Legalize / United Kingdom / Public General Act

Finance Act 2011

Type Public General Act

Publication 2011-07-19

Last updated 2025-03-20

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(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

(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

(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 international accounting standards, or

(ii) if no such financial statements are prepared, the amounts 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 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—

“ activities ” includes buying, holding, managing and selling assets;

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

"dealing on own account" has the same meaning as in Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments (see Article 2.1(5));

“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— insurance activities, asset management activities and related activities, andnon-financial trading activities;

“financial trading entity” means an entity which— is an authorised person for the purposes of FISMA 2000 (see section 31 of that Act), is not UK resident, but if it were and it carried on its activities in the United Kingdom, would be required to be an authorised person, or is not within paragraph (a) or (b) but carries on a trade consisting wholly or partly in dealing in securities;

“insurance activities” means— the effecting or carrying out of contracts of insurance by a regulated insurer, andinvestment business that arises directly from activities falling within paragraph (a);

“lending activities” means— acceptance of deposits or other repayable funds,lending of money, including consumer credit, mortgage credit, factoring (with or without recourse) and financing of commercial transactions (including forfeiting),finance leasing (as lessor),issuing and administering means of payment,provision of guarantees or commitments to provide money,money transmission services,provision of alternative finance arrangements, andother 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 international accounting standards;

“ non-financial trading activities ” means activities carried on by an entity which is not a financial trading entity, other than— lending activities, anddealing on own account, with the exception of any hedging transactions in relation to activities which (disregarding this exception) are non-financial trading activities;

“regulated insurer”, in relation to the relevant group, means a member of the group which— is authorised under the law of any territory to carry on insurance business, oris a member of a body or organisation which is so authorised;

“related activities” means— activities which are ancillary to insurance activities or asset management activities of any entity which is a member of the relevant group (whether or not the entity carrying on the insurance activities or asset management activities), andactivities which would not be carried on but for such insurance activities or asset management activities being carried on,but does not include dealing on own account;

“securities” includes— shares, rights of unit holders in unit trust schemes to which TCGA 1992 applies as a result of section 99 of that Act, and 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”

14

(1) For the purposes of this Schedule, “ assets ”, “ equity ” and “ liabilities ” have the same meaning as they have for the purposes of international accounting standards.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

15

(1) This paragraph applies if the bank levy is charged as provided for by paragraph 4 (groups).

(2) The amount of the chargeable equity and liabilities of the relevant group is the total of—

(a) the UK-based equity and liabilities, as at the end of the chargeable period, of—

(i) each UK sub-group, and

(ii) each chargeable UK resident entity, and

(b) if a relevant foreign bank is a member of the relevant group, the UK allocated equity and liabilities of that bank as at the end of the chargeable period (see paragraph 24).

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 . . . (“M's liabilities”),

(b) M, or another member of the relevant group, recognises, as assets, amounts due from N or another entity which is not a member of the group (“N's liabilities”),

(c) there is in place an agreement which makes provision for there to be a single net settlement of all M's liabilities, and liabilities of other members of the group to N or another entity which is not a member of the group, (so far as covered by the provision) and all N's liabilities (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.

(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,

(b) references to amounts due from N or another entity which is not a member of the relevant group include securities provided by M, or another member of the relevant group, to N or another entity which is not a member of the relevant group as collateral, but only where M or another member of the relevant group recognises those securities in its balance sheet or statement of financial position, and

(d) “the netting event occurs” if the insolvency or bankruptcy of—

(i) M, or another member of the relevant group which has . . . a liability covered by the provision mentioned in sub-paragraph (1)(c), or

(ii) N, or another entity which is not a member of the group and which has such a liability,

gives rise to the termination of any arrangements under which such a liability arises.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) 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.

(5) “ M's net settlement liabilities ” means M's liabilities so far as they—

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

(b) are not excluded liabilities.

(6) “ M's net settlement assets ” means the assets of M, or of another member of the relevant group, so far as corresponding to N's net settlement liabilities.

