Finance (No. 3) Bill

Session 2010 - 11
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Other Bills before Parliament

Finance (No. 3) Bill

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 7 — Double taxation relief
334

      (8)
The Treasury may by regulations make provision—
(a)
generally for carrying out the provisions of this paragraph or double
taxation arrangements;
(b)
for removing, or reducing the amount of, relief obtained by virtue of
double taxation arrangements in circumstances where a scheme or
5
arrangement of a specified description has been made or in other
specified circumstances;
(c)
for restricting the amount of relief allowed against an entity’s
liability for the bank levy for a chargeable period to an amount
calculated in a specified manner.
10
      (9)
Regulations under sub-paragraph (8)(a) may, in particular, provide that
where, under double taxation arrangements, the Commissioners arrive at a
solution to a case, or make a mutual agreement with an authority in another
territory for the resolution of a case—
(a)
the Commissioners are to give effect to the solution or mutual
15
agreement despite anything in any enactment, and
(b)
any adjustment as is appropriate in consequence may be made.
     (10)
Regulations under this paragraph may—
(a)
amend any provision made by or under an Act whenever passed or
made (including this Act), and
20
(b)
contain transitional provisions that appear to the Treasury to be
necessary or expedient.
     (11)
Orders or regulations under this paragraph are to be made by statutory
instrument.
     (12)
A statutory instrument containing an order or regulations under this
25
paragraph is subject to annulment in pursuance of a resolution of the House
of Commons.
Power to provide for double taxation relief
66    (1)
The Treasury may by regulations make provision for relief from the bank
levy for the purpose of affording relief from double taxation in relation to the
30
bank levy and any equivalent foreign levy imposed by the law of a foreign
territory.
      (2)
Regulations under this paragraph must specify the equivalent foreign levy
or levies in respect of which they are made.
      (3)
Regulations under this paragraph may, in particular—
35
(a)
provide for relief from the bank levy for periods before the making
of the regulations or before the passing of this Act;
(b)
make provision for removing, or reducing the amount of, relief
obtained in circumstances where a scheme or arrangement of a
specified description has been made or in other specified
40
circumstances;
(c)
make provision for restricting the amount of relief allowed against
an entity’s liability for the bank levy for a chargeable period to an
amount calculated in a specified manner.
      (4)
Regulations under this paragraph may—
45
(a)
make different provision for different purposes, cases or
circumstances,

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 8 — Definitions
335

(b)
amend any provision made by or under an Act whenever passed or
made (including this Act), and
(c)
contain transitional provisions that appear to the Treasury to be
necessary or expedient.
      (5)
Regulations under this paragraph are to be made by statutory instrument.
5
      (6)
A statutory instrument containing regulations under this paragraph—
(a)
in a case where the reciprocity condition is met, are subject to
annulment in pursuance of a resolution of the House of Commons,
and
(b)
in any other case, may not be made unless a draft has been laid before
10
and approved by a resolution of that House.
      (7)
The reciprocity condition is met if the Treasury is satisfied that in relation to
the foreign territory or each of the foreign territories concerned—
(a)
appropriate provision has been made under the law of the territory
for relief from double taxation in relation to the bank levy and the
15
equivalent foreign levy under the law of that territory to which the
regulations apply, or
(b)
such provision will be made as a result of an agreement which has
been entered into in relation to the territory.
Disclosure of information to foreign tax authorities
20
67    (1)
Sub-paragraph (2) applies if the law of a foreign territory makes provision
allowing, in respect of payments of the bank levy, relief from an equivalent
foreign levy payable under that law.
      (2)
No obligation as to secrecy or other restriction on the disclosure of
information prevents the Commissioners for Her Majesty’s Revenue and
25
Customs, or an officer of Revenue and Customs, from disclosing to the
authorised officer of the authorities of the territory such facts as may be
necessary to enable the proper relief to be given under the law of the
territory.
Consequential amendment to the Constitutional Reform and Governance Act 2010
30
68
In section 23 of the Constitutional Reform and Governance Act 2010 (which
excepts certain treaties from the requirements imposed by section 20 of that
Act as to the laying of treaties before Parliament), after subsection (2)
insert—
“(2A)
Section 20 does not apply to a treaty in relation to which an order
35
may be made under paragraph 65 of Schedule 19 to the Finance Act
2011 (bank levy: arrangements affording double taxation relief).”
Part 8
Definitions
General
40
69    (1)
In this Schedule—

