BKLM433100 - Collection and management: payment through the Corporation Tax system: exceptions to joint and several liability

Paragraph 53(6) of Schedule 19 excludes entities that are either ‘securitisation companies’ (see below), covered bond vehicles and any entity that the Treasury has prescribed by Order as being exempt.

Paragraph 53A was inserted by Finance Act 2018 to limit the joint and several liability of any ‘ring-fenced entity’ with effect from 1 January 2019.

This paragraph does not exempt chargeable equities or liabilities arising in these vehicles from being chargeable to the bank levy.

Securitisation companies

For bank levy purposes the entities coming within this definition are not limited to those taxed under the temporary regime in FA05/S83 and those in the permanent regime in SI2006/3296 (The Taxation of Securitisation Companies Regulations 2006).

The exclusion covers any entities mentioned in:

  • paragraphs (a) to (e) of FA05/S83(2), or
  • paragraphs (a) to (e) of regulation 4(2) of the Taxation of Securitisation Companies Regulations 2006.

So it includes entities that:

  • did not elect for the permanent regime, but would have qualified for it had they elected, and
  • qualified for the temporary regime, but where the securitisation was still in existence after the cut-off point for that regime (where an election had not otherwise been made) of accounting periods ending on or after 1 January 2017 (see regulation 2(2) SI2007/3338 (The Securitisation Companies (Application of Section 83(1) of the Finance Act 2005: Accounting Standards) Regulations 2007).

Covered bond vehicles

A ‘covered bond vehicle’ means a limited liability partnership subject to the following conditions set out in paragraph 53(7):

  • which is a party to a capital market arrangement, or a transaction in pursuance of a capital market arrangement,

  • whose trade or business (ignoring any incidental activities) consists wholly of one or both of the following:

  • providing guarantees, and

  • acquiring, owning and managing assets directly or indirectly forming the whole or part of the security for the capital market arrangement, and

  • which is within the charge to Corporation Tax.

Limited liability partnerships are defined in the Limited Liability Partnerships Act 2000 (web)(link is external) - - (in Great Britain) and the Limited Liability Partnerships Act (Northern Ireland) 2002 in Northern Ireland (web)(link is external) (). For the purposes of the bank levy a limited liability partnership includes an entity established under the law of a territory outside the UK of a similar character to a limited liability partnership.

Ring-fenced entities

From 1 January 2019, the largest UK banks are required to separate core retail banking from investment banking, under ring-fencing requirements.

Where an entity is a ‘ring-fenced body’ or a member of a ‘ring-fenced body’ sub-group, and it is not the relevant group’s responsible member, the entity is jointly and severally liable for the bank levy liability of the group’s responsible member only so far as it is attributable to that entity or the ‘ring-fenced body’ sub-group.

A ‘ring-fenced body’ is defined in FSMA00/S142A.

A ‘ring-fenced body sub-group’ is a group where there is a ring-fenced body parent undertaking and its subsidiaries, or a ring-fenced body, which is not a subsidiary of an RFB parent undertaking, and the ring-fenced body’s subsidiaries. A ring-fenced body parent undertaking is a body corporate that is subject to the rules under FSMA00/S192JA.

These ring-fenced entities will not be liable for bank levy amounts arising in respect of any non-ring-fenced entity within the group.