Finance Act 2011

[F1 Step 2 in paragraph 15N: equity and liability adjustments and netting U.K.

Textual Amendments

F1 Sch. 19 paras. 15-15Z5 and cross-headings substituted for Sch. 19 paras. 15-23 (with effect in accordance with Sch. 9 para. 35 of the amending Act) by Finance Act 2018 (c. 3), Sch. 9 para. 2

15O (1) This paragraph applies if— U.K.

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

(b) the members of a UK sub-group which are UK resident entities are also members of at least one larger unconsolidated sub-group.

(2) A group of entities is an “unconsolidated sub-group” if—

(a) the conditions in paragraph 15B(a) to (c) and (e) are met in respect of the group, but

(b) the condition in paragraph 15B(d) (consolidated financial statements) is not met in respect of the group.

(3) Any equity of the UK resident entities which are members of the UK sub-group is to be left out so far as it would have been eliminated under normal consolidation procedures, had consolidated financial statements for the larger or largest unconsolidated sub-group been prepared for the chargeable period under international accounting standards.

15P (1) This paragraph applies if the bank levy is charged as provided for by paragraph 4 (groups). U.K.

(2) Sub-paragraph (3) applies in relation to an entity if—

(a) it is a chargeable UK resident entity (whether or not a designated FPE entity), and

(b) it is a member of at least one unconsolidated sub-group (see paragraph 15O(2)).

(3) Any equity of the entity is to be left out so far as it would have been eliminated under normal consolidation procedures, had consolidated financial statements for the unconsolidated sub-group, or the largest unconsolidated sub-group of which the entity is a member, been prepared for the chargeable period under international accounting standards.

15Q (1) This paragraph applies if the bank levy is charged as provided for by paragraph 4 (groups). U.K.

(2) Sub-paragraph (3) applies in relation to a UK resident entity if—

(a) it is a member of a UK sub-group in respect of which an entity-by-entity election has been made under paragraph 15L (whether or not it is a designated FPE entity), or

(b) it is a designated FPE entity and a member of a UK sub-group in respect of which no entity-by-entity election has been made.

(3) Any equity of the entity is to be left out so far as it would have been eliminated under normal consolidation procedures under international accounting standards, but disregarding from the consolidation any non-UK resident entities.

15R (1) This paragraph applies if the bank levy is charged as provided for by paragraph 4 (groups). U.K.

(2) The following liabilities of a chargeable UK sub-group or entity are to be left out—

(a) UK connected liabilities to a chargeable UK resident entity which is a member of the relevant group,

(b) UK connected liabilities to a UK sub-group of the relevant group,

(c) UK connected liabilities to a relevant foreign bank which is a member of the relevant group, and

(d) in the case of an entity to which paragraph 15Q applies, UK connected liabilities of the entity to another UK resident entity which is a member of the same UK sub-group.

(3) For the purposes of sub-paragraph (2)(a) and (d), liabilities to a UK resident entity are “UK connected liabilities” except so far as the entity’s assets corresponding to the liabilities are assets of a foreign permanent establishment in respect of which an election under paragraph 15D has been made (as determined at Step 2 in paragraph 15Z1).

(4) For the purposes of sub-paragraph (2)(b), liabilities to a UK sub-group are “UK connected liabilities” except so far as the sub-group’s assets corresponding to the liabilities are—

(a) assets of a non-UK resident entity, or

(b) assets of a foreign permanent establishment in respect of which an election under paragraph 15D has been made (as determined at Step 2 in paragraph 15Z1).

(5) For the purposes of sub-paragraph (2)(c), liabilities to a relevant foreign bank are “UK connected liabilities” so far as the bank’s assets corresponding to the liabilities are assets of the permanent establishment through which the bank carries on a trade in the United Kingdom as determined at Step 2 in paragraph 24(1).

15S (1) Paragraph 15U applies if— U.K.

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

(b) an entity (“M”) within sub-paragraph (5) has liabilities to another entity (“N”) not within that sub-paragraph (“M’s liabilities”),

(c) M, 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 or another entity not within sub-paragraph (5),

(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 M 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 M’s liabilities, and liabilities of other entities within sub-paragraph (5), to N or another entity which is not within that sub-paragraph (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 M, 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 M, 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, or

(b) a chargeable UK resident entity.

(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) if N is a relevant foreign bank which is a member of the relevant group, liabilities of M to N are to be ignored so far as N recognises assets in respect of those liabilities as assets of the permanent establishment through which N carries on a trade in the United Kingdom as determined at Step 2 in paragraph 24(1),

(c) references to amounts due from N or another entity not within sub-paragraph (5) include securities provided by M, or another member of the relevant group, to N or another entity not within sub-paragraph (5) as collateral, but only where M or that other member recognises those securities in its balance sheet or statement of financial position, and

(d) “a netting event occurs”—

(i) in relation to M, if the insolvency or bankruptcy of M, or another entity within sub-paragraph (5) which has a liability covered by the provision mentioned in sub-paragraph (1)(d), gives rise to the termination of any arrangements under which such a liability arises, or

(ii) in relation to N, if the insolvency or bankruptcy of N, or another entity not within sub-paragraph (5) which has a liability covered by the provision mentioned in sub-paragraph (1)(d), 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) and paragraph 15T(5) as it applies for the purposes of Chapter 10 of Part 6 of that Act.

15T (1) Paragraph 15U also applies if— U.K.

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

(b) the relevant entity (“M”) is a UK resident entity,

(c) M has liabilities to another entity (“M’s liabilities”),

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

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

(f) that provision is legally effective and enforceable.

(2) In sub-paragraph (1)(e), “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 M 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 M’s liabilities (so far as covered by the provision mentioned in sub-paragraph (1)(e)), 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 M, 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 M, if a netting event occurs,

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

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

(c) “a netting event occurs”—

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

15U (1) The amount of M’s net settlement liabilities is to be reduced (but not below nil) by the amount of M’s net settlement assets. U.K.

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

(a) are covered by the provision mentioned in paragraph 15S(1)(d) or 15T(1)(e), and

(b) are not excluded liabilities.

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

(a) M, or

(b) in a case within paragraph 15S, another member of the relevant group,

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

(4) But, in a case within paragraph 15S—

(a) if N’s net settlement liabilities include liabilities of a relevant foreign bank which is a member of the relevant group, X% (as determined at Step 2 in paragraph 24(1)) of the assets corresponding to the liabilities of the relevant foreign bank are to be disregarded for the purposes of sub-paragraph (3), and

(b) if sub-paragraph (1) applies in relation to more than one entity within paragraph 15S(5), no part of an asset may be included in the net settlement assets of more than one such entity, and

(c) if an asset, or part of an asset, is included for the purposes of paragraph 27D in the net settlement assets of a relevant foreign bank which is a member of the relevant group, the asset (or part) is not to be included in M’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 15S(1)(d) or 15T(1)(e).

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

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

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