Session 2010 - 11
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Finance (No. 3) Bill


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

299

 

“deposit” has the meaning given by article 5(2) of the Financial Services

and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/

544) but ignoring the exclusions in articles 6 to 9AB;

“exempt activities” means—

(a)   

insurance activities, asset management activities and related

5

activities, and

(b)   

non-financial trading activities;

“financial trading entity” means an entity which—

(a)   

is an authorised person for the purposes of FISMA 2000 (see

section 31 of that Act),

10

(b)   

is not UK resident, but if it were and it carried out its activities

in the United Kingdom, would be required to be an

authorised person, or

(c)   

is not within paragraph (a) or (b) but carries on a trade

consisting wholly or partly in dealing in securities;

15

“insurance activities” means—

(a)   

the effecting or carrying out of contracts of insurance by a

regulated insurer, and

(b)   

investment business that arises directly from activities falling

within paragraph (a);

20

“lending activities” means—

(a)   

acceptance of deposits or other repayable funds,

(b)   

lending of money, including consumer credit, mortgage

credit, factoring (with or without recourse) and financing of

commercial transactions (including forfeiting),

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(c)   

finance leasing (as lessor),

(d)   

issuing and administering means of payment,

(e)   

provision of guarantees or commitments to provide money,

(f)   

money transmission services,

(g)   

provision of alternative finance arrangements, and

30

(h)   

other activities carried on in connection with activities falling

within any of paragraphs (a) to (g);

“net-basis activities” means activities normally reported on a net basis

in consolidated financial statements prepared under the applicable

accounting standards;

35

“non-financial trading activities” means activities carried on by an

entity which is not a financial trading entity, other than—

(a)   

lending activities, and

(b)   

dealing on own account, with the exception of any hedging

transactions in relation to activities which (disregarding this

40

exception) are non-financial trading activities;

“regulated insurer”, in relation to the relevant group, means a member

of the group which—

(a)   

is authorised under the law of any territory to carry on

insurance business, or

45

(b)   

is a member of a body or organisation which is so authorised;

“related activities” means—

(a)   

activities which are ancillary to insurance activities or asset

management activities of any entity which is a member of the

 
 

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 4 — Chargeable equity and liabilities

300

 

relevant group (whether or not the entity carrying on the

insurance activities or asset management activities), and

(b)   

activities which would not be carried on but for such

insurance activities or asset management activities being

carried on,

5

but does not include dealing on own account;

“securities” includes—

(a)   

shares,

(b)   

rights of unit holders in unit trust schemes to which TCGA

1992 applies as a result of section 99 of that Act, and

10

(c)   

in the case of a company with no share capital, interests in the

company possessed by members of the company.

Part 4

Chargeable equity and liabilities

Definition of “assets”, “equity” and “liabilities”

15

14    (1)  

For the purposes of this Schedule, “assets”, “equity” and “liabilities” have

the same meanings as they have for the purposes of international accounting

standards.

      (2)  

Sub-paragraph (1) is without prejudice to any provision of this Schedule

which requires anything to be determined by reference to amounts which

20

are recognised, or amounts which would have been recognised, in

consolidated financial statements or financial statements prepared under

UK GAAP.

Chargeable equity and liabilities of a UK banking group or a building society group

15    (1)  

This paragraph applies if the relevant group is a UK banking group or a

25

building society group.

      (2)  

To determine the amount of the relevant group’s chargeable equity and

liabilities—

(a)   

determine the amount of the group’s equity and liabilities (other

than excluded equity and liabilities) as at the end of the chargeable

30

period,

(b)   

adjust that amount in accordance with paragraphs 16 and 43 (so far

as applicable), and

(c)   

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

(i)   

the amount of the group’s high quality liquid assets as at the

35

end of that period, other than any asset which for the

purposes of an adjustment under paragraph (b) is an asset to

which paragraph 16(3) applies, and

(ii)   

where sub-paragraph (4) applies, the amount determined

under that sub-paragraph.

40

      (3)  

Sub-paragraph (4) applies where—

(a)   

as at the end of the chargeable period, the assets of the group include

a financial asset in respect of an advance of cash made by a member

of the group,

 
 

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 4 — Chargeable equity and liabilities

301

 

(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 16(3) applies, and

(c)   

underlying that asset, as collateral, is an item (“the collateral”) owned

by that member which would form part of the group’s high quality

5

liquid assets as at the end of that period were the collateral, rather

than the financial asset, an asset of the group.

      (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

10

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 16 the relevant group’s

15

assets, equity and liabilities are to be determined by reference to—

(a)   

the amounts recognised in the group’s consolidated financial

statements for the chargeable period as prepared under international

accounting standards or UK GAAP, or

(b)   

if no such financial statements are prepared, the amounts which

20

would have been so recognised had consolidated financial

statements for the group been prepared for the chargeable period

under international accounting standards.