(7) But if this paragraph applies in relation to more than one member of the relevant group, no part of an asset may be included in the net settlement assets of more than one such member.

(8) “ N's net settlement liabilities ” means N's liabilities so far as they are covered by the provision mentioned in sub-paragraph (1)(c).

(9) 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 (4)—

(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.

(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—

(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

(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 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—

(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 44 (so far as applicable), and

(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(12) applies, and

(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 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(12) applies, and

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

(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 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—

(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)—

(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 44 (so far as applicable), and

(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(12) applies, and

(ii) where sub-paragraph (14) applies, the amount determined under that sub-paragraph.

(13) Sub-paragraph (14) applies where—

(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(12) applies, and

(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—

(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 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 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—

(i) under international accounting standards, or

(ii) under UK GAAP if that is what the entity prepares its financial statements under.

(16) Where any amount (“A”) within sub-paragraph (6)(c) or (12)(c) is used to reduce short term liabilities, the amount of the reduction is determined as if A were an amount equal to half of A.

(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

(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

(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 18.

(19) But the total amount of equity and liabilities which may be ignored under sub-paragraph (18) may not exceed £200,000,000.

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

(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 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.

(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-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.

(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 trade in the United Kingdom as determined at Step 2 in paragraph 24(1).

(8) Sub-paragraph (12) applies if—

(a) an entity (“M”) within sub-paragraph (9) has liabilities to another entity (“N”) not within that sub-paragraph . . . (“M's liabilities”),

(b) M, or another entity within sub-paragraph (9), recognises, as assets, amounts due from N or another entity not within that sub-paragraph (“N's liabilities”),

(c) there is in place an agreement which makes provision for there to be a single net settlement of all M's liabilities, and liabilities of other entities within sub-paragraph (9) to N or another entity which is not within that sub-paragraph, (so far as covered by the provision) and all N's liabilities (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—

(a) a member of a relevant UK sub-group, or

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

(10) For the purposes of sub-paragraph (8)—

(a) “ agreement ” includes an agreement which forms part of a multi-lateral agreement, arrangement or trading facility,

(b) if N is a relevant foreign bank covered by paragraph 17(17), liabilities of M to N are to be ignored so far as N recognises assets in respect of those liabilities as assets of the permanent establishment through which N carries on a trade in the United Kingdom as determined at Step 2 in paragraph 24(1),

(c) references to amounts due from N or another entity not within sub-paragraph (9) include securities provided by M, or another entity within that sub-paragraph, to N or another entity not within sub-paragraph (9) as collateral, but only where M or that other entity within that sub-paragraph recognises those securities in its balance sheet or statement of financial position, and

(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e) “the netting event occurs” if the insolvency or bankruptcy of—

(i) M, or another entity within sub-paragraph (9) which has . . . a liability covered by the provision mentioned in sub-paragraph (8)(c), or

(ii) N, or another entity not within sub-paragraph (9) which has such a liability,

gives rise to the termination of any arrangements under which such a liability arises.

(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(12) 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.

(13) “ M's net settlement liabilities ” means M's liabilities so far as they—

(a) are covered by the provision mentioned in sub-paragraph (8)(c), and

(b) are not excluded liabilities.

(14) “ M's net settlement assets ” means the assets of M, or of another entity within sub-paragraph (9), so far as corresponding to N's net settlement liabilities.

(15) But—

(a) if N's net settlement liabilities include liabilities of a relevant foreign bank covered by paragraph 17(17), X% (as determined at Step 2 in paragraph 24(1)) of the assets corresponding to the liabilities of the relevant foreign bank are to be disregarded for the purposes of sub-paragraph (14), and

(b) if sub-paragraph (12) applies in relation to more than one entity within sub-paragraph (9), no part of an asset may be included in the net settlement assets of more than one such entity.

(16) “ N's net settlement liabilities ” means N's liabilities so far as they are covered by the provision mentioned in sub-paragraph (8)(c).

