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The Budget 2010 commentaries - banking sector

"The commentaries below are written in general terms. Details can also be found in our downloadable Budget Report brochure. You are strongly recommended to seek specific advice before taking any action based on the information given, both in the commentaries and in the publication."

Bank Payroll Tax (BPT)

Further details of the BPT, in particular regarding company exclusions, have been confirmed.

There is no further draft legislation; however, HMRC’s recent pronouncements on the tax have been republished.

Specifically, companies that do not carry out deposit-taking in the UK and who have a capital resources requirement of under £100 million will not be within the definition of UK resident bank or a relevant foreign bank for BPT purposes.

Furthermore, the following companies will also be excluded from the definition:

1) Insurance special purpose vehicles;

2) Exempt BIPRU commodities firms; and

3) Firms that do not carry out relevant regulated activities otherwise than:

  • as a manager of a pension scheme;
  • on behalf of an insurance company in the same group;
  • in respect of asset management activities;
  • for the purposes of trading in commodities and their derivatives; and
  • for the purposes of trading in contracts for difference’s as a principal with retail clients or trading with another to enable them to do so.

The definition of “banking group” is also refined such that where 90% of the trading income in the last period of account of the group before 5 April 2010 is derived from insurance asset management and related activities or non-financial activities then the group will be excluded.

Comment

Although all these amendments represent relaxations to the rules and therefore are to be welcomed, the BPT remains fiendishly complicated and uncertain.  The BPT is still far wider than it need be; and if the mischief aimed at is bankers taking unnecessary risks, it would appear preferable to seek to tackle the banks’ proprietorial risk-taking rather than any trading for clients which would not have jeopardized the banks’ own resources.