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Bank Levy and other bank taxes

Source: HM Revenue & Customs | | 08/10/2015

In the summer Budget, the Chancellor announced that the Bank Levy rate is to be reduced from 1 January 2016. The main rate will be reduced to 0.18% (from 0.21%). A proportionate decrease to 0.09% will be made to the half rate, also with effect from 1 January 2016. The rates will be gradually reduced over the next six years. The decreases will see the main rate at 0.10% by 1 January 2021. UK banks’ overseas subsidiaries will also be excluded from the Bank Levy from January 2021.

However, at the same time the Chancellor announced a new 8% Corporation Tax surcharge on bank profits from the 1 January 2016 in order to maintain a fair contribution from the banks. The profits will be calculated on the same basis as for Corporation Tax, but with some reliefs added back. The reliefs to be added back relate to any group relief for the period from non-banking companies and any relief arising before 1 January 2016.

A recent report commissioned by the BBA, the leading trade association for the UK banking sector has revealed that the total tax contribution of the UK banking sector in 2014 has been estimated at £31.3bn. UK-headquartered banks contributed £15.3bn with the balance being contributed by foreign headquartered banks. The Bank Levy comprised 17.8% (£2.2 billion) of total taxes paid by the sector. Whilst this will reduce from January 2016 the additional 8% Bank Corporation Tax Surcharge will mean that the banking sector will pay Corporation Tax at a rate higher than other industries.

Commenting on the report, Chief Executive of the BBA Anthony Browne said:

 'Both foreign and UK headquartered banks pay substantial amounts of tax in the UK. Much banking is internationally mobile; banks have made a choice to invest in the UK and face competition from those outside the UK. It’s crucial that the tax system provides long term certainty to invest in the UK for all banks, so we can stay ahead of the global race.'

 

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