(17) 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 (12)—

(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 relevant non-banking group

19

(1) This paragraph applies if the relevant group is a relevant non-banking group.

(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 banking sub-group.

(4) “ UK banking sub-group ” means a group of entities—

(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 bank, and

(5) A UK banking sub-group is “relevant” if—

(a) consolidated financial statements for the chargeable period are prepared for it under international accounting standards or UK GAAP, and

(b) its members are not members of any larger UK banking sub-group for which such financial statements are prepared.

(6) To determine the amount of the chargeable equity and liabilities of a relevant UK banking sub-group—

(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 the amount in accordance with paragraphs 20 and 44 (so far as applicable), and

(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 20(12) applies, and

(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 banking sub-group include a financial asset in respect of an advance of cash made by a member of the 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 20(12) applies, and

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

(9) For the purposes of this paragraph and paragraph 20 the assets, equity and liabilities of a relevant UK banking 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 UK resident bank which—

(a) is a member of the relevant group, but

(b) is not a member of a relevant UK banking sub-group.

(11) Type C equity and liabilities are the chargeable equity and liabilities of any entity (apart from a UK resident bank) which—

(a) is a member of the relevant group, and

(b) is a member of a UK banking sub-group but is not a member of a relevant UK banking sub-group.

(12) To determine the amount of the chargeable equity and liabilities of an entity covered by sub-paragraph (10) or (11)—

(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 the amount in accordance with paragraphs 20 and 44 (so far as applicable), and

(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 20(12) applies, and

(ii) where sub-paragraph (14) applies, the amount determined under that sub-paragraph.

(13) Sub-paragraph (14) applies where—

(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 20(12) applies, and

(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—

(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 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.

(15) For the purposes of this paragraph and paragraph 20 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 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—

(i) under international accounting standards, or

(ii) under UK GAAP if that is what the entity prepares its financial statements under.

(16) Where an amount (“A”) within sub-paragraph (6)(c) or (12)(c) is used to reduce short term liabilities, the amount of the reduction is determined as if A were an amount equal to half of A.

(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

(b) is not a member of a UK banking sub-group.

(18) If—

(a) the amount of the equity and liabilities, as at the end of the chargeable period, of a relevant UK banking sub-group or an entity covered by sub-paragraph (10) or (11), or

(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 20.

(19) But the total amount of equity and liabilities which may be ignored under sub-paragraph (18) may not exceed £200,000,000.

20

(1) This paragraph applies for the purposes of paragraph 19(6) and (12).

(2) In this paragraph “ relevant member ” means—

(a) a relevant UK banking sub-group,

(b) a UK resident bank covered by paragraph 19(10), or

(3) Sub-paragraph (4) applies if the members of a relevant UK banking sub-group are also members of one or more larger UK banking sub-groups.

(4) Any equity of the relevant UK banking 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 for the larger or largest UK banking 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 banking sub-group prepares its financial statements under UK GAAP.

(5) Sub-paragraph (6) applies if a relevant member within sub-paragraph (2)(b) or (c) is a member of one or more UK banking 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 banking sub-group or the largest UK banking 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 banking sub-group or the largest UK banking sub-group prepares its financial statements under UK GAAP.

(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 19(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 trade in the United Kingdom as determined at Step 2 in paragraph 24(1).

(8) Sub-paragraph (12) applies if—

(a) an entity (“M”) within sub-paragraph (9) has liabilities to another entity (“N”) not within that sub-paragraph . . . (“M's liabilities”),

(b) M, or another entity within sub-paragraph (9), recognises, as assets, amounts due from N or another entity not within that sub-paragraph (“N's liabilities”),

(c) there is in place an agreement which makes provision for there to be a single net settlement of all M's liabilities, and liabilities of other entities within sub-paragraph (9) to N or another entity which is not within that sub-paragraph, (so far as covered by the provision) and all N's liabilities (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—

