Finance (No. 3) Bill

Session 2010 - 11
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Finance (No. 3) Bill

Finance (No. 3) Bill
Schedule 18 — Lifetime allowance charge
Part 2 — Commencement and transitional provision
292

      (9)
Sub-paragraphs (7) to (8B) of paragraph 12 of Schedule 36 to FA 2004 (when
there is a permitted transfer) apply for the purposes of sub-paragraph (4)(c);
and where there is a permitted transfer—
(a)
if it is a permitted transfer by virtue of sub-paragraph (8)(a) of
paragraph 12, this paragraph applies in relation to the arrangement
5
to which the transfer is made,
(b)
if it is a permitted transfer by virtue of sub-paragraph (8)(b) of that
paragraph, this paragraph applies in relation to the arrangement to
which the transfer is made as if it were the same as that from which
it is made, and
10
(c)
if it is a permitted transfer by virtue of sub-paragraph (8)(c) of that
paragraph, this paragraph applies in relation to the arrangement to
which the transfer is made as if it were the same as that from which
it is made and (if the employment is transferred) as if the
employment with the transferee were the employment with the
15
transferor.
     (10)
Sub-paragraphs (2A) to (2C) of paragraph 12 of Schedule 36 to FA 2004
(“permitted circumstances”) apply for the purposes of sub-paragraph (4)(d).
     (11)
Paragraph 14 of Schedule 36 to FA 2004 (when a relevant contribution is paid
under an arrangement) applies for the purposes of sub-paragraph (5)(a).
20
     (12)
Increases in the value of the individual’s rights under an arrangement are to
be ignored for the purposes of sub-paragraph (5)(b) or (c)(ii) if in no tax year
do they exceed the relevant percentage.
     (13)
The relevant percentage, in relation to a tax year, means—
(a)
where the arrangement (or a predecessor arrangement) includes
25
provision for the value of the rights of the individual to increase
during the tax year at an annual rate specified in the rules of the
pension scheme (or a predecessor registered pension scheme) on 9
December 2010, that percentage (or, where more than one
arrangement does so the higher or highest of the percentages so
30
specified), and
(b)
otherwise, the percentage by which the consumer prices index for
the month of September in the previous tax year is higher than it was
for the same month in the period of 12 months (or nil per cent if it is
not higher).
35
     (14)
In sub-paragraph (13)(a)—
“predecessor arrangement”, in relation to an arrangement, means
another arrangement (under the same or another registered pension
scheme) from which some or all of the sums or assets held for the
purposes of the arrangement directly or indirectly derive;
40
“predecessor registered pension scheme”, in relation to a pension
scheme, means another registered pension scheme from which some
or all of the sums or assets held for the purposes of the arrangement
under the pension scheme directly or indirectly derive.
     (15)
Regulations under sub-paragraph (2) may include supplementary or
45
incidental provision.
     (16)
The power to make regulations under sub-paragraph (2) is exercisable by
statutory instrument.

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 2 — Charging of bank levy
293

     (17)
A statutory instrument containing regulations under sub-paragraph (2) is
subject to annulment in pursuance of a resolution of the House of Commons.
     (18)
Expressions used in this paragraph and Part 4 of FA 2004 have the same
meaning in this paragraph as in that Part.
Schedule 19
5
Section 72

The bank levy
Part 1
Introduction
1
There is to be a tax called “the bank levy”.
2
The bank levy is charged on certain types of equity and liabilities of certain
10
groups of entities and individual entities as set out in Part 2 of this Schedule.
3
In this Schedule—
Part 3 contains provision defining the different types of groups of
entities in relation to which the bank levy is charged;
Part 4 contains provision defining the equity and liabilities on which
15
the bank levy is charged;
Part 5 contains supplementary provision;
Part 6 deals with the collection and management of the bank levy;
Part 7 deals with double taxation relief;
Part 8 contains definitions;
20
Part 9 confers a power to make changes to this Schedule in specified
circumstances.
Part 2
Charging of bank levy
Bank levy to be charged in relation to certain groups of entities
25
4     (1)
The bank levy is charged if, as at the end of a period of account (“the
chargeable period”) of an entity (“the parent entity”)—
(a)
the parent entity is a parent and is not a subsidiary of any other
entity, and
(b)
the group (“the relevant group”) for which the parent entity is the
30
parent is a group within sub-paragraph (2).
      (2)
The groups within this sub-paragraph are—
(a)
a UK banking group,
(b)
a building society group,
(c)
a foreign banking group, or
35
(d)
a relevant non-banking group.

