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Finance Act 2011

Type Public General Act

Publication 2011-07-19

Last updated 2025-03-20

State In force

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(1) This paragraph applies for the purposes of paragraphs 15W and 15X.

(2) References to “loss absorbing instruments” are references to—

(a) tier one capital equity and liabilities, and

(b) other instruments,

which satisfy a loss absorbing capacity or recapitalisation requirement.

(3) In this paragraph and paragraphs 15W and 15X, “tier one capital equity and liabilities” means—

(a) equity and liabilities which are “tier one equity and liabilities” within the meaning of paragraph 30, and

(b) equity and liabilities that are (or are of a description) specified, or meet such conditions as may be specified, in regulations made by the Treasury.

(4) A “loss absorbing capacity or recapitalisation requirement” is a requirement—

(a) that is imposed, in relation to tier one capital equity and liabilities or other instruments issued by an entity, by an authority in the exercise of its regulatory functions under the law of the United Kingdom or of a country or territory outside the United Kingdom, and

(b) that is (or is of a description) specified, or meets such conditions as may be specified, in regulations made by the Treasury.

15W

(1) Paragraph 15X applies in relation to a chargeable UK sub-group or entity if Conditions A to C are met.

(2) Condition A is that the bank levy is charged as provided for by paragraph 4 (groups).

(3) Condition B is that, as at the end of the chargeable period, the assets of a relevant group member include—

(a) qualifying loss absorbing instruments, or

(b) assets representing qualifying loss absorbing instruments.

(4) A loss absorbing instrument is “qualifying” for the purposes of this paragraph and paragraph 15X if—

(a) it is issued by a non-UK resident entity which is a subsidiary of a UK resident entity within sub-paragraph (5), and

(b) such other conditions as may be specified in regulations made by the Treasury are met in respect of the instrument.

(5) A UK resident entity is within this sub-paragraph if—

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

(b) if the relevant group is a relevant non-banking group, the entity is a UK resident bank or a subsidiary of a UK resident bank.

(6) For the purposes of Condition B, “relevant group member” means—

(a) the chargeable UK sub-group or entity,

(b) another UK sub-group of the relevant group, or

(7) Condition C is that, as at the end of the chargeable period, the liabilities of the chargeable UK sub-group or entity include—

(a) tier one capital equity and liabilities (other than tier one capital equity and liabilities excluded by paragraph 30), or

(b) loss absorbing instruments, other than tier one capital equity and liabilities,

in respect of which such conditions as may be specified in regulations made by the Treasury are met.

15X

(1) The amount within Step 3 in paragraph 15N(1) is the total of—

(a) the amount of the relevant group member’s assets which are, or represent, qualifying loss absorbing instruments within paragraph 15V (2)(a) as at the end of the chargeable period, so far as that amount does not exceed the liabilities amount within sub-paragraph (3), and

(b) the amount of the relevant group member’s assets which are, or represent, qualifying loss absorbing instruments within paragraph 15V (2)(b) as at the end of the chargeable period, so far as that amount does not exceed the liabilities amount within sub-paragraph (4).

(2) Sub-paragraph (1) is subject to sub-paragraph (5).

(3) The “liabilities amount” within this sub-paragraph is the total amount of the chargeable UK sub-group or entity’s equity and liabilities, adjusted in accordance with Steps 1 and 2 in paragraph 15N(1), that are tier one capital equity and liabilities within paragraph 15W(7)(a).

(4) The “liabilities amount” within this sub-paragraph is the total amount of the chargeable UK sub-group or entity’s equity and liabilities, adjusted in accordance with Steps 1 and 2 in paragraph 15N(1), that are loss absorbing instruments within paragraph 15W(7)(b).

(5) An asset (or part of an asset) of the relevant group member is to be disregarded for the purposes of sub-paragraph (1) if—

(a) for the purposes of an adjustment at Step 2 in paragraph 15N(1), it is an asset (or part of an asset) to which paragraph 15U (1) applies,

(b) in a case where this paragraph applies in relation to more than one chargeable UK sub-group or entity, the asset (or part) is taken into account in determining the amount within Step 3 in paragraph 15N(1) in relation to another chargeable UK sub-group or entity, or

(c) in a case where a relevant foreign bank is a member of the relevant group, it is an asset (or part) to which paragraph 27D(1) applies for the purposes of Step 3 of paragraph 24(1).