(a) a member of a relevant UK banking sub-group, or

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

(10) For the purposes of sub-paragraph (8)—

(a) “ agreement ” includes an agreement which forms part of a multi-lateral agreement, arrangement or trading facility,

(b) if N is a relevant foreign bank covered by paragraph 19(17), liabilities of M to N are to be ignored so far as N recognises assets in respect of those liabilities as assets of the permanent establishment through which N carries on a trade in the United Kingdom as determined at Step 2 in paragraph 24(1),

(c) references to amounts due from N or another entity not within sub-paragraph (9) include securities provided by M or another entity within that sub-paragraph to N or another entity not within sub-paragraph (9) as collateral, but only where M or that other entity within that sub-paragraph recognises those securities in its balance sheet or statement of financial position, and

(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e) “the netting event occurs” if the insolvency or bankruptcy of—

(i) M, or another entity within sub-paragraph (9) which has . . . a liability covered by the provision mentioned in sub-paragraph (8)(c), or

(ii) N, or another entity not within sub-paragraph (9) which has such a liability,

gives rise to the termination of any arrangements under which such a liability arises.

(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(12) 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.

(13) “ M's net settlement liabilities ” means M's liabilities so far as they—

(a) are covered by the provision mentioned in sub-paragraph (8)(c), and

(b) are not excluded liabilities.

(14) “ M's net settlement assets ” means the assets of M, or of another entity within sub-paragraph (9), so far as corresponding to N's net settlement liabilities.

(15) But—

(a) if N's net settlement liabilities include liabilities of a relevant foreign bank covered by paragraph 19(17), X% (as determined at Step 2 in paragraph 24(1)) of the assets corresponding to the liabilities of the relevant foreign bank are to be disregarded for the purposes of sub-paragraph (14), and

(b) if sub-paragraph (12) applies in relation to more than one entity within sub-paragraph (9), no part of an asset may be included in the net settlement assets of more than one such entity.

(16) “ N's net settlement liabilities ” means N's liabilities so far as they are covered by the provision mentioned in sub-paragraph (8)(c).

(17) 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 (12)—

(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 UK resident banks and building societies which are not members of groups

21

(1) This paragraph applies where the bank levy is charged as provided for by paragraph 5 and the relevant entity is a UK resident bank or a building society.

(2) To determine the amount of the relevant entity's chargeable equity and liabilities—

(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 22 and 44 (so far as applicable), and

(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 22(4) applies, and

(ii) where sub-paragraph (4) applies, the amount determined under that sub-paragraph.

(3) Sub-paragraph (4) applies where—

(a) as at the end of the chargeable period, the assets of the relevant 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 (2)(b), is an asset to which paragraph 22(4) applies, and

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

(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 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 22 the relevant entity's assets, equity and liabilities are to be determined by reference to the amounts recognised in the entity's financial statements for the chargeable period as prepared under international accounting standards or UK GAAP.

(6) Where an amount (“A”) within sub-paragraph (2)(c) is used to reduce short term liabilities, the amount of the reduction is determined as if A were an amount equal to half of A.

22

(1) This paragraph applies for the purposes of paragraph 21(2) if—

(a) the relevant entity has liabilities to another entity . . . (“the relevant entity's liabilities”),

(b) the relevant entity recognises, as assets, amounts due from that other entity (“N”) to the relevant entity (“N's liabilities”),

(c) there is in place an agreement between the relevant entity and N which makes provision for there to be a single net settlement of all the relevant entity's liabilities (so far as covered by the provision) and all N's liabilities (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.

(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,

(b) references to amounts due from N include securities provided by the relevant entity to N as collateral, but only where the relevant entity recognises those securities in its balance sheet or statement of financial position, and

(d) “the netting event occurs” if the insolvency or bankruptcy of the relevant entity or N gives rise to the termination of any arrangements under which any liability covered by the provisions mentioned in sub-paragraph (1)(c) arises.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The amount of the relevant entity's net settlement liabilities is to be reduced (but not below nil) by the amount of the relevant entity's net settlement assets.