      (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

25

liabilities.

16    (1)  

This paragraph applies for the purposes of paragraph 15(2) if—

(a)   

a member (“M”) of the relevant group has liabilities to an entity (“N”)

which is not a member of the group and N has assets which

correspond to those liabilities,

30

(b)   

M also has assets which correspond to liabilities which N has to M,

(c)   

there is in place an agreement between M and N which makes

provision for there to be a single net settlement of all M’s liabilities

to N (so far as covered by the provision) and all N’s liabilities to M

(so far as covered by the provision) if the netting event occurs, and

35

(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,

40

(b)   

references to assets of one party which correspond to liabilities of

another party are to amounts receivable by that first party which

correspond to amounts due from that other party, and

(c)   

“the netting event occurs” if the insolvency or bankruptcy of M or N

gives rise to the termination of any arrangements under which any

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liability covered by the provision mentioned in sub-paragraph (1)(c)

arises.

      (3)  

The amount of M’s net settlement liabilities is to be reduced (but not below

nil) by the amount of M’s net settlement assets.

 
 

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 4 — Chargeable equity and liabilities

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      (4)  

“M’s net settlement liabilities” means M’s liabilities to N so far as they—

(a)   

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

(b)   

are not excluded liabilities.

      (5)  

“M’s net settlement assets” means M’s assets so far as corresponding to N’s

net settlement liabilities.

5

      (6)  

“N’s net settlement liabilities” means N’s liabilities to M so far as they are

covered by the provision mentioned in sub-paragraph (1)(c).

      (7)  

If M’s net settlement liabilities exceed M’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 (3)—

10

(a)   

the long term liabilities are reduced by A% of M’s net settlement

assets, and

(b)   

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

Chargeable equity and liabilities of a foreign banking group

17    (1)  

This paragraph applies if the relevant group is a foreign banking group.

15

      (2)  

The amount of the chargeable equity and liabilities of the relevant group is

the sum of all type A, type B, type C and type D equity and liabilities.

      (3)  

Type A equity and liabilities are the chargeable equity and liabilities of any

relevant UK sub-group.

      (4)  

“UK sub-group” means a group of entities—

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(a)   

which is a group for the purposes of those provisions of international

accounting standards or UK GAAP which relate to the preparation

of consolidated financial statements,

(b)   

which has as its parent or parent undertaking for the purposes of

those provisions an entity which is a UK resident entity, and

25

(c)   

the members of which for the purposes of those provisions are all

members of the relevant group.

      (5)  

A UK sub-group is “relevant” if—

(a)   

consolidated financial statements for the chargeable period are

prepared for it under international accounting standards or UK

30

GAAP, and

(b)   

its members are not members of any larger UK sub-group for which

such financial statements are prepared.

      (6)  

To determine the amount of the chargeable equity and liabilities of a

relevant UK sub-group—

35

(a)   

determine the amount of the sub-group’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 18 and 43 (so far

as applicable), and

40

(c)   

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

(i)   

the amount of the sub-group’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 18(11) applies, and

45

 
 

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 4 — Chargeable equity and liabilities

303

 

(ii)   

where sub-paragraph (8) applies, the amount determined

under that sub-paragraph.

      (7)  

Sub-paragraph (8) applies where—

(a)   

as at the end of the chargeable period, the assets of the relevant UK

sub-group include a financial asset in respect of an advance of cash

5

made by a member of that sub-group,

(b)   

that financial asset is not an asset which, for the purposes of an

adjustment under sub-paragraph (6)(b), is an asset to which

paragraph 18(11) applies, and

(c)   

underlying that asset, as collateral, is an item (“the collateral”) owned

10

by that member which would form part of the sub-group’s high

quality liquid assets as at the end of that period were the collateral,

rather than the financial asset, an asset of the sub-group.

      (8)  

The amount within sub-paragraph (6)(c)(ii) is—

(a)   

the amount of the financial asset as at the end of that period or, if

15

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.

20

      (9)  

For the purposes of this paragraph and paragraph 18, the assets, equity and

liabilities of a relevant UK sub-group are to be determined by reference to

the amounts recognised in its consolidated financial statements for the

chargeable period.

     (10)  

Type B equity and liabilities are the chargeable equity and liabilities of any

25

UK resident entity which—

(a)   

is a member of the relevant group, but

(b)   

is not a member of a relevant UK sub-group.

     (11)  

Type C equity and liabilities are the chargeable equity and liabilities of any

non-UK resident entity which—

30

(a)   

is a member of the relevant group, and

(b)   

is a member of a UK sub-group but is not a member of a relevant UK

sub-group.

     (12)  

To determine the amount of the chargeable equity and liabilities of an entity

covered by sub-paragraph (10) or (11)—

35

(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 18 and 43 (so far

as applicable), and

(c)   

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

40

(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 18(11) applies, and

(ii)   

where sub-paragraph (14) applies, the amount determined

45

under that sub-paragraph.

