the purposes of sub-paragraphs (2) and (3) if—

(a) the entity holding the deposit (“the relevant deposit”) is required to
pay, in relation to the scheme, levies for purposes mentioned in
section 213(3)(b) of FISMA 2000 or purposes comparable to those
5purposes,

(b) those levies are calculated—

(i) by reference to a proportion (“X%”) of the total amount of all
deposits held by the entity or all deposits held by the entity
within a specified class within which the relevant deposit
10falls, or

(ii) by reference to another amount which is a proportion (“Y%”)
of the total amount of all the scheme deposits held by the
entity, and

(c) X% or (as the case may be) Y% exceeds the proportion (“Z%”) of the
15relevant deposit covered by the scheme.

(5) The scheme is treated—

(a) in a case within sub-paragraph (4)(b)(i), as covering X% of the
relevant deposit (instead of Z%), and

(b) in a case within (4)(b)(ii), as covering Y% or, if smaller, 100% of the
20relevant deposit (instead of Z%).

(6) In sub-paragraph (4) “scheme deposit” means a deposit the whole or part of
which is covered by the scheme (disregarding sub-paragraph (5)).

(7) A deposit is “protected” so far as it is covered by a guarantee—

(a) which is given explicitly by a national government (other than the
25government of the United Kingdom), and

(b) under which the government guarantees to compensate depositors
for losses on their deposits.

(8) In sub-paragraph (2), and sub-paragraphs (4), (5) and (6) so far as relating to
a scheme within sub-paragraph (2), “deposit” has the meaning given by
30article 5(2) of the Financial Services and Markets Act 2000 (Regulated
Activities) Order 2001 (S.I. 2001/544S.I. 2001/544).

(9) In sub-paragraphs (3) and (7), and sub-paragraphs (4), (5) and (6) so far as
relating to a scheme within sub-paragraph (3), “deposit” has the meaning
given by article 5(2) of that Order but ignoring the exclusions in articles 6 to
359AB.

(10) If two or all of sub-paragraphs (2), (3) and (7) apply to a deposit, the amount
of the deposit “protected” is the highest amount which results from any one
of those sub-paragraphs.

30 (1) Equity and liabilities which are “tier one capital equity and liabilities” are
40excluded.

(2) “Tier one capital equity and liabilities” means, in relation to an entity or a
group of entities, so much of the entity or group’s equity and liabilities as—

(a) is tier one capital before deductions for the purposes of the FSA
Handbook, or

(b) 45would be treated as tier one capital before deductions for those
purposes were the tier one capital before deductions of the entity or
group as at the end of the chargeable period to be determined under
that Handbook.

Finance (No. 3) BillPage 331

31 (1) Sovereign repo liabilities are excluded.

(2) “Sovereign repo liability” means a liability of a person (“A”) which
represents a sum of money or other asset received by A from another person
(“B”) under an arrangement where—

(a) 5under the arrangement A sells high quality securities at any time to
B,

(b) the arrangement makes provision conferring a right or imposing an
obligation on A to buy those or similar securities at any subsequent
time, and

(c) 10the subsequent buying of those or similar securities would
extinguish the liability.

(3) Section 556 of CTA 2009 (meaning of securities and similar securities)
applies for the purposes of sub-paragraph (2) as it applies for the purposes
of Chapter 10 of Part 6 of that Act.

(4) 15Securities are “high quality” if—

(a) they are debt securities issued by entities within section BIPRU
12.7.3(1) or (2) of the FSA Handbook which meet the requirements of
section BIPRU 12.7.4(1) and (2), or

(b) they are issued by a designated multilateral development bank.

20“Debt securities” has the same meaning as that term has in section BIPRU
12.7.3 of the FSA Handbook.

32 (1) Sovereign stock-lending liabilities are excluded.

(2) “Sovereign stock-lending liabilities” means liabilities of the lender to
redeliver equivalent cash collateral under a stock lending arrangement in
25respect of high quality securities.

(3) Section 805 of CTA 2010 (“stock lending arrangement”) applies for the
purposes of sub-paragraph (2) as it applies for the purposes of Chapter 5 of
Part 17 of that Act, and the reference in sub-paragraph (2) to “the lender” is
to be construed accordingly.

(4) 30Paragraph 31(3) and (4) apply for the purposes of this paragraph.

33 (1) Relevant insurance liabilities are excluded.

(2) “Relevant insurance liabilities” means liabilities of a regulated insurer
carrying on an insurance business which are—

(a) liabilities to policyholders under contracts of general insurance or
35contracts of long-term insurance, including such contracts effected or
carried out outside the United Kingdom,

(b) liabilities representing unallocated surpluses, or

(c) liabilities representing participants’ interests in collective
investment schemes.