(5) The relevant entity's “net settlement liabilities” are the relevant entity's liabilities so far as they—

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

(b) are not excluded liabilities.

(6) The relevant entity's “net settlement assets” are its assets so far as corresponding to N's net settlement liabilities.

(7) “ N's net settlement liabilities ” means N's liabilities so far as they are covered by the provision mentioned in sub-paragraph (1)(c).

(8) If the relevant entity's net settlement liabilities exceed the entity'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 (4)—

(a) the long term liabilities are reduced by A% of the entity's net settlement assets, and

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

Chargeable equity and liabilities of relevant foreign banks which are not members of groups

23

(1) This paragraph applies where the bank levy is charged as provided for by paragraph 5 and the relevant entity is a relevant foreign bank.

(2) The chargeable equity and liabilities of the relevant entity is the amount of its UK allocated equity and liabilities (see paragraph 24) as at the end of the chargeable period.

Definition of “UK allocated equity and liabilities”

24

(1) Take Steps 1 to 4 to determine the amount of the UK allocated equity and liabilities of a relevant foreign bank as at the end of the chargeable period. Take Steps 5 and 6 to determine how much of that amount is to be treated as long term equity and liabilities and how much as short term liabilities for the purposes of Step 3 in paragraph 6(2).

Step 1 Determine the amount (“A”) of the bank's assets as at the end of the chargeable period (subject to any adjustment under paragraph 25(5)).

Step 2 In accordance with paragraph 26, determine the amount (“B”) of the assets, as at the end of the chargeable period, of the permanent establishment through which the bank carries on a trade in the United Kingdom (subject to any adjustment under paragraph 25(6)). The proportion which B is of A is “X%”.

Step 3 In accordance with paragraph 27, determine the amount (“C”) of the bank's adjusted equity and liabilities.

Step 4 The amount of the UK allocated equity and liabilities is X% of C.

Step 5 Determine the proportion (“Y%”) of C which is long term equity and liabilities.

Step 6 For the purposes of Step 3 in paragraph 6(2), treat Y% of the amount of the UK allocated equity and liabilities as long term equity and liabilities and the rest as short term liabilities.

(2) For the purposes of this paragraph and paragraphs 25 to 27, assets, equity and liabilities of a relevant foreign bank or the permanent establishment through which it carries on a trade in the United Kingdom are to be determined by reference to—

(a) the amounts recognised in the bank's financial statements for the chargeable period as prepared under international accounting standards ... , or

(b) if no such financial statements are prepared, the amounts which would have been so recognised had such financial statements been prepared—

(i) under international accounting standards, ...

(ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25

(1) This paragraph applies for the purposes of Steps 1 and 2 in paragraph 24(1) if—

(a) the relevant foreign bank has liabilities to another entity . . . (subject to sub-paragraph (2)) . . . (“the bank's liabilities”),

(b) the bank recognises, as assets, amounts due from that other entity (“N”) to the bank (“N's liabilities”),

(d) the provision mentioned in paragraph (c) is legally effective and enforceable.

(1A) In sub-paragraph (1)(c), “net settlement provision” means provision for there to be a single net settlement—

(a) if a netting event occurs, or

(b) at the option of the bank or N, if a netting event occurs.

(1B) The reference in sub-paragraph (1A) to a “single net settlement” is a reference to a single net settlement of—

(a) all the bank’s liabilities (so far as covered by the provision mentioned in sub-paragraph (1)(c)), and

(b) all N’s liabilities (so far as covered by that provision).

(1C) But a provision for there to be single net settlement—

(a) at the option of the bank, but not at the option of N, if a netting event occurs, or

(b) at the option of N, but not at the option of the bank, if a netting event occurs,

is not to be treated as a net settlement provision for the purposes of sub-paragraph (1)(c).