See Part 3 of this Schedule for the definitions of these groups.

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 2 — Charging of bank levy
294

      (3)
“Group”, “parent” and “subsidiary” have the meanings given by those
provisions of international accounting standards relating to the preparation
of consolidated financial statements (whether or not the parent entity
prepares financial statements under those standards).
      (4)
Accordingly, for the purposes of this Schedule the members of the relevant
5
group are—
(a)
the parent entity, and
(b)
any other entity which, as at the end of the chargeable period, is a
member of the group for the purposes of the provisions mentioned
in sub-paragraph (3).
10
      (5)
Sub-paragraphs (3) and (4) are subject to what follows.
      (6)
Sub-paragraph (7) applies if—
(a)
as at the end of the chargeable period—
(i)
the parent entity is resident in a territory outside the United
Kingdom,
15
(ii)
generally accepted accounting practice for entities resident in
that territory is or includes US GAAP, and
(iii)
the parent entity is a parent for the purposes of those
provisions of US GAAP which relate to the preparation of
consolidated financial statements (as well as being a parent
20
for the purposes of the provisions mentioned in sub-
paragraph (3)), and
(b)
the parent entity prepares consolidated financial statements for the
chargeable period under US GAAP.
      (7)
The relevant group is the group for which the parent entity is the parent for
25
the purposes of the provisions of US GAAP mentioned in sub-paragraph
(6)(a)(iii) (instead of the provisions mentioned in sub-paragraph (3)) and,
accordingly, for the purposes of this Schedule the members of the relevant
group are—
(a)
the parent entity, and
30
(b)
any other entity which, as at the end of the chargeable period, is a
member of the group for the purposes of the provisions of US GAAP
mentioned in sub-paragraph (6)(a)(iii).
      (8)
This paragraph applies in relation to periods of account ending on or after 1
January 2011.
35
Bank levy to be charged in relation to certain entities which are not members of groups
5     (1)
The bank levy is charged if, as at the end of a period of account (“the
chargeable period”) of an entity (“the relevant entity”), the relevant entity—
(a)
is a UK resident bank, a building society or a relevant foreign bank,
and
40
(b)
does not fall within sub-paragraph (2) or (3).
      (2)
An entity falls within this sub-paragraph if it is an entity in relation to which
paragraph 4(1) applies as at the end of the chargeable period.
      (3)
An entity (“A”) falls within this sub-paragraph if—
(a)
there is another entity (“B”) in relation to which paragraph 4(1)
45
applies as at the end of the chargeable period (or in relation to which

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 2 — Charging of bank levy
295

paragraph 4(1) would apply if B had a period of account ending at
the same time as the chargeable period), and
(b)
A is (or would be) a member of the relevant group.
      (4)
This paragraph applies in relation to periods of account ending on or after 1
January 2011.
5
Steps for determining the amount of the bank levy
6     (1)
This paragraph applies where the bank levy is charged as provided for by
paragraph 4 or 5.
      (2)
Here are the steps to be taken to determine the amount of the bank levy.
Step 1
10

In accordance with Part 4 of this Schedule, determine the amount of the
chargeable equity and liabilities of the relevant group or the relevant entity
(as the case may be).
Step 2

If the amount of the chargeable equity and liabilities is not more than
15
£20,000,000,000, the amount of the bank levy is nil and no further steps are
taken.