15Y

(1) This paragraph makes provision about regulations under any provision of paragraph 15V or 15W.

(2) The regulations may include different provision for different purposes.

(3) The regulations are to be made by statutory instrument.

(4) A statutory instrument containing the regulations is subject to annulment in pursuance of a resolution of the House of Commons.

Step 4 in paragraph 15N: high quality liquid assets

15Z

(1) This paragraph applies where—

(a) as at the end of the chargeable period, the assets of the chargeable UK sub-group or entity include a financial asset in respect of an advance of cash made—

(i) in the case of a UK sub-group, by a member of that sub-group, or

(ii) in any other case, by the entity,

(b) that financial asset is not—

(i) an asset which, for the purposes of an adjustment at Step 2 in paragraph 15N, is an asset to which paragraph 15U(1) applies,

(ii) an asset which is taken into account in determining the amount of a reduction under paragraph 15X for the purposes of Step 3 in paragraph 15N in the application of those paragraphs in relation to any member of the relevant group, or

(iii) in a case where the bank levy is charged as provided for by paragraph 4 (groups) and a relevant foreign bank is a member of the relevant group, an asset which for the purposes of Step 3 of paragraph 24(1) is an asset to which paragraph 27D(1) applies, and

(i) in a case within paragraph (a)(i), is owned by the member and 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;

(ii) in a case within paragraph (a)(ii), is owned by the entity and 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.

(2) The amount within paragraph (b) of Step 4 in paragraph 15N 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.

Designated FPE entities: non-UK allocated equity and liabilities etc

15Z1

Take Steps 1 to 4 to determine the non-UK allocated equity and liabilities attributable to a foreign permanent establishment of a designated FPE entity as at the end of the chargeable period.

15Z2

(1) This paragraph applies for the purposes of Step 2 in paragraph 15Z1.

(2) The assets of the foreign 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 designated FPE entity.

(3) For the purposes of paragraph 15Z1 and this paragraph, any relevant provisions of Chapter 3A of Part 2 of CTA 2009 (UK resident companies: profits of foreign permanent establishments) are to be applied as they would be applied in determining profits attributable to the foreign permanent establishment for corporation tax purposes.

(4) But in determining the non-UK allocated equity and liabilities attributable to a foreign permanent establishment of a designated FPE entity which is a member of the relevant group, any assets within sub-paragraph (5) are to be left out.

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

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

(a) the designated FPE entity mentioned in sub-paragraph (4) is the creditor,

(b) the debtor (“D”) is a UK resident bank, a building society or a 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 designated FPE entity mentioned in sub-paragraph (4) from another entity, and

(d) in borrowing that money the designated FPE entity 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.

Netting: non-UK allocated equity and liabilities

15Z3

(1) Paragraph 15Z4 applies for the purposes of Steps 1 and 2 in paragraph 15Z1 if—

(a) the designated FPE entity mentioned in paragraph 15Z1 (“E”) has liabilities to another entity which (in a case where the bank levy is charged as provided for by paragraph 4 (groups)) is not within sub-paragraph (5) (“E’s liabilities”),

(b) E recognises, as assets, amounts due from that other entity (“N”) to E (“N’s liabilities”),

(d) that provision is legally effective and enforceable.

(2) 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 E or N, if a netting event occurs.

(3) The reference in sub-paragraph (2) to a “single net settlement” is a reference to a single net settlement of—

(a) all E’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).

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

(a) at the option of E, 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 E, if a netting event occurs,

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

(5) An entity is within this sub-paragraph if it is—

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

(b) a chargeable UK resident entity, or

(6) 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 E to N as collateral, but only where E recognises those securities in its balance sheet or statement of financial position, and

(i) in relation to E, if the insolvency or bankruptcy of E gives rise to the termination of any arrangements under which any liability covered by the provision mentioned in sub-paragraph (1)(c) arises, or

(ii) in relation to N, if the insolvency or bankruptcy of N gives rise to the termination of any arrangements under which such a liability arises.

(7) Section 556 of CTA 2009 (meaning of securities and similar securities) applies for the purposes of sub-paragraph (6) as it applies for the purposes of Chapter 10 of Part 6 of that Act.

15Z4

(1) In determining the amount of E’s assets at Step 1 in paragraph 15Z1, the amount of E’s net settlement assets is to be reduced (but not below nil) by the amount of E’s net settlement liabilities.

