The Government has scrapped plans to redesign the banking levy after the industry warned the proposed new approach could see businesses exit the UK.
Introduced in January 2011, the bank levy is a tax on banks’ balance sheets, chargeable at the end of a firm’s financial year.
Originally set at 0.075 per cent of a bank’s balance sheet, it has been increased several times to boost revenue and now stands at 0.156 per cent. However, it has never raised the £2.5bn a year the Treasury anticipated.
A consultation published as part of March’s Budget proposed redesigning the levy after banks raised concerns it is damaging their competitiveness and could lead to certain activities being moved abroad.
It proposed introducing a banding approach where each bank would be placed in a band based on the size of its balance sheet, with each band having a pre-determined charge for the year. Higher charges would be attached to bands that encompass the largest and riskiest banks.
In a written ministerial statement published yesterday, Treasury economic secretary Andrea Leadsom said the Government would not go ahead with the changes after respondents said the banding approach would increase uncertainty over charges and the likelihood of business moving abroad.
She said: “Reflecting on these concerns – which were raised by banks of different domicile, structure and balance sheet size and trajectory – the Government have decided against the introduction of a banding approach for the bank levy at Finance Bill 2014 and have no plans to consider this idea further.”
The Government will, however, consider charging the levy at the start of a firm’s financial year rather than at the end, after some respondents said this would provide greater certainty.
She said: “The case for making these changes remains unclear and the Government need to give further consideration as to their merit, legality and legislative deliverability. However, the Government intends to maintain a dialogue with the sector on these points.”