(2) If the UK allocated equity and liabilities of the bank are being determined for the purposes of paragraph 15(2)(b), this paragraph does not apply if N is—

(a) a UK resident entity which is a member of a UK sub-group,

(b) a chargeable UK resident entity (see paragraph 15C), or

(3) For the purposes of sub-paragraph (1)—

(a) “agreement” includes an agreement which forms part of a multi-lateral agreement, arrangement or trading facility,

(b) references to amounts due from N include securities provided by the relevant foreign bank to N as collateral, but only where the bank recognises those securities in its balance sheet or statement of financial position, and

(d) “a netting event occurs” if the insolvency or bankruptcy of the relevant foreign bank or N gives rise to the termination of any arrangements under which any liability covered by the provision mentioned in sub-paragraph (1)(c) arises.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) In determining the amount of the bank's assets at Step 1 in paragraph 24(1), the amount of the bank's net settlement assets is to be reduced (but not below nil) by the amount of the bank's net settlement liabilities.

(6) In determining the amount of the permanent establishment's assets at Step 2 in paragraph 24(1)—

(a) the reduction in the bank's assets under sub-paragraph (5) is to be ignored, but

(b) the amount of the permanent establishment's net settlement assets is to be reduced by Z%.

(7) For this purpose, “Z%” is the proportion by which the bank's net settlement assets are reduced under sub-paragraph (5).

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) The bank's “net settlement liabilities” are the bank's liabilities so far as they—

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

(b) are not excluded liabilities.

(10) The bank's “net settlement assets” are its assets so far as corresponding to N's net settlement liabilities.

(11) “ N's net settlement liabilities ” means N's liabilities so far as they are covered by the provision mentioned in sub-paragraph (1)(c).

(12) The permanent establishment's “net settlement assets” are its assets so far as they are part of the bank's net settlement assets.

(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

26

(1) This paragraph applies for the purposes of Step 2 in paragraph 24(1).

(2) The assets of the permanent establishment are those which it would have were it a distinct and separate enterprise which—

(a) engaged in the same or similar activities under the same or similar conditions, and

(b) dealt wholly independently with the relevant foreign bank.

(3) For this purpose, any relevant provisions of sections 21 to 28 of CTA 2009 are to be applied as they would be applied in determining profits attributable to the permanent establishment for corporation tax purposes.

(4) But where paragraph 24(1) is being applied in determining the UK allocated equity and liabilities of a relevant foreign bank for the purposes of paragraph 15(2)(b), any assets within sub-paragraph (5) are to be left out.

(5) The assets within this sub-paragraph are any assets of the permanent establishment (as otherwise determined under this paragraph) representing an excluded loan relationship.

(6) A loan relationship is “excluded” if—

(a) the relevant foreign bank is the creditor,

(b) the debtor (“D”) is a UK resident bank or another relevant foreign bank—

(i) which is a member of the relevant group, and

(ii) whose activities include the relevant regulated activity described in the provision mentioned in paragraph 79(a),

(c) the money which is the subject of the transaction giving rise to D's debt is money borrowed by the relevant foreign bank from another entity, and

(d) in borrowing that money the relevant foreign bank was acting as the agent or intermediary of D.

(7) Section 302(1) of CTA 2009 (definition of “loan relationship”) applies for the purposes of sub-paragraphs (5) and (6) as it applies for corporation tax purposes.

27

(1) This paragraph applies for the purposes of Step 3 in paragraph 24(1).

(2) To determine the amount of the relevant foreign bank's adjusted equity and liabilities —

(a) determine the amount of the bank'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 sub-paragraph (5) and paragraph 27D(1) ... (so far as applicable), and

(i) the amount of the entity’s high quality liquid assets as at the end of that period, other than—

(a) any asset which for the purposes of an adjustment under paragraph (b) is an asset to which paragraph 27D(1) applies;

(b) in a case where the bank levy is charged as provided for by paragraph 4 (groups), any asset to which paragraph 15U(1) applies for the purposes of adjusting the amount of the equity and liabilities of another member of the relevant group (see Step 2 in paragraph 15N(1)), and

(ii) where sub-paragraph (4) applies, the amount determined under that sub-paragraph.

