Budget 2011 – Bank Levy
The Chancellor has confirmed that the bank levy rate is to be adjusted to take account of the introduction of the lower corporation tax main rate from 1 April 2011. This move has been designed to ensure that banks do not pay less tax as a result of the reduction in the corporation tax rate.
The bank levy rates will be increased from 1 January 2012 onward. The rates will be 0.078% for short-term chargeable liabilities and 0.039% for long-term chargeable equity and liabilities. The Levy will not be charged on the first £20 billion of chargeable liabilities.
The bank levy is designed to encourage banks to take on less risky funding profiles, improve regulatory standards and enhance the financial stability of the UK banking industry. The levy will apply to the global balance sheets of UK banks as well as to the UK operations of banks from other countries. The Government is expected to announce its final decision on the bank levy rates later in the year. From 2012-13 the levy is expected to generate around £2½ billion of annual revenues.
The bank levy will apply to:
- The global consolidated balance sheet of UK banking groups and building societies.
- The aggregated UK-group and UK subsidiary balance sheets, together with a proportion (determined in accordance with these provisions) of the balance sheets of foreign banks operating in the UK through permanent establishments which are members of foreign banking groups.
- The balance sheets of UK banks and banking sub-groups in non-banking groups.
- The balance sheets of UK banks that are not members of groups.