BKLM250000 - Relevant entities and groups: excluded entities

Paragraph 73 of Schedule 19

An entity is not a UK resident bank (see BKLM243000) or a relevant foreign bank (see BKLM245000) if it is an excluded entity.

The exclusion applies on the basis that the entity only carries on a regulated activity for a specified purpose. The exclusion will only apply if that purpose is the only purpose for which the regulated activity is carried out.

However, if the regulated activity is carried out for a combination of excluded purposes the entity will not be an excluded entity. For example, if an entity (a) carries on regulated activities as a manager of a pension scheme and (b) commodity trading, it will not satisfy either exclusion. This ensures that investment banks that are authorised to carry on a range of activities are not within this exclusion.

For chargeable periods beginning on or after 15 September 2016, an entity will be an excluded entity if it would fall within the relevant relieving provisions but for a single line of business which it carries on. This provision is subject to the entity not being a deposit taker, and that the entity’s activities in the other line of business are not such that it would be an FCA investment firm that meets the conditions in paragraph 70(1B). The relevant relieving provisions are those which would result in a company undertaking the activity being an excluded entity. More guidance on this can be found in the Banking Manual at BKM402800.

The following types of entities are 'excluded entities':

Insurance
Asset management
Commodities and emission allowances
Spread betting
Other companies

Insurance

An 'insurance company' is an excluded entity, as is an 'insurance special purpose vehicle'. For bank levy purposes, both of these terms have their corporation tax meaning, as given by FA12/S65 and FA12/S139 respectively.

An entity is an excluded entity if:

• it is a member of a group, and
• it only carries on relevant regulated activities on behalf of (a) an insurance company or (b) an insurance special purpose vehicle, and
• the insurance company or insurance special purpose vehicle is a member of the same group.

Asset management

An entity is an excluded entity if it only carries on relevant regulated activities as the manager of a 'pension scheme' within the meaning of the FCA Handbook.

An entity is an excluded entity if it is, for corporation tax purposes, an investment trust.

An entity is an excluded entity if the only relevant regulated activities it carries on are 'asset management activities' (see BKLM242720).

Commodities and emission allowances

A 'commodities and emission allowance dealer', within the meaning of the FCA Handbook, is an excluded entity.

If an entity not otherwise excluded as a 'commodities and emission allowance dealer' only carries on relevant regulated activities for the purpose of trading in commodities or commodity derivatives, it is an excluded entity.

We view hedging transactions undertaken in respect of commodities trades as being undertaken for the purposes of the commodity trading.

Spread betting

If an entity only carries on relevant regulated activities for the purpose of dealing in contracts for differences as principal with persons all (or all but an insignificant proportion) of whom are retail clients, it is an excluded entity.

If an entity ('C') only carries on relevant regulated activities for the purpose of dealing in contracts for differences with another person ('P') to enable C or P to deal in contracts for differences as principal with persons all (or all but an insignificant proportion) of whom are retail clients, then C is an excluded entity.

For bank levy purposes, 'contracts for differences', 'principal' and 'retail clients' all have the meaning given by the FCA Handbook.

Other companies

An entity is also an excluded entity if it is:

• a friendly society
• a credit union, or
• a building society.

A building society is an excluded entity for the purposes of determining whether an entity is a UK resident bank or a relevant foreign bank. However, a building society does fall within the bank levy by virtue of being included in its own right as a relevant entity (paragraph 21) or group (paragraph 15).