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Categorized | Banks

Big banks face tax rise under levy reform

Posted on March 27, 2014

City of London©Getty

The biggest banks could face higher tax bills under government plans to reform the bank levy, published in a consultation paper on Thursday.

The tax, branded “a location levy” by British lenders, is levied as a percentage of their total global liabilities. Foreign banks also contribute, but pay only a percentage of their UK liabilities.

    Since its introduction in 2011, the levy has raised £5bn for the taxpayer.

    The Treasury paper said it was considering a redesign of the charging mechanism for the levy to put lenders into different bands according to their size, rather than setting the tax for each bank separately each year.

    The consultation document includes five “illustrative models”, in which the banks in the top bands would face tax charges ranging from £569.8m to £782.4m each.

    If the Treasury’s final decision for reform falls in the middle of these two figures, it would represent a tax increase of more than a fifth for HSBC, which was the highest contributor to the bank levy last year, paying $916m (£551m) – up by a third from the previous year. Barclays was the second-highest contributor at £504m.

    The British Bankers’ Association has complained about eight consecutive increases in the bank levy. This was “inconsistent with the government’s desire for Britain to have a competitive, stable and predictable tax regime”.

    Few other countries had a levy at all, damaging the UK’s position, it added in a submission to the Treasury.

    The BBA said on Thursday: “We will use the consultation period to work through the details to ensure that the redesign meets the objectives set for the review.”