Bank Levy

Hartley Foster, Tax Partner, Olswang

The Chancellor announced today that the Government will introduce a bank levy with effect from 1 January 2011. Rather than the 10 per cent proposed by the Liberal Democrats in their manifesto, the levy generally will be set at 0.07 per cent.

The levy will be calculated by reference to:

• the consolidated balance sheet of UK banking groups and building societies;

• the aggregated subsidiary and branch balance sheets of foreign banks and banking groups operating in the UK; and

• the balance sheets of UK banks in non-banking groups.

Institutions will be liable for the levy only where their relevant aggregate short and long term liabilities (excluding Tier 1 capital, insured retail deposits, repos secured on sovereign debt, and policyholder liabilities of retail insurance businesses within banking groups) amount to £20 billion or more.

The Government will consult over the summer. Final details of the levy will be published later this year, following this consultation. Anti-avoidance provisions will be introduced.

2 thoughts on “Bank Levy”

  1. Great blog – many thanks.

    However I can’t pick up from your description of the bank levy what the .07% will be calculated on (is it aggregate short and long term liabilities?), and whether it will be an annual charge or once off.

    William Sunnucks

    1. Although the precise details of the banking levy have yet to be released, the intention is that banks will pay an annual charge. There will be a lower rate of 0.04 per cent in 2011, but the rate then will increase to 0.07 per cent. The levy will be paid on the total liabilities (i.e. both short and long term liabilities) of the bank. The aim is to seek to reduce “risky lending” by banks, and so Tier 1 capital, insured retail deposits, repos secured on sovereign debt, and policyholder liabilities of retail insurance businesses within banking groups will be excluded from “total liabilities” for the purpose of the bank levy calculation.

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