(3) Sub-paragraph (4) applies where—

(a) as at the end of the chargeable period, the assets of the relevant foreign bank include a financial asset in respect of an advance of cash made by the bank,

(b) that financial asset is not an asset which—

(i) for the purposes of an adjustment under sub-paragraph (2)(b), is an asset to which paragraph 27D(1) applies, or

(ii) in a case where the bank levy is charged as provided for by paragraph 4 (groups), is an asset to which paragraph 15U(1) applies for the purposes of adjusting the amount of the equity and liabilities of another member of the relevant group under Step 2 in paragraph 15N(1), and

(c) underlying that asset, as collateral, is an item (“the collateral”) owned by the bank which would form part of the bank's high quality liquid assets as at the end of that period were the collateral, rather than the financial asset, an asset of the bank.

(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 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) Where paragraph 24(1) is being applied in determining the UK allocated equity and liabilities of a relevant foreign bank for the purposes of paragraph 15(2)(b), the following liabilities are to be left out—

(a) UK connected liabilities to a chargeable UK resident entity which is a member of the relevant group,

(b) UK connected liabilities to a UK sub-group of the relevant group, and

(5A) In sub-paragraph (5), references to “UK connected liabilities” have the same meaning as in paragraph 15R(2) (see paragraph 15R(3) to (5)).

(6) Where an amount (“A”) within sub-paragraph (2)(c) is used to reduce short term liabilities, the amount of the reduction is determined as if A were an amount equal to half of A.

“Excluded” equity and liabilities

28

(1) Equity or liabilities are “excluded” so far as they consist of equity or liabilities which are specified to be excluded—

(a) by any of paragraphs 29 to 39, or

(b) by an order made by the Treasury.

(2) The Treasury may also by order add to, repeal or otherwise amend any of paragraphs 29 to 39.

(3) An order under this paragraph may make consequential amendments of paragraph 76 (“long term” liabilities: non-protected deposits).

(4) An order under this paragraph may have retrospective effect in relation to—

(a) any chargeable period in which the order is made, or

(b) in the case of an order made on or before 31 December 2011, any chargeable period ending on or after 1 January 2011.

(5) Orders under this paragraph are to be made by statutory instrument.

(6) A statutory instrument containing an order under this paragraph may not be made unless a draft has been laid before, and approved by a resolution of, the House of Commons.

29

(1) Liabilities representing protected deposits are excluded.

(2) A deposit is “protected” so far as it is covered by the Financial Services Compensation Scheme under section 213 of FISMA 2000 (“the FSCS”).

(3) A deposit is “protected” so far as it is covered by a scheme which—

(a) operates outside the United Kingdom, and

(b) is comparable to the FSCS.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(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 government of the United Kingdom), and

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

(8) In sub-paragraph (2)... “ 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).

(9) In sub-paragraphs (3) and (7)... “ deposit ” has the meaning given by article 5(2) of that Order but ignoring the exclusions in articles 6 to 9AB.

(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 excluded.

(2) For the purposes of this paragraph, Tier one capital equity and liabilities” means, in relation to an entity or group of entities, so much of the entity or group's equity and liabilities as is tier one capital within the meaning of Article 25 of the Capital Requirements Regulation (taking account of the transitional provisions in Part Ten of that Regulation).

(3) For the purposes of sub-paragraph (2), the Capital Requirements Regulation is to be treated as applying, in relation to all entities and groups of entities, as if—

(a) to the extent it would not otherwise be the case, the Prudential Regulation Authority were the competent authority in relation to those entities and groups,

(b) the only determinations made, and discretions exercised, by the Prudential Regulation Authority for the purposes of the Capital Requirement Regulation were those published by it in accordance with that Regulation, and

(c) those entities and groups (to the extent that it would not otherwise be the case) were subject to the provisions of the the Handbook made by the Prudential Regulation Authority under FISMA 2000 (as that Handbook had effect from time to time) immediately before 1 January 2014.

