25(1)This paragraph applies [F1for the purposes of Steps 1 and 2 in paragraph 24(1)] if—U.K.
(a) the relevant foreign bank has liabilities to another entity F2 . . . (subject to sub-paragraph (2)) F3 . . . (“the bank's liabilities”),
[F4(b)the bank recognises, as assets, amounts due from that other entity (“N”) to the bank (“N's liabilities”),]
(c)there is in place an agreement between the bank and N which [F5makes net settlement provision], and
(d)the provision mentioned in paragraph (c) is legally effective and enforceable.
[F6(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).]
[F7(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
(c)another relevant foreign bank which is a member of the relevant group.]
(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,
[F8(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]
(c)F9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d)[F10“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.
[F11Section 556 of CTA 2009 (meaning of securities and similar securities) applies for the purposes of this sub-paragraph as it applies for the purposes of Chapter 10 of Part 6 of that Act.]
(4)F12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(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).
F13(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.
F14(13). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F1Words in Sch. 19 para. 25(1) inserted (with effect in accordance with Sch. 9 para. 35 of the amending Act) by Finance Act 2018 (c. 3), Sch. 9 para. 4(2)
F2 Word in Sch. 19 para. 25(1)(a) omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 7(2)(a)(i)
F3 Words in Sch. 19 para. 25(1)(a) omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 7(2)(a)(ii)
F4 Sch. 19 para. 25(1)(b) substituted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 7(2)(b)
F5Words in Sch. 19 para. 25(1)(c) substituted (with effect in accordance with Sch. 9 para. 35 of the amending Act) by Finance Act 2018 (c. 3), Sch. 9 para. 4(3)
F6Sch. 19 para. 25(1A)-(1C) inserted (with effect in accordance with Sch. 9 para. 35 of the amending Act) by Finance Act 2018 (c. 3), Sch. 9 para. 4(4)
F7Sch. 19 para. 25(2) substituted (with effect in accordance with Sch. 9 para. 35 of the amending Act) by Finance Act 2018 (c. 3), Sch. 9 para. 4(5)
F8 Sch. 19 para. 25(3)(b) substituted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 7(3)(a)
F9 Sch. 19 para. 25(3)(c) and following word omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 7(3)(b)
F10Words in Sch. 19 para. 25(3)(d) substituted (with effect in accordance with Sch. 9 para. 35 of the amending Act) by Finance Act 2018 (c. 3), Sch. 9 para. 4(6)
F11 Words after Sch. 19 para. 25(3)(d) inserted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 7(3)(c)
F12 Sch. 19 para. 25(4) omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 7(4)
F13Sch. 19 para. 25(8) omitted (with effect in accordance with Sch. 9 para. 35 of the amending Act) by virtue of Finance Act 2018 (c. 3), Sch. 9 para. 4(7)
F14Sch. 19 para. 25(13) omitted (with effect in accordance with Sch. 9 para. 35 of the amending Act) by virtue of Finance Act 2018 (c. 3), Sch. 9 para. 4(8)