HM Revenue & Customs has clarified what constitutes a bank following its announcement on 9 December that it will be implementing a bank payroll tax.
According to Kinetic Partners, HMRC has confirmed that the bank payroll tax is aimed at retail and investment banks and to banking groups and does not apply to non-banking companies outside of banking groups.
The guidance published states that insurance companies, asset managers and stockbrokers, for example, are not intended to be caught.
While draft legislation is not expected until the New Year, HMRC has confirmed that the definition of a bank and banking group for non-deposit takers applies to Full Scope BIPRU 730k Investment Firms, whose activities consist wholly or mainly of relevant regulated activities. Relevant regulated activities are defined as:
• Accepting deposits;
• Dealing in investments as principal;
• Dealing in investments as agent;
• Arranging deals in investments;
• Safeguarding and administering investments on behalf of clients; and
• Regulated mortgage contracts
A specific exclusion from the scope of the regime has been given to prime brokers who are Full Scope BIPRU 730k Investment Firms. A Full Scope BIPRU 730k Investment Firm is one which has both a base capital requirement of EUR730,000 and is neither a limited licence firm, nor a limited activity firm.
Kinetic says uncertainty remains over whether, for instance, a broker/dealer or a market maker would be caught by the provisions. These two types of firms could be viewed as non-banking activities outside of banking groups; however, they may fall within the regime as they could be Full Scope BIPRU 730k Investment Firms and wholly or mainly undertaking dealing in investments as principal and/or dealing in investments as agent.
In addition, the list of what constitutes an excluded company has been extended to include:
• A non deposit taking company undertaking relevant regulated activities on behalf of an insurance company in the same group;
• A company not carrying on any relevant regulated activities otherwise than as a manager of a pension scheme;
• A company whose activities consist wholly or mainly in acting as the operator of a collective investment scheme; and
• An exempt BIPRU commodities firm
While some questions have been answered, Kinetic says the publication of this guidance still contains unresolved matters, particularly in relation to the application of the measures to certain Full Scope BIPRU 730k Investment Firms not specifically excluded by provisions in the guidance, but who could arguably be described as non banking companies.
HMRC has confirmed that it is working with representative bodies and individual groups to address continued representations.