(3) 40The liabilities of a regulated insurer within sub-paragraph (2)(c) include a
liability which would be a liability of the insurer within that provision if the
insurer prepared consolidated financial statements.

(4) In this paragraph—

34 (1) Relevant property, plant and equipment reserves are excluded.

(2) 15“Relevant property, plant and equipment reserves” means equity amounts
representing revaluation reserves relating to the revaluation of property,
plant and equipment under International Accounting Standard 16 or
Financial Reporting Standard 15.

(3) “Property, plant and equipment” has the meaning given, for the time being,
20by International Accounting Standard 16.

35 (1) Relevant tax liabilities are excluded.

(2) In relation to liabilities to be determined by reference to amounts recognised,
or which would have been recognised, in consolidated financial statements
or financial statements prepared under international accounting standards,
25“relevant tax liabilities” means liabilities representing—

(a) current tax or deferred tax liabilities within the meaning, for the time
being, of International Accounting Standard 12, or

(b) an amount of the bank levy.

(3) In relation to liabilities to be determined by reference to amounts recognised,
30or which would have been recognised, in consolidated financial statements
or financial statements prepared under UK GAAP, “relevant tax liabilities”
means liabilities representing—

(a) current tax or deferred tax within the meaning, for the time being, of
Financial Reporting Standard 16 or 19, or

(b) 35an amount of the bank levy.

36 (1) Relevant retirement benefit liabilities are excluded.

(2) In relation to liabilities to be determined by reference to amounts recognised,
or which would have been recognised, in consolidated financial statements
or financial statements prepared under international accounting standards,
40“relevant retirement benefit liabilities” means liabilities under defined
benefit plans within the meaning, for the time being, of International
Accounting Standard 19.

(3) In relation to liabilities to be determined by reference to amounts recognised,
or which would have been recognised, in consolidated financial statements
45or financial statements prepared under UK GAAP, “relevant retirement
benefit liabilities” means liabilities under defined benefit schemes within the
meaning, for the time being, of Financial Reporting Standard 17.

Finance (No. 3) BillPage 333

37 (1) Financial services compensation scheme liabilities are excluded.

(2) “Financial services compensation scheme liabilities” means liabilities
representing—

(a) levies payable by virtue of section 213(2)(b) of FISMA 2000, or

(b) 5levies payable for purposes comparable with those mentioned in
section 213(2)(b) of that Act in relation to a scheme which—

(i) operates outside the United Kingdom, and

(ii) is comparable to the Financial Services Compensation
Scheme under section 213 of that Act.

38 (1) 10Liabilities representing clients’ money held by an authorised person are
excluded.

(2) “Authorised person” means an entity which—

(a) is an authorised person for the purposes of FISMA 2000 (see section
31 of that Act), or

(b) 15would be required to be such an authorised person if it were a UK
resident entity which carried on its activities in the United Kingdom.

(3) “Clients’ money”—

(a) in relation to an authorised person within sub-paragraph (2)(a), has
the meaning given by section 139(1) of FISMA 2000 (rules relating to
20handling of money), and

(b) in relation to an authorised person within sub-paragraph (2)(b),
means any money held by the person outside the United Kingdom
where the holding of that money is subject to rules comparable with
rules made under section 139 of that Act,

25but does not include a deposit within the meaning of article 5(2) of the
Financial Services and Markets Act 2000 (Regulated Activities) Order 2001
(S.I. 2001/544S.I. 2001/544) ignoring the exclusions in articles 6 to 9AB.

39 (1) Currency liabilities are excluded.

(2) “Currency liabilities” means liabilities of an entity or a group of entities
30representing notes issued by the entity or a member of the group as
currency.

Part 5 Supplementary provision

Chargeable periods: entities which do not prepare financial statements

40 (1) 35This paragraph applies where an entity does not prepare financial
statements (consolidated or otherwise) for a period (“the relevant period”).

(2) If the relevant period is 12 months or less, this Schedule (apart from this
paragraph) applies as if that period were a period of account of the entity.

(3) If the relevant period is more than 12 months, this Schedule (apart from this
40paragraph) applies as if each period to which sub-paragraph (4) applies
were a period of account of the entity.

(4) This sub-paragraph applies to a period if—

(a) it is the first period of 12 months falling within the relevant period, or

Finance (No. 3) BillPage 334

(b) it begins immediately after the end of the period mentioned in
paragraph (a) and ends at the end of the relevant period.

(5) Sub-paragraph (6) applies if, at the end of a period of 36 months beginning
with a relevant date, an entity has not prepared financial statements for a
5period which begins with that date.

