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Financial services
Bank levy
The Government has put forward ambitious plans to reform the financial sector after the crisis. Those plans included the introduction of a levy on banks’ balance sheets from 1 January 2011.
The Government believes that banks should make a full and fair contribution in respect of the potential risks they pose to the wider economy. The design of the Levy is based on the proposal in the International Monetary Fund Report to the G20, A Fair and Substantial Contribution by the Financial Sector, for a broad balance sheet charge. It has been designed to encourage less risky funding and complements the wider agenda to improve regulatory standards and enhance financial stability.
The Chancellor set out more detailed plans on the UK Bank Levy in the June 2010 Budget.
Update and next steps
The UK and French Governments have agreed on a mechanism that will ensure that there is no double taxation of banking groups subject to both the UK and French bank levies.
This announcement demonstrates the Government’s commitment to ensuring a level playing field for all banks subject to the UK Bank Levy. The Government will continue discussions with other international partners in this respect. The legislation giving effect to the agreement will be enacted once the Bank Levy legislation receives Royal Assent
Following a period of consultation around the design and implementation of the Bank Levy, the Government published draft legislation. The consultation ran from 13 July to the 5 October 2010, during which time the Government received a number of written representations from across the industry and met with key industry figures to discuss the approach.
Following consultation on the draft legislation, final draft legislation has been published as part of consolidated draft clauses planned for Finance Bill 2011. The Levy will be set at a full rate of 0.075 per cent in 2012 with an initial full rate of 0.05 per cent in 2011. The Bank Levy legislation is available on the HMRC website;
More information on the legislations passage through the Houses of Parliament can be found on the Parliament website.
The draft legislation and explanatory notes can be found below.
Related links
- Written Ministerial Statement: Bank Levy: draft legislation (PDF 24KB)
- Draft legislation and Explanatory notes (HMRC website, opens in a new browser window)
- Government’s response to the consultation (PDF 412KB)
- July 2010 consultation on design and implementation
- 21 October 2010 Press notice: UK Government publishes draft legislation on the Bank Levy
- Speech by the Financial Secretary to the Treasury at the British Bankers Association Annual Industry Dinner, Mansion House
- Speech at the Lord Mayor’s Dinner for Bankers and Merchants of the City of London by the Chancellor of the Exchequer, Mansion House
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