Challenger banks face £70m tax bill after changes
The 8% surcharge on bank profits is set to leave the UK’s challenger banks facing a £70m tax bill, a recent report into the sector from accountancy giants KPMG has claimed.
In the Summer Budget of 2015 Chancellor George Osborne introduced the new 8% surcharge on the profits of any bank with profits in excess of £25m.
The surcharge, which took effect from 1 January 2016, was broadly designed to offset the forecast reduction in revenue from the bank levy reforms.
But KPMG has said that given the £20bn liability/equity exemption within the bank levy rules, it does nothing to help the challenger banks as they generally do not have large enough balance sheets to be subject to it.
The report said: “A potential reduction in the levy does little or nothing to offset the additional cost of the corporation tax surcharge for challenger banks.
“We estimate that the surcharge would have added approximately £70m to the challenger banks’ tax charge for 2015 (excluding Williams & Glyn).”
Such a move appears to be at odds with the government’s intention to increase competition by supporting strong new market participants.
As such KPMG has warned that the time for special treatment for challenger banks from the Treasury looks to be a thing of the past.
It said: “The message is clear, the landscape has changed, the challengers have grown up and they should expect no special treatment as they continue their journey.”