BKLM315611 - Chargeable assets and liabilities: adjustments: step 2 in paragraph 15N: equity and liability: equity issued within a group

Paragraphs 15O to 15Q of Schedule 19

Background

In order to arrive at the chargeable equity and liabilities of groups, the chargeable equity and liabilities of various different members of the relevant group are brought together to give the overall chargeable equity and liabilities of the group.

To ensure that the chargeable equity and liabilities do not contain any items that are double counted or that would have been eliminated on consolidation special rules apply when calculating the chargeable equity and liabilities.

Some UK sub-groups and residual UK sub-groups base their chargeable equity and liabilities on their consolidated financial statements so any adjustments to remove intra-group transactions have already taken place on consolidation. However, specific provisions are required where:

•consolidated accounts are not prepared for a UK sub-group (see BKLM315130)

•there is a designated FPE entity in the group (see BKLM315200); or

•an entity-by-entity election (see BKLM315500) has been made.

Equity to be left out

Para 15O

• There may be some group structures where a UK sub-group is held underneath a UK parent but where that UK parent does not prepare consolidated financial statements under IAS for the larger sub-group. In such circumstances the UK parent and UK sub-group are both within the scope of the Bank Levy.

Therefore, any equity of UK resident members of the relevant UK sub-group that would have been eliminated under normal consolidation procedures under IAS, had the larger unconsolidated sub-group prepared consolidated accounts, can be left out of the calculations.

Para 15P

As with para 15O, there may be circumstances where a chargeable UK resident entity (see BKLM315140) is held underneath a UK parent that does not prepare consolidated financial statements under IAS for the larger sub-group.

Therefore, any equity of that chargeable UK resident entity (whether or not a designated FPE entity) that would have been eliminated under normal consolidation procedures under IAS, had the larger unconsolidated sub-group prepared consolidated accounts, can be left out of the calculations.

Para 15Q

Where an entity is a member of a UK sub-group that has made an entity-by- entity-election (see BKLM315500) (whether or not a designated FPE entity), or is a designated FPE entity and a member of a UK sub-group that has not made an entity-by-entity election, any equity of the entity is to be left out so far as it would have been eliminated under normal consolidation procedures under IAS. In applying such normal consolidation procedures, any non-UK resident entities should be ignored.