BKLM331105 - Chargeable equity and liabilities: excluded equity and liabilities: protected deposits: exemption from the charge

Paragraph 29 of Schedule 19

The exemption from the charge to the bank levy for protected deposits reflects the greater stability of deposits covered by a guarantee or insurance scheme and also prevents a ‘double levy’ imposition where banks are liable to contribute to such schemes or guarantees.

Protected deposits are those deposits covered by a statutory or State-run guarantee or insurance scheme even where those schemes extend beyond deposits made by individuals.

Any remaining deposits (except for deposits from financial institutions and financial traders) that are not protected deposits under paragraph 29 are treated as ‘non-protected deposits’. Under paragraph 76 of Schedule 19 these non-protected deposits will be subject to the half rate in the same way as longer maturity liabilities.

Deposit

Deposit has the meaning given by article 5(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI2001/544), ignoring the exclusions in articles 6 to 9AB for the purposes of paragraph 29, except when considering deposits under The Financial Services Compensation Scheme (see BKLM331450).

Protected deposits

There are three types of protected deposit.

A deposit is ‘protected’ to the extent that it is covered by the Financial Services Compensation Scheme (FSCS) under FSMA00/S213.

In addition deposits are also protected to the extent that they are covered by other statutory guarantee or insurance schemes which operate outside the UK and are comparable with the FSCS scheme. An overseas insurance scheme is regarded as comparable if the purpose of that scheme is the same or is comparable to the purpose of the FSCS.

The third category of protected deposits are those explicitly guaranteed by a non-UK, State-run guarantee or insurance scheme, that is, one run by a national government which guarantees to compensate depositors for losses on their deposits.

Exempt amount

For chargeable periods ending on or before 31 December 2014, the exempt amount of scheme deposits, in the case of the FSCS and comparable overseas schemes, was the higher of either:

  • the amount of the deposit insured
  • the amount of the deposit by reference to which the premium or fee in respect of the scheme is computed, or
  • the amount of the deposit by reference to another amount.

For chargeable periods ending on or after 1 January 2015, the exempt amount of scheme deposits is the amount of the deposit insured.

Excluded deposits may not exceed 100% of the relevant scheme deposits.

Comparable schemes to the FSCS

See BKLM331110 for more details.