Section 204: No Deductions for UK Or Foreign Bank Levies
Summary
1.Section 204 makes a number of amendments to Schedule 19 to the Finance Act 2011 (FA 2011). It puts beyond doubt that recharges of the Bank Levy are not an allowable deduction for the purposes of income tax and corporation tax whether recharged directly or via a third party. It also provides that foreign bank levies are not an allowable deduction for the purposes of income tax or corporation tax.
Details of the Section
2.Subsection (2) amends paragraph 46, Schedule 19 of FA 2011to make it clear that an indirect recharge of the Bank Levy is also not an allowable deduction for the purposes of income tax and corporation tax.
3.Subsection (3) inserts new paragraph 69A into Part 7, Schedule 19 of FA 2011.
4.New paragraph 69A(1) provides that no deduction will be allowed for the purposes of income tax or corporation tax where a foreign bank levy corresponds to the Bank Levy. It also provides that any amounts paid or received in respect of meeting or reimbursing a corresponding foreign bank levy are not taken into account in determining the profit or loss for income tax or corporation tax purposes of any member of the relevant group.
5.New paragraph 69A(2) makes it clear that the same criteria are used to determine whether foreign bank levy corresponds to the Bank Levy as are used for double taxation relief.
6.Subsection (4) makes consequential amendments to paragraph 3, Schedule 19 and to the title of Chapter 7, Schedule 19 of FA 2011 following the extension of the scope of Chapter 7.
7.Subsection (5) provides that the provisions introduced by the section will have effect for any periods of account commencing on or after 1 January 2013.
8.Subsection (6) provides that subsections (3) and (4) will apply to periods beginning before 1 January 2013 in respect of any corresponding foreign bank levy that is the subject of a claim for double taxation relief made on or after 5 December 2012.
9.Subsection (7) provides that where a company has a period of account straddling the 1 January 2013 then it will be treated as if it had two periods of account. One for a period ending on 31 December 2012 and one for a period beginning on 1 January 2013.
Background
10.Part 7 of Schedule 19 to FA 2011 provides for double taxation relief to be given where a bank or banking group is doubly charged to the UK bank levy and an equivalent foreign levy.
11.There is a general prohibition which applies to income tax, corporation tax or capital gains tax preventing further relief by way of a deduction against profits or gains where credit relief is given to alleviate double taxation. This section aligns the treatment of amounts paid either directly or indirectly in respect of foreign bank levies with this general prohibition.
12.The section also extends the principle that a bank levy is not an allowable deduction to foreign bank levies by putting beyond doubt that such levies, whether paid directly or by way of a recharge, are not an allowable deduction for the purposes of income tax and corporation tax.
