BKLM242760 - Relevant entities and groups: banking groups: conditions to be met to be a banking group: the exempt activities condition: non-financial trading activities

Paragraph 13(4) of Schedule 19

Exempt activities include, as a general rule, activities carried on by an entity which is not a financial trading entity, but there are two exceptions to that rule.

Exempt activities do not include:

  • lending activities, or
  • dealing on own account (except hedging transactions in respect of non-financial trading activities).

Financial trading entity

An entity is a financial trading entity if it is:

  • an authorised person for the purposes of FSMA00, or
  • not UK resident, but if it carried out its activities in the UK it would be required to be an authorised person, or
  • not in either of the above bullets, but carries on a trade consisting wholly or partly in dealing in securities.

'Securities' are defined as including shares, rights of holders in unit trust schemes (see TCGA92/S99), or where a company does not have share capital, interests in the company possessed by members of the company.

Lending activities

Paragraph 13(4) of Schedule 19

'Lending activities' means:

  • acceptance of deposits or other repayable funds
  • lending of money, including consumer credit, mortgage credit, factoring (with or without recourse) and financing of commercial transactions (including forfeiting)
  • finance leasing (as lessor)
  • issuing and administering means of payment
  • provision of guarantees or commitments to provide money
  • money transmission services
  • provision of alternative finance arrangements (see CFM44020(link is external) - external users can find the guidance at www.hmrc.gov.uk/manuals/cfmmanual/CFM44020.htm), and
  • other activities carried on in connection with activities falling within any of the other bullet points in this list.

Other ‘activities' in the last bullet point means buying, holding, managing and selling assets.

Dealing on own account

Paragraph 13(4) of Schedule 19

'Dealing on own account' has the same meaning as in Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments.

Article 4(1)(6) of the Directive sets out that;

'Dealing on own account' means trading against proprietary capital resulting in the conclusion of transactions in one or more financial instruments.