Overseas banks miss out on bid to be excluded from banking levy scope

 
Hayley Kirton
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George Osborne pledged to size down the banking levy last year (Source: Getty)

Overseas banks have failed in their bid to be taken outside the scope of the UK's banking levy, a government consultation has revealed.

The document, which was published today, noted various consultation submissions from foreign banks had asked government if it would reconsider the rules so the levy was on assessed on the balance sheets of their UK permanent establishments.

Government rejected this argument, with the consultation document noting: "The government believes that including UK permanent establishments of foreign banking entities within the scope of the bank levy remains appropriate and will not be amending this policy."

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The consultation was sparked by proposals in last July's Budget. Among then-chancellor George Osborne's plans were moving away from the balance sheet based banking levy in favour of an eight per cent bank surcharge will be put on profits.

One of the proposals to scale back the banking levy was limiting the charge to banks' UK balance sheets, as opposed to the global balance sheets of UK lenders along with the UK balance sheets of overseas banks, with plans for these changes to apply from 2021.

The bank levy itself came into effect in 2011, and was intended to make sure banks made a " fair contribution, reflecting the risks they pose to the financial system and the wider UK economy".

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The decision to change focus from the levy to the surcharge last year proved unpopular with challenger banks, as, although most were exempt from the reach of the bank levy, were caught within the scope of the surcharge.

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