If the amount of the chargeable equity and liabilities is more than
£20,000,000,000, go to Step 3.
Step 3
20

Determine how much of the chargeable equity and liabilities are long term
equity and liabilities and how much are short term liabilities.
Step 4

Determine the proportion (“A%”) of the chargeable equity and liabilities
which is long term equity and liabilities and the proportion (“B%”) of the
25
chargeable equity and liabilities which is short term liabilities.
Step 5

Reduce the amount of the long term chargeable equity and liabilities by an
amount equal to A% of £20,000,000,000 and the amount of the short term
chargeable liabilities by an amount equal to B% of £20,000,000,000.
30
Step 6

If the chargeable period is 12 months, go straight to Step 7.

If not, adjust the amount of the long term chargeable equity and liabilities
and the amount of the short term chargeable liabilities as follows.

Divide the amount by 365 and then multiply the result by the number of
35
days in the chargeable period.
Step 7

Charge the amount of the long term chargeable equity and liabilities at the
rate of 0.039%.

Charge the amount of the short term chargeable liabilities at the rate of
40
0.078%.

Add these results together to give the amount of the bank levy.

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 3 — Groups covered by the bank levy
296

      (3)
The bank levy is to be paid as provided for by Part 6 of this Schedule.
Special provision for chargeable periods falling wholly or partly before 1 January 2012
7     (1)
Paragraph 6(2) applies subject to this paragraph if some or all of the
chargeable period falls before 1 January 2012.
      (2)
For Step 7 there is substituted—
5
“Step 7

Determine the proportion (“X%”) of the chargeable period (if any) falling in
the period from 1 January 2011 to 28 February 2011.

Determine the proportion (“Y%”) of the chargeable period (if any) falling in
the period from 1 March 2011 to 30 April 2011.
10

Determine the proportion (“Z%”) of the chargeable period (if any) falling in
the period from 1 May 2011 to 31 December 2011.

Charge X% of the amount of the long term chargeable equity and liabilities
at the rate of 0.025%, Y% of that amount at the rate of 0.05%, Z% of that
amount at the rate of 0.0375% and the balance (if any) at the rate of 0.039%.
15

Charge X% of the amount of the short term chargeable liabilities at the rate
of 0.05%, Y% of that amount at the rate of 0.1%, Z% of that amount at the rate
of 0.075% and the balance (if any) at the rate of 0.078%.

Add these results together to give the amount of the bank levy.”
      (3)
If the chargeable period starts before 1 January 2011, for the purposes of Step
20
6 and Step 7 (as substituted by sub-paragraph (2)) the part of the period
falling before 1 January 2011 is ignored and, accordingly, the period is
treated as having started on 1 January 2011.
Part 3
Groups covered by the bank levy
25
Definitions of “UK banking group”, “building society group”, “foreign banking group” and
“relevant non-banking group”
8
The relevant group is a “UK banking group” if—
(a)
the group is a banking group (see paragraph 12), and
(b)
the parent entity is a UK resident entity.
30
9
The relevant group is a “building society group” if the parent entity is a
building society.
10
The relevant group is a “foreign banking group” if—
(a)
the group is a banking group (see paragraph 12), and
(b)
the parent entity is a non-UK resident entity.
35
11
The relevant group is a “relevant non-banking group” if—
(a)
the members of the group include at least one UK resident bank or
relevant foreign bank, and
(b)
the group is neither a banking group nor a building society group.
Definition of “banking group”
40
12    (1)
The relevant group is a “banking group” if—

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 3 — Groups covered by the bank levy
297