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 8 — Definitions
336

“arrangements” includes any agreement, understanding, scheme,
transaction or series of transactions (whether or not it is legally
enforceable);
“asset management activities” is defined in paragraph 70;
“assets” is defined in paragraph 14;
5
“banking group” is defined in paragraph 12;
“the bank levy” is defined in paragraph 1;
“building society” means a building society within the meaning of the
Building Societies Act 1986;
“building society group” is defined in paragraph 9;
10
“capital resources condition” is defined in paragraph 71;
“the chargeable period” is defined in paragraph 4(1) or 5(1) (as the case
may be);
“company” has the meaning given by section 1121(1) of CTA 2010;
“contract of insurance” has the meaning given by article 3(1) of the
15
Financial Services and Markets Act 2000 (Regulated Activities)
Order 2001 (S.I. 2001/544);
“entity” includes a company, a partnership or a joint venture, but not—
(a)
the Crown,
(b)
a Minister of the Crown,
20
(c)
a government department,
(d)
a Northern Ireland department,
(e)
a foreign sovereign power, or
(f)
an international organisation;
“equity” is defined in paragraph 14;
25
“excluded”, in relation to equity and liabilities, is defined in paragraph
28;
“excluded entity” is defined in paragraph 72;
“exempt activities condition” is defined in paragraph 13;
“fair value”, in relation to an item, means the amount for which the item
30
could be exchanged between knowledgeable, willing parties in an
arm’s length transaction;
“foreign banking group” is defined in paragraph 10;
“the FSA Handbook” means the Handbook of Rules and Guidance
made by the Financial Services Authority (as that Handbook has
35
effect from time to time);
“high quality liquid asset”, in relation to an entity or group of entities,
means an asset (within the meaning of this Schedule) within section
BIPRU 12.7.2(1) to (4) of the FSA Handbook (whether or not it is held
by an ILAS BIPRU firm), but see sub-paragraph (4);
40
“international accounting standards” has the meaning given by section
1127(5) of CTA 2010, including any modifications mentioned in
section 1127(6);
“international organisation” means an organisation of which—
(a)
two or more sovereign powers are members, or
45
(b)
the governments of two or more sovereign powers are
members,
(see also sub-paragraph (5));
“liabilities” is defined in paragraph 14;

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 8 — Definitions
337

“long term”, in relation to equity and liabilities, is defined in
paragraphs 73 to 76;
“the parent entity” is defined in paragraph 4(1);
“partnership” includes—
(a)
a limited liability partnership, and
5
(b)
an entity established under the law of a territory outside the
United Kingdom of a similar character to a partnership,
and “member”, in relation to a partnership, is to be read accordingly;
“period of account”, in relation to an entity, means a period for which
the entity prepares financial statements (consolidated or otherwise),
10
(see also paragraph 40);
“permanent establishment” is to be read in accordance with Chapter 2
of Part 24 of CTA 2010;
“the relevant entity” is defined in paragraph 5(1);
“relevant foreign bank” is defined in paragraph 77;
15
“the relevant group” is defined in paragraph 4(1);
“relevant non-banking group” is defined in paragraph 11;
“relevant regulated activity” is defined in paragraph 78;
“relevant UK banking sub-group” is defined in paragraph 19(5);
“relevant UK sub-group” is defined in paragraph 17(5);
20
“short term”, in relation to liabilities, means any liabilities which are not
long term;
“UK allocated equity and liabilities” is defined in paragraph 24;
“UK banking sub-group” is defined in paragraph 19(4);
“UK GAAP” means UK generally accepted accounting practice as
25
defined in section 1127(2) of CTA 2010 (subject to paragraph 41(9));
“UK resident bank” is defined in paragraph 79;
“UK resident entity” means an entity which is resident in the United
Kingdom (see paragraph 44) and “non-UK resident entity” is to be
read accordingly;
30
“UK sub-group” is defined in paragraph 17(4);
“US GAAP” means United States Generally Accepted Accounting
Principles.
      (2)
In this Schedule the following terms have the meaning given in the FSA
Handbook—
35
“authorised corporate director”;
“BIPRU 730k firm”;
“capital resources requirement”;
“contracts for differences”;
“discretionary investment manager”;
40
“exempt BIPRU commodities firm”;
“full scope BIPRU investment firm”;
“ILAS BIPRU firm”;
“designated multilateral development bank”;
“pension scheme”;
45
“principal”;
“retail client”.

