Corporation tax surcharge on banking companies
Produced in partnership with Andrew Loan of Fieldfisher LLP
Corporation tax surcharge on banking companies

The following Tax guidance note Produced in partnership with Andrew Loan of Fieldfisher LLP provides comprehensive and up to date legal information covering:

  • Corporation tax surcharge on banking companies
  • Legislation and guidance
  • Commencement
  • Who is liable to pay?
  • How does the surcharge work?
  • Annual surcharge allowance
  • Compliance aspects
  • Targeted anti-avoidance rule
  • Practical impact

With effect from 1 January 2016, banking companies and building societies have been required to pay a surcharge of 8% on (broadly) their taxable profits, in addition to the main rate of corporation tax, subject to an annual allowance.

On top of the bank levy, the restriction of carried forward tax losses, and the non-deductibility of compensation payments, the surcharge is yet another measure that has increased the tax and compliance burden on banks. However, the introduction of the surcharge was linked to a gradual reduction in the headline rate of the bank levy over the next few years, from 0.21% to 0.1%, so the total amount of corporation tax and bank levy payable by banks may eventually fall as a result.

Legislation and guidance

The surcharge was introduced by Schedule 3 to the Finance (No 2) Act 2015 (F(No 2)A 2015), which inserted Chapter 4 of Part 7A of the Corporation Tax Act 2010 (CTA 2010).

In addition to:

  1. the explanatory notes that were published alongside a draft of the F(No 2)A 2015 when it was still a Bill, and

  2. the tax information and impact note (TIIN) published on 8 July 2015

HMRC has published guidance on the corporation tax surcharge applicable to banks in its Banking Manual at BKM400000.

Commencement

The 8% surcharge applies to accounting periods of banking