(2) In determining the amount of the foreign permanent establishment’s assets at Step 2 in paragraph 15Z1—

(a) the reduction in E’s assets under sub-paragraph (1) is to be ignored, but

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

(3) For this purpose, “Z%” is the proportion by which E’s net settlement assets are reduced under sub-paragraph (1).

(4) E’s “net settlement liabilities” are E’s liabilities so far as they—

(a) are covered by the provision mentioned in paragraph 15Z3(1)(c), and

(b) are not excluded liabilities.

(5) E’s “net settlement assets” are E’s assets so far as corresponding to N’s net settlement liabilities.

(6) “N’s net settlement liabilities” means N’s liabilities so far as they are covered by the provision mentioned in sub-paragraph 15Z3(1)(c).

(7) The permanent establishment’s “net settlement assets” are its assets so far as they are part of E’s net settlement assets.

Equity and liabilities: threshold amount

15Z5

(1) If a relevant equity and liabilities amount is less than £50 million, that amount may be ignored for the purposes of determining the chargeable equity and liabilities of the relevant group under paragraph 15.

(2) But the total amount which may be ignored under sub-paragraph (1) may not exceed £200 million.

(3) In sub-paragraph (1), “relevant equity and liabilities amount” means—

(a) in the case of a chargeable UK resident entity, the amount of the equity and liabilities, as at the end of the chargeable period, of the entity,

(b) in the case of a UK sub-group to which paragraph 15J applies, the amount of the equity and liabilities, as at the end of the chargeable period, of the UK sub-group,

(i) the equity and liabilities of the residual UK sub-group, and

(ii) the equity and liabilities of each designated FPE entity,

as at the end of the chargeable period,

(d) in the case of a UK sub-group to which paragraph 15L applies, the total amount of the equity and liabilities, as at the end of the chargeable period, of each UK resident entity (whether or not a designated FPE entity) which is a member of the UK sub-group, or

(e) in the case of a relevant foreign bank which is a member of the relevant group, the amount of the UK allocated equity and liabilities, as at the end of the chargeable period.

27A

(1) Paragraph 27D applies for the purposes of paragraph 27(2)(b) if—

(a) the bank levy is charged as provided for by paragraph 4 (groups),

(b) the relevant foreign bank (“B”) has liabilities to another entity (“N”) which is not within sub-paragraph (5) (“B’s liabilities”),

(c) B, or another member of the relevant group, recognises, as assets, amounts (“N’s liabilities”) that are due to any member of the relevant group from N,

(d) there is in place an agreement which makes net settlement provision, and

(e) that provision is legally effective and enforceable.

(2) In sub-paragraph (1)(d), “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 B or N, if a netting event occurs.

(3) The reference in sub-paragraph (2) to a “single net settlement” is a reference to a single net settlement of—

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

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

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

(a) at the option of B, 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 B, if a netting event occurs,

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

(5) An entity is within this sub-paragraph if it is —

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

(b) a chargeable UK resident entity, or

(6) 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 B, or another member of the relevant group, to N as collateral, but only where B or that other member recognises those securities in its balance sheet or statement of financial position, and

(i) in relation to B, if the insolvency or bankruptcy of B gives rise to the termination of any arrangements under which any liability covered by the provision mentioned in sub-paragraph (1)(d) arises, or

(ii) in relation to N, if the insolvency or bankruptcy of N gives rise to the termination of any arrangements under which such a liability arises.

27B

(1) Paragraph 27D also applies for the purposes of paragraph 27(2)(b) if—

(a) the bank levy is charged as provided for by paragraph 5 (entities which are not members of groups),

(b) the relevant foreign bank (“B”) has liabilities to another entity (“B’s liabilities”),

(d) there is in place an agreement between B and N which makes net settlement provision, and

(e) that provision is legally effective and enforceable.

(2) In sub-paragraph (1)(d), “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 B or N, if a netting event occurs.

(3) The reference in sub-paragraph (2) to a “single net settlement” is a reference to a single net settlement of—

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

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

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

(a) at the option of B, 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 B, if a netting event occurs,

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

(5) 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 B to N as collateral, but only where B recognises those securities in its balance sheet or statement of financial position, and

(i) in relation to B, if the insolvency or bankruptcy of B gives rise to the termination of any arrangements under which any liability covered by the provision mentioned in sub-paragraph (1)(d) arises, or

(ii) in relation to N, if the insolvency or bankruptcy of N gives rise to the termination of any arrangements under which such a liability arises.