(4) “The Capital Requirements Regulation” means Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms.

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) under 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

(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) Securities are “high quality” if—

(za) they are debt securities issued by the Bank of England, Her Majesty’s Government in the United Kingdom, or the government of Gibraltar,

(a) they are debt securities issued by—

(i) the European Central Bank, a member State’s central bank or the central government of a member State,

(ii) the central bank of a country (other than a member State) where the exposure to the bank is assigned a credit assessment of at least credit quality step 1, as provided by Article 10(1)(b)(ii) of Commission Regulation 2015/61, or

(iii) the central government of a country (other than a member State) where the government is assigned a credit assessment of at least credit quality step 1, as provided by Article 10(1)(c)(ii) of Commission Regulation 2015/61, or

(b) they are securities, including debt securities, issued by the multinational development banks or the international organisations described in Article 10(1)(g) of Commission Regulation 2015/61.

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 respect 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) Paragraph 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 contracts of long-term insurance, including such contracts effected or carried out outside the United Kingdom,

(b) liabilities representing unallocated surpluses, or

(3) The 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—

“ collective investment scheme ” has the same meaning as in Part 17 of FISMA 2000 (see sections 235 and 237 of that Act);

“ contract of general insurance ” means a contract of a type described in Part 1 of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 ( S.I. 2001/544);

“ contract of long-term insurance ” means a contract of a type described in Part 2 of that Schedule;

“ regulated insurer ” means an entity which— is authorised under the law of any territory to carry on insurance business, oris a member of a body or organisation which is so authorised;

“ unallocated surplus ” means the fund for future appropriations shown in line 15 of Form 3 of a return deposited with the Prudential Regulation Authority under section 9.6 of the Interim Prudential Sourcebook for Insurers made by that Authority under FISMA 2000.

34

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

(2) “ 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, by International Accounting Standard 16.

35

(1) Relevant tax liabilities are excluded.

(2) ...“ 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36

(1) Relevant retirement benefit liabilities are excluded.

(2) ... “ relevant retirement benefit liabilities ” means liabilities under defined benefit plans within the meaning, for the time being, of International Accounting Standard 19.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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(3)(b) of FISMA 2000, or

(b) levies payable for purposes comparable with those mentioned in section 213(3)(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) Liabilities 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) would 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 137B of FISMA 2000 (FCA general rules: clients’ money, right to rescind etc. ) , 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 137B of that Act,

but 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. 2001/544) 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 representing notes issued by the entity or a member of the group as currency.

Part 5 — Supplementary provision

Netting agreements

40

(1) The Treasury may by order add to, repeal or otherwise amend any of paragraphs 15S to 15U, 15Z3, 15Z4, 25 and 27A to 27D.

(2) An order under this paragraph may make consequential amendments of this Schedule.

(3) An order under this paragraph may have retrospective effect in relation to—

(a) any chargeable period in which the order is made, or

(b) in the case of an order made on or before 31 December 2011, any chargeable period ending on or after 1 January 2011.

(4) Orders under this paragraph are to be made by statutory instrument.

(5) A statutory instrument containing an order under this paragraph may not be made unless a draft has been laid before, and approved by a resolution of, the House of Commons.

Chargeable periods: entities which do not prepare financial statements

41

(1) This 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 paragraph) 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

(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 period 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) 1 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.

Financial statements etc

42

(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) References 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 amount 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 spot 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) In sub-paragraph (7) “ relevant accounting framework ” means—

(a) international accounting standards,

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Joint ventures

43

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

44

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Residence

45

For 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 investment activities take place.

Bank levy to be ignored for other tax purposes

46

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) no account is to be taken of any amount which is paid(directly or indirectly) 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.

Anti-avoidance

47

(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 of 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) includes 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 effect.

(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) is 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) This 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 relevant 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, in 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 entity).

(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, in 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 (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).

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