(6) The entity is to be treated for the purposes of this paragraph as not having
prepared financial statements for that period or, if that period exceeds 24
months, for the first 24 months of that period.

(7) “Relevant date” means—

(a) 101 January 2011,

(b) the first day after a period, ending on or after that date, for which the
entity has prepared financial statements, or

(c) the first day after a period for which the company is treated under
sub-paragraph (6) as not having prepared financial statements.

15Financial statements etc

41 (1) This paragraph applies for the purposes of this Schedule.

(2) References to consolidated financial statements for a period include
references to a consolidated balance sheet (or consolidated statement of
financial position) as at the last day of the period.

(3) 20References to financial statements for a period include references to a
balance sheet (or statement of financial position) as at the last day of the
period.

(4) References to amounts recognised in consolidated financial statements or
financial statements include references to an amount comprised in an
25amount so recognised.

(5) Sub-paragraph (6) applies if an amount for the chargeable period, or as at the
last day of the chargeable period, is so recognised in a currency other than
sterling.

(6) The amount is to be translated into its sterling equivalent by reference to the
30spot rate of exchange for the last day of the chargeable period.

(7) If consolidated financial statements or financial statements for the
chargeable period are not prepared in a way which complies with the
relevant accounting framework under which the statements are prepared,
the statements are to be adjusted as necessary to ensure that they comply.

(8) 35In sub-paragraph (7) “relevant accounting framework” means—

(a) international accounting standards,

(b) US GAAP, or

(c) UK GAAP.

(9) In relation to the preparation of consolidated financial statements or
40financial statements under UK GAAP, Financial Reporting Standard 23 and
Financial Reporting Standard 26 are to be treated as if they were mandatory
for all entities.

(10) Accordingly, if any statements are prepared under UK GAAP without one
or both of those Standards being applied, the statements are to be treated as

Finance (No. 3) BillPage 335

not complying with UK GAAP and adjusted under sub-paragraph (7)
accordingly.

Joint ventures

42 (1) This paragraph applies if—

(a) 5the relevant group is a foreign banking group or a relevant non-
banking group,

(b) a member of the relevant group has an interest (“the relevant
interest”) in a joint venture for the purposes of those provisions of the
applicable accounting standards which relate to joint ventures,

(c) 10the amounts recognised in the relevant consolidated financial
statements include amounts representing the liabilities (“the JV
liabilities”) of the joint venture so far as determined by the relevant
interest,

(d) the joint venture is a UK resident entity or, if the relevant group is a
15relevant non-banking group, a UK resident bank, and

(e) none of the liabilities of a relevant UK sub-group, a relevant UK
banking sub-group or any entity for the purposes of (as the case may
be) paragraph 17(6)(a) or (12)(a), 19(6)(a) or (12)(a) or 27(2)(a) include
the JV liabilities.

(2) 20For the purpose of determining the chargeable equity and liabilities of the
relevant group the joint venture is to be treated as if it were (as the case may
be) a UK resident entity covered by paragraph 17(10) or a UK resident bank
covered by paragraph 19(10)

(a) the liabilities of which consist of the JV liabilities, and

(b) 25the assets of which consist of the assets of the joint venture so far as
determined by the relevant interest.

(3) In this paragraph references to the amounts recognised in the relevant
consolidated financial statements are to—

(a) the amounts recognised in the relevant group’s consolidated
30financial statements for the chargeable period as prepared under the
applicable accounting standards, or

(b) if no such financial statements are prepared, the amounts which
would have been so recognised had consolidated financial
statements for the relevant group been prepared for the chargeable
35period under international accounting standards.

(4) “The applicable accounting standards” means—

(a) international accounting standards, or

(b) US GAAP if the members of the relevant group are determined
under paragraph 4(7).

43 (1) 40This paragraph applies for the purpose of determining the chargeable equity
and liabilities of the relevant group or the relevant entity if, as at the end of
the chargeable period—

(a) the parent entity or the relevant entity is a joint venture for the
purposes of a JV standard, and

(b) 45the liabilities of the parent entity or the relevant entity include
liabilities (“the JV liabilities”) which are subject to a double charge.

(2) The JV liabilities are to be left out for the purpose of determining the
chargeable equity and liabilities.

Finance (No. 3) BillPage 336

(3) In sub-paragraph (1)(b) the reference to the liabilities of the parent entity
includes any liabilities which, in the absence of this paragraph, would form
part of the chargeable equity and liabilities of the relevant group.

(4) The JV liabilities are subject to a double charge if conditions A and B are met.

(5) 5Condition A is that an entity (“V”) which has an interest in the joint venture
for the purposes of the JV standard—

(a) is an entity in relation to which paragraph 4(1) or 5(1) applies as at
the end of the chargeable period (or in relation to which paragraph
4(1) or 5(1) would apply if V had a period of account ending at the
10same time as the chargeable period), or

(b) falls within sub-paragraph (6).