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 8 — Definitions
338

      (3)
A entity which would be a BIPRU 730k firm and a full scope BIPRU
investment firm by virtue of activities carried on in the United Kingdom but
for the fact that its registered office (or, if it does not have a registered office,
its head office) is not in the United Kingdom is to be treated as being one.
      (4)
The definition of “high quality liquid assets” has effect, in relation to a
5
particular entity or group of entities, subject to any direction made in
relation to that entity or group under section 148 of FISMA 2000
(modification or waiver of rules).
      (5)
If, in any proceedings, any question arises whether a person is an
international organisation for the purposes of the definition of “entity” in
10
sub-paragraph (1), a certificate issued by or under the authority of the
Secretary of State stating any fact relevant to that question is conclusive
evidence of that fact.
“Asset management activities”
70    (1)
“Asset management activities” means activities which consist (or, if they
15
were carried on in the United Kingdom, would consist) of any or all of the
following—
(a)
acting as the operator of a collective investment scheme (within the
meaning of Part 17 of FISMA 2000: see sections 235 and 237 of that
Act),
20
(b)
acting as a discretionary investment manager for clients none of
which is a linked entity, and
(c)
acting as an authorised corporate director.
      (2)
In sub-paragraph (1), “linked entity”, in relation to an entity (“E”), means—
(a)
a member of the same group as E,
25
(b)
a company in which a company which is a member of the same
group as E has a major interest (within the meaning of Part 5 of CTA
2009: see section 473 of that Act), or
(c)
a partnership the members of which include an entity—
(i)
which is a member of the same group as E, and
30
(ii)
whose share of the profits or losses of a trade carried on by
the partnership for an accounting period of the partnership
any part of which falls within the chargeable period is at least
a 40% share (see Part 17 of CTA 2009 for provisions about
shares of partnership profits and losses).
35
      (3)
In sub-paragraph (2) “group” means a group for the purposes of—
(a)
the provisions mentioned in paragraph 4(3), or
(b)
the provisions of US GAAP mentioned in paragraph 4(6)(a)(iii).
“Capital resources condition”
71    (1)
“The capital resources condition” is that the entity has a capital resources
40
requirement of at least £100,000,000.
      (2)
But if the entity is a member of a group, “the capital resources condition” is
that the entity and—
(a)
any other entities which—
(i)
are members of the group,
45
(ii)
meet either of the conditions in sub-paragraph (3),

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 8 — Definitions
339

(iii)
are not excluded entities, and
(iv)
are not members of any partnership within paragraph (b),
and
(b)
any partnership—
(i)
the members of which are or include one or more entities
5
which are members of the group and not excluded entities,
and
(ii)
which meets either of the conditions in sub-paragraph (3),