     (13)  

Sub-paragraph (14) applies where—

 
 

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 4 — Chargeable equity and liabilities

304

 

(a)   

as at the end of the chargeable period, the assets of the 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 (12)(b), is an asset to which

paragraph 18(11) applies, and

5

(c)   

underlying that asset, as collateral, is an item (“the collateral”) owned

by that 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.

     (14)  

The amount within sub-paragraph (12)(c)(ii) is—

10

(a)   

the amount of the financial asset as at the end of the chargeable

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

15

respect of each of those assets.

     (15)  

For the purposes of this paragraph and paragraph 18 the assets, equity and

liabilities of an entity covered by sub-paragraph (10) or (11) are to be

determined by reference to—

(a)   

the amounts recognised in the entity’s financial statements for the

20

chargeable period as prepared under international accounting

standards or UK GAAP, or

(b)   

if no such financial statements are prepared, the amounts which

would have been so recognised had such financial statements been

prepared—

25

(i)   

under international accounting standards, or

(ii)   

under UK GAAP if that is what the entity prepares its

financial statements under.

     (16)  

In reducing the amount of any equity or liabilities under sub-paragraph

(6)(c) or (12)(c), long term equity and liabilities are to be reduced before short

30

term liabilities.

     (17)  

Type D equity and liabilities are the UK allocated equity and liabilities (see

paragraph 24) as at the end of the chargeable period of any relevant foreign

bank which—

(a)   

is a member of the relevant group, but

35

(b)   

is not a member of a UK sub-group.

     (18)  

If—

(a)   

the amount of the equity and liabilities, as at the end of the

chargeable period, of a relevant UK sub-group or an entity covered

by sub-paragraph (10) or (11), or

40

(b)   

the amount of the UK allocated equity and liabilities, as at the end of

that period, of a relevant foreign bank covered by sub-paragraph

(17),

           

is less than £50,000,000, the equity and liabilities, or UK allocated equity and

liabilities, may be ignored for the purposes of this paragraph and paragraph

45

18.

     (19)  

But, the total amount of equity and liabilities which may be ignored under

sub-paragraph (18) may not exceed £200,000,000.

 
 

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 4 — Chargeable equity and liabilities

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18    (1)  

This paragraph applies for the purposes of paragraph 17(6) and (12).

      (2)  

In this paragraph “relevant member” means—

(a)   

a relevant UK sub-group,

(b)   

a UK resident entity covered by paragraph 17(10), or

(c)   

a non-UK resident entity covered by paragraph 17(11).

5

      (3)  

Sub-paragraph (4) applies if the members of a relevant UK sub-group are

also members of one or more larger UK sub-groups.

      (4)  

Any equity of the relevant UK sub-group is to be left out so far as it would

have been eliminated under normal consolidation procedures had

consolidated financial statements for the chargeable period been prepared

10

for the larger or largest UK sub-group—

(a)   

under international accounting standards, or

(b)   

under UK GAAP if the entity which is the parent or parent

undertaking for the larger or largest UK sub-group prepares its

financial statements under UK GAAP.

15

      (5)  

Sub-paragraph (6) applies if a relevant member within sub-paragraph (2)(b)

or (c) is a member of one or more UK sub-groups.

      (6)  

Any equity of the relevant member is to be left out so far as it would have

been eliminated under normal consolidation procedures had consolidated

financial statements for the chargeable period been prepared for the UK sub-

20

group or the largest UK sub-group—

(a)   

under international accounting standards, or

(b)   

under UK GAAP if the entity which is the parent or parent

undertaking for the UK sub-group or the largest UK sub-group

prepares its financial statements under UK GAAP.

25

      (7)  

The following liabilities of a relevant member are to be left out—

(a)   

liabilities to other relevant members, and

(b)   

liabilities to a relevant foreign bank covered by paragraph 17(17) so

far as the bank’s assets corresponding to the liabilities are assets of

the permanent establishment through which the bank carries on a

30

trade in the United Kingdom as determined at Step 2 in paragraph

24(1).

      (8)  

Sub-paragraph (11) applies if—

(a)   

an entity (“M”) within sub-paragraph (9) has liabilities to another

entity (“N”) which is neither an entity within that sub-paragraph nor

35

a relevant foreign bank covered by paragraph 17(17), and N has

assets which correspond to those liabilities,

(b)   

M also has assets which correspond to liabilities which N has to M,

(c)   

there is in place an agreement between M and N which makes

provision for there to be a single net settlement of all M’s liabilities

40

to N (so far as covered by the provision) and all N’s liabilities to M

(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.

      (9)  

An entity is within this sub-paragraph if it is—

45

(a)   

a member of a relevant UK sub-group, or

(b)   

a relevant member within sub-paragraph (2)(b) or (c).

 
 

 
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Revised 31 March 2011