27C

Section 556 of CTA 2009 (meaning of securities and similar securities) applies for the purposes of paragraphs 27A(6) and 27B(5) as it applies for the purposes of Chapter 10 of Part 6 of that Act.

27D

(1) The amount of B’s net settlement liabilities is to be reduced (but not below nil) by the amount of B’s net settlement assets.

(2) “B’s net settlement liabilities” means B’s liabilities so far as they—

(a) are covered by the provision mentioned in paragraph 27A(1)(d) or 27B(1)(d), and

(b) are not excluded liabilities.

(3) “B’s net settlement assets” means the assets of—

(a) B, or

(b) in a case within paragraph 27A, another member of the relevant group,

so far as corresponding to N’s net settlement liabilities.

(4) But, in a case within paragraph 27A—

(a) if sub-paragraph (1) of this paragraph applies in relation to more than one relevant foreign bank, no part of an asset may be included in the net settlement assets of more than one of those relevant foreign banks, and

(b) if an asset, or part of an asset, is included for the purposes of paragraph 15U in the net settlement assets of a member of the relevant group, the asset (or part) is not to be included in B’s net settlement assets for the purposes of this paragraph.

(5) “N’s net settlement liabilities” means N’s liabilities so far as they are covered by the provision mentioned in paragraph 27A(1)(d) or 27B(1)(d).

(6) If B’s net settlement liabilities exceed B’s net settlement assets, and a proportion (A%) of those liabilities is long term liabilities and a proportion (C%) of those liabilities is short term liabilities, under sub-paragraph (1)—

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

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

53A

(1) This paragraph applies where—

(a) an entity (the “ring-fenced entity”) which is a member of the relevant group is—

(i) a ring-fenced body, or

(ii) a member of a ring-fenced body sub-group,

or both, and

(b) the entity is not the relevant group’s responsible member.

(2) The ring-fenced entity is jointly and severally liable for the bank levy liability of the relevant group’s responsible member under paragraph 53(2) only so far as the liability is—

(a) attributable to the ring-fenced body sub-group of which the ring-fenced entity is a member, or

(b) if the ring-fenced entity is not a member of a ring-fenced body sub-group, attributable to that entity.

(3) For the purposes of sub-paragraph (2)—

(a) the bank levy liability that is attributable to a ring-fenced body sub-group is the amount of the bank levy that would be charged for the chargeable period in relation to that sub-group if it were “the relevant group” for the purposes of this Part;

(b) the bank levy liability that is attributable to a ring-fenced entity is the amount of the bank levy that would be charged for the chargeable period in relation to that entity if it were “the relevant entity” for the purposes of this Part.

(4) “Ring-fenced body” has the same meaning as in the Financial Services and Markets Act 2000 (see section 142A of that Act).

(5) A “ring-fenced body sub-group” is a group of entities consisting of—

(a) an RFB parent undertaking and its subsidiaries, or

(b) a ring-fenced body, which is not a subsidiary of an RFB parent undertaking, and the ring-fenced body’s subsidiaries.

(6) “RFB parent undertaking” means a body corporate which is subject to rules made under section 192JA of the Financial Services and Markets Act 2000 (rules applying to parent undertakings of ring-fenced bodies).

55A

(1) This paragraph applies for the purposes of paragraph 54(3)(c)(ii) and (d)(ii).

(2) HMRC may from time to time publish requirements as to the information to be provided by, or on behalf of, the relevant group’s responsible member before the end of the nomination period.

(3) In a case within paragraph 54(3)(c)(ii), HMRC may determine that E is not to be the relevant group’s responsible member for the chargeable period.

(4) A determination under sub-paragraph (3) must be made within the period of 30 days from the end of the nomination period.

(5) HMRC may make a determination under this paragraph only if—

(a) information required under sub-paragraph (2) has not been provided to HMRC, or

(b) HMRC has reason to believe that E—

(i) has ceased to be a chargeable member of the relevant group,

(ii) no longer has an accounting period for corporation tax purposes which is the same as the chargeable period, or

(iii) will turn out not to have sufficient resources to pay the bank levy.

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