(6) V falls within this sub-paragraph if—

(a) there is another entity (“A”) in relation to which paragraph 4(1)
applies as at the end of the chargeable period (or in relation to which
15paragraph 4(1) would apply if A had a period of account ending at
the same time as the chargeable period), and

(b) V is (or would be) a member of the relevant group of which A is (or
would be) the parent entity.

(7) Condition B is that—

(a) 20in the circumstances mentioned in sub-paragraph (5)(a) or sub-
paragraph (5)(b) (when read with sub-paragraph (6)), the bank levy
is charged (or would be charged), and

(b) in determining the amount of the bank levy, the JV liabilities are (or
would be) liabilities for the purposes of paragraph 15(2)(a), 17(6)(a)
25or (12)(a), 19(6)(a) or (12)(a), 21(2)(a) or 27(2)(a) by virtue of V having
an interest in the joint venture.

(8) “JV standard” means those provisions of international accounting standards
or UK GAAP which relate to joint ventures.

Residence

44 30For the purposes of this Schedule—

(a) the territory in which a company is resident is to be determined as
for corporation tax purposes, and

(b) the territory in which a partnership is resident is the territory in
which the control and management of the partnership’s trade and
35investment activities take place.

Bank levy to be ignored for other tax purposes

45 In calculating profits or losses for the purposes of income tax or corporation
tax—

(a) no deduction is allowed in respect of the bank levy, and

(b) 40no account is to be taken of any amount which is paid by a member
of the relevant group to another member of the group for the
purposes of meeting or reimbursing the cost of the bank levy
charged in relation to the group.

Finance (No. 3) BillPage 337

Anti-avoidance

46 (1) This paragraph applies if—

(a) arrangements are entered into by one or more entities, and

(b) the main purpose, or one of the main purposes, of the entity, or any
5of the entities, in entering into the arrangements or any part of them
is to avoid or reduce a charge or assessment to the bank levy.

(2) In this paragraph “the relevant arrangements”—

(a) means the arrangements or the part of them referred to in sub-
paragraph (1)(b), and

(b) 10includes any part of those arrangements or of that part.

(3) Sub-paragraph (4) applies if an effect of the relevant arrangements is that the
bank levy is not charged or assessed as it would have been in the absence of
the relevant arrangements.

(4) The bank levy is charged or assessed as it would have been ignoring that
15effect.

(5) The cases covered by sub-paragraph (3) include (in particular) cases in
which the bank levy is charged or assessed but an effect of the relevant
arrangements is that the amount of the bank levy charged or assessed—

(a) is nil, or

(b) 20is otherwise less than it would have been in the absence of the
relevant arrangements.

(6) In sub-paragraphs (3) and (5) references to the relevant arrangements do not
include those arrangements to the extent to which any of the following sub-
paragraphs applies to them.

(7) 25This sub-paragraph applies to the relevant arrangements so far as their effect
is to increase, on an ongoing basis, the excluded equity and liabilities of the
relevant group or the relevant entity.

(8) This sub-paragraph applies to the relevant arrangements so far as their effect
is to increase, on an ongoing basis, the long term equity and liabilities of the
30relevant group or the relevant entity.

(9) This sub-paragraph applies to the relevant arrangements so far as—

(a) their effect is to reduce, on an ongoing basis, the short term liabilities
of the relevant group or the relevant entity, and

(b) there is no corresponding increase, on an ongoing basis or otherwise,
35in the amount of the funding, or the size of the financial obligations,
of the relevant group or the relevant entity which is not, or are not,
excluded equity and liabilities or long term equity and liabilities (it
being immaterial for this purpose whether or not any such funding
or obligation is recognised in the financial statements of the group or
40entity).

(10) This sub-paragraph applies to the relevant arrangements so far as—

(a) their effect is to reduce, on an ongoing basis, the long term equity and
liabilities of the relevant group or the relevant entity, and

(b) there is no corresponding increase, on an ongoing basis or otherwise,
45in the amount of the funding, or the size of the financial obligations,
of the relevant group or the relevant entity which is not, or are not,

Finance (No. 3) BillPage 338

excluded equity and liabilities (it being immaterial for this purpose
whether or not any such funding or obligation is recognised in the
financial statements of the group or entity).

(11) This sub-paragraph applies to the relevant arrangements so far as they are
5an agreement within paragraph 16(1)(c) and (d), 18(8)(c) and (d), 20(8)(c)
and (d), 22(1)(c) and (d) or 25(1)(c) and (d).

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