Draft Bank Levy (Double Taxation Relief) (SIngle Resolution Fund Levy) Regulations 2016

Nigel Mills Excerpts

Thursday 8th December 2016 General Committees

[The Financial Secretary to the Treasury (Jane Ellison)]

I beg to move,

That the Committee has considered the draft Bank Levy (Double Taxation Relief) (Single Resolution Fund Levy) Regulations 2016.

The regulations are made under powers available in schedule 19 to the Finance Act 2011 to provide double taxation relief in respect of contributions to the UK bank levy. In particular, the regulations allow double taxation relief when there is a charge under both the UK levy and a new eurozone levy called the single resolution fund.

Since 1 January 2015, all EU member states have been bound by the bank recovery and resolution directive, which requires that member states have a resolution financing mechanism and raise a certain amount of funding on an ex-ante basis from banks authorised in their territory. In the eurozone, banks pay a contribution to the single resolution fund; the UK is satisfying its obligations under the bank recovery and resolution directive by raising contributions through our existing bank levy. In some circumstances, payments made to the single resolution fund overlap with the UK bank levy, giving rise to instances of double taxation.

For other bank levies, such as those of France, Germany and the Netherlands, we have introduced provisions that allow for double taxation relief, but currently no mechanism is in place to give relief for payments made into the single resolution fund. In line with the Government’s general policy of avoiding double taxation, it was announced at summer Budget 2015 that relief would be provided against the UK bank levy for payments made to the single resolution fund from 1 January 2015.

I shall explain how the double taxation arises. The UK bank levy is levied on a group basis, whereas the single resolution fund levy is levied on an entity basis, which means that there could be double taxation if there is either an EU subsidiary of a UK-resident entity or a UK permanent establishment of an EU entity. As both bank levies are charged on balance-sheet liability, the regulations will give relief if there is a charge under both the bank levy and the single resolution fund levy in respect of liabilities on the same balance sheet. The regulations set out clear rules for calculating the amount of double tax relief due in the different circumstances in which it could arise. The rules ensure that the regulations provide a clear, consistent and fair outcome for all affected parties.

The Government are continuing their policy of avoiding the double imposition of taxation. Not to do so would risk unfairly burdening certain banks and damaging UK financial sector competitiveness.

[Nigel Mills (Amber Valley) (Con)]

Will the Minister confirm that we will get the first taxing right on UK assets? For a UK permanent establishment of an overseas bank, we should not be crediting overseas tax against our tax so that we end up with no levy on UK assets that we are effectively guaranteeing. Will we credit overseas tax only if that territory is, for example, first in line to be paid any claims if there was a default on the assets?

[Jane Ellison]

That is a typically erudite question from my hon. Friend, to which I shall attempt to respond during my remarks following the comments of the Opposition Front-Bench spokesman.

I was saying that were the Government not to proceed with this measure, that would risk unfairly burdening certain banks and damaging UK financial sector competitiveness. The regulations address such a risk by supporting UK business and creating a level playing field, so I hope they are approved. I am happy to respond to further questions.