Currently, UK banks and building societies pay corporation tax on their UK taxable profits at the standard rate of 20%.
From 1 January 2016, taxable profits arising in banking or building society groups in the UK, including any Controlled Foreign Company allocations, will be subject to an additional 8% surcharge above the main rate of corporation tax.
In calculating the surcharge, no relief will be available for any group relief received in the period from non-banking companies or for any losses carried forward prior to 1 January 2016. In addition, a specific anti-avoidance provision will be introduced to prevent manipulation of profits/losses to mitigate the surcharge.
There will be a £25 million annual allowance available to each banking/building society group, which would exempt profits up to this threshold from the surcharge. Any unused allowance cannot be carried forward to future years.
This surcharge is being coupled with the reduction in the Bank levy and the combined effect of the two measures is anticipated to lead to additional revenue of £415m to the Treasury in 2016/17.