(a)
condition A, B, C or D is met, and
(b)
the exempt activities condition is not met (see paragraph 13).
      (2)
Condition A is that the parent entity is a UK resident bank (see paragraph
79) or a relevant foreign bank (see paragraph 77).
      (3)
Condition B is that—
5
(a)
the parent entity is an investment entity, and
(b)
the members of the relevant group include at least one UK resident
bank to which sub-paragraph (6) applies or relevant foreign bank to
which that sub-paragraph applies.
      (4)
Condition C is that—
10
(a)
the parent entity is a non-UK resident entity to which sub-paragraph
(8) applies, and
(b)
the members of the relevant group include at least one UK resident
bank or relevant foreign bank.
      (5)
Condition D is that—
15
(a)
the parent entity is an investment entity,
(b)
the members of the relevant group include at least one non-UK
resident entity to which both sub-paragraphs (6) and (8) apply, and
(c)
those members also include at least one UK resident bank or relevant
foreign bank.
20
      (6)
This sub-paragraph applies to an entity (“E”) if, for the purposes of the
applicable accounting provisions, E is not a subsidiary of any other entity
apart from investment entities.
      (7)
“The applicable accounting provisions” means—
(a)
the provisions mentioned in paragraph 4(3), or
25
(b)
if the members of the relevant group are determined under
paragraph 4(7), the provisions of US GAAP mentioned in paragraph
4(6)(a)(iii).
      (8)
This sub-paragraph applies to an entity (“F”) if—
(a)
F would be a UK resident bank if—
30
(i)
F were a UK resident entity,
(ii)
it carried on its activities in the United Kingdom,
(iii)
where it would be required to be an authorised person for the
purposes of FISMA 2000 in order to carry on those activities
in the United Kingdom, it were an authorised person with
35
permission to carry on those activities, and
(iv)
where those activities consist wholly or mainly of any of the
relevant activities described in the provisions mentioned in
paragraph 78(b) to (f), as a result of carrying on those
activities and having such permission it would be a BIPRU
40
730k firm and a full scope BIPRU investment firm, or
(b)
F is a member of a partnership which is a non-UK resident entity and
F would be a UK resident bank if—
(i)
both F and the partnership were UK resident entities,
(ii)
the partnership carried on its activities in the United
45
Kingdom,

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 3 — Groups covered by the bank levy
298

(iii)
where the partnership would be required to be an authorised
person for the purposes of FISMA 2000 in order to carry on
those activities in the United Kingdom, the partnership were
an authorised person with permission to carry on those
activities, and
5
(iv)
where those activities consist wholly or mainly of any of the
relevant activities described in the provisions mentioned in
paragraph 78(b) to (f), as a result of carrying on those
activities and having such permission the partnership would
be a BIPRU 730k firm and a full scope BIPRU investment
10
firm.
      (9)
“Investment entity”—
(a)
means an entity the business of which consists wholly or mainly of,
and the principal part of the income of which is derived from, the
making of investments, and
15
(b)
also includes any savings bank or other bank for savings.
13    (1)
The exempt activities condition is met for the purposes of paragraph 12(1)(b)
if—
(a)
at least 90% of the trading income of the relevant group for the
chargeable period derives from exempt activities, or
20
(b)
at least 50% of the trading income of the relevant group for the
chargeable period derives from non-financial trading activities.
      (2)
For this purpose, the trading income of the relevant group for the chargeable
period—
(a)
consists of the items mentioned in sub-paragraph (3), and
25
(b)
is to be determined by reference to—
(i)
the amounts recognised in the group’s consolidated financial
statements for the chargeable period as prepared under the
applicable accounting standards, or
(ii)
if no such financial statements are prepared, the amounts
30
which would have been so recognised had consolidated
financial statements for the group been prepared for the
chargeable period under international accounting standards.
      (3)
The items referred to in sub-paragraph (2)(a) are—
(a)
the group’s gross income for the chargeable period arising from its
35
activities (other than net-basis activities) without taking account of
any deductions (whether for expenses or otherwise), and
(b)
the group’s net income for the chargeable period arising from its net-
basis activities.
      (4)
In this paragraph—
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“activities” includes buying, holding, managing and selling assets;
“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);
45
“dealing on own account” has the same meaning as in Directive 2004/
39/EC of the European Parliament and of the Council of 21 April
2004 on markets in financial instruments (see Article 4(1)(6));