have (in aggregate) capital resources requirements of at least £100,000,000.
      (3)
The conditions referred to in sub-paragraph (2) are that the entity or
10
partnership—
(a)
is both a BIPRU 730k firm and a full scope BIPRU investment firm, or
(b)
is an entity or partnership which carries on in the United Kingdom
activities including the relevant regulated activity described in the
provision mentioned in paragraph 78(a).
15
      (4)
In determining whether the entity is a UK resident bank or a relevant foreign
bank by virtue of paragraph 77(2) or 79(2), the references in sub-paragraph
(1) to the entity are to the partnership.
      (5)
If any entity whose capital resources may be material for the purposes of
sub-paragraph (1) or (2) prepares its accounts in a currency other than
20
sterling, the amount of its capital resources at the end of the chargeable
period is to be translated into its sterling equivalent by reference to the spot
rate of exchange on the last day of the chargeable period.
      (6)
If any entity whose capital resources may be material for the purposes of
sub-paragraph (1) or (2) carries on a trade in the United Kingdom through a
25
permanent establishment in the United Kingdom, its capital resources are to
be determined as they would be for corporation tax purposes (see Chapter 4
of Part 2 of CTA 2009).
      (7)
In sub-paragraph (2) “group” means a group for the purposes of—
(a)
the provisions mentioned in paragraph 4(3), or
30
(b)
the provisions of US GAAP mentioned in paragraph 4(6)(a)(iii).
“Excluded entity”
72    (1)
“Excluded entity” means an entity which is—
(a)
an insurance company or an insurance special purpose vehicle,
(b)
an entity which is a member of a group and does not carry on any
35
relevant regulated activities otherwise than on behalf of an insurance
company or insurance special purpose vehicle which is a member of
the group,
(c)
an entity which does not carry on any relevant regulated activities
otherwise than as the manager of a pension scheme,
40
(d)
an investment trust (within the meaning given by section 1158 of
CTA 2010),
(e)
an entity which does not carry on any relevant regulated activities
other than asset management activities,
(f)
an exempt BIPRU commodities firm,
45

Finance (No. 3) Bill
Schedule 19 — The bank levy
Part 8 — Definitions
340

(g)
an entity which does not carry on any relevant regulated activities
otherwise than for the purpose of trading in commodities or
commodity derivatives,
(h)
an entity which does not carry on any relevant regulated activities
otherwise than for the purpose of dealing in contracts for
5
differences—
(i)
as principal with persons all or all but an insignificant
proportion of whom are retail clients, or
(ii)
with another person to enable the entity or other person to
deal in contracts for differences as principal with persons all
10
or all but an insignificant proportion of whom are retail
clients,
(i)
a society incorporated under the Friendly Societies Act 1992,
(j)
a society registered as a credit union under the Industrial and
Provident Societies Act 1965 or the Credit Unions (Northern Ireland)
15
Order 1985 (S.I. 1985/1205 (NI 12)), or
(k)
a building society.
      (2)
In sub-paragraph (1)(a) and (b) “insurance company” and “insurance special
purpose vehicle” have the meaning given by section 431(2) of ICTA.
      (3)
In sub-paragraph (1)(b) “group” means a group for the purposes of—
20
(a)
the provisions mentioned in paragraph 4(3), or
(b)
the provisions of US GAAP mentioned in paragraph 4(6)(a)(iii).
“Long term” equity and liabilities
73
All equity is “long term”.
74    (1)
Liabilities are “long term” to the extent that—
25
(a)
as at the end of the chargeable period, the liabilities are not required,
and cannot be required, to be repaid or otherwise met during the 12
month period starting with the last day of the chargeable period, and
(b)
in the case of liabilities of one member of the relevant group to
another member of the relevant group, an officer of Revenue and
30
Customs is satisfied that the following condition is also met in
relation to the liabilities.
      (2)
The condition is that, as at the end of the chargeable period, the liabilities are
funded by the relevant group through—
(a)
equity,
35
(b)
excluded liabilities to persons who are not members of the relevant
group, or
(c)
liabilities to such persons which are not required, and cannot be
required, to be repaid or otherwise met during the 12 month period
starting with the last day of the chargeable period.
40
75    (1)
Liabilities are also “long term” so far as they consist of non-protected
deposits.
      (2)
But sub-paragraph (1) does not apply to a deposit if the depositor is—
(a)
an authorised person for the purposes of FISMA 2000 (see section 31
of that Act), or
45