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2011 Budget: financial services implications
Practical Law UK Legal Update 9-505-3668 (Approx. 3 pages)
2011 Budget: financial services implications
by PLC Financial Services
| Published on 23 Mar 2011 • United Kingdom |
The Chancellor, George Osborne, delivered the 2011 Budget on 23 March 2011.
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On 23 March 2011, the Chancellor, George Osborne, delivered the 2011 Budget.
Of particular interest to PLC Financial Services subscribers are the announcements about the rate of the bank levy increasing and the introduction of tax legislation in response to the UCITS Directive (2009/65/EC) (UCITS IV) and the Solvency II Directive (2009/138/EC). Consultations relating to the Money Laundering Regulations 2007 (SI 2007/2157) and the UK's regulatory framework for covered bonds have also been announced.
On 23 March 2011, the Chancellor, George Osborne, delivered the 2011 Budget.
Of particular interest to PLC Financial Services subscribers are the following measures:
- Bank levy. From 1 January 2012, the rate of the bank levy will increase to 0.078%. The increase in the rate offsets the further reduction in the rate of corporation tax announced in the 2011 Budget.
- Real estate investment trusts. Subject to informal consultation, the government intends to legislate in the Finance Bill 2012 to support good business practices and remove barriers to entry, and investment in, the real estate investment trusts (REITs) regime, including removing a 2% conversion charge.
- UCITS IV. The government intends to introduce legislation to enable funds within scope of the UCITS Directive (2009/65/EC) (UCITS IV) to be managed from the UK without adverse tax consequences. Regulations will also be introduced to amend the genuine diversity of ownership test for master/feeder structures.
- Solvency II. The government intends to legislate on the life insurance tax regime because of the Solvency II Directive (2009/138/EC) (Solvency II). The new regime will deal with essential adjustments arising from Solvency II and aims to deliver significant changes to create a simpler and more stable tax basis aligned with the taxation of companies generally.
- Covered bonds. The government and the FSA will consult on the UK's regulatory framework for covered bonds shortly.
- New bank capital instruments. The government intends to set up an industry working group in April 2011 to explore tax issues associated with the development of new bank capital instruments and, if necessary, will legislate in 2012. This is in response to Basel III, a sequence of major reforms to the international prudential framework for capital requirements.
- Tax transparent fund. The government intends to legislate to introduce a tax transparent fund vehicle from 2012. The government will consult in June 2011 on the regulatory and tax aspects of this regime.
- Protection life insurance. The government intends to introduce legislation to remove protection business from the "income minus expenses" life tax system designed to tax investment type business and align it with the tax treatment of other trading entities. The change is to take effect from 1 January 2013.
- Claims equalisation reserves. Dependent on industry reaction, the government intends to legislate to retain the claims equalisation reserves (CERs) tax relief.
- Islamic finance. The government intends to make regulations to introduce direct tax rules for Sharia-compliant variable loan arrangements and derivatives in 2011.
Alongside the 2011 Budget, HM Treasury and the Department for Business, Innovation and Skills (BIS) have published a Plan for Growth. This includes a statement about the government consulting shortly on detailed proposals for changes to the Money Laundering Regulations 2007 (SI 2007/2157). The government wants to abolish 24 regulatory offences under the 2007 Regulations and exempt businesses with very low turnovers.
For more information about the financial services related initiatives announced in the 2011 Budget, including links to key primary source material and related PLC Financial Services content, see Practice note, 2011 Budget: financial services implications and measures.
For an overview of the most significant business tax announcements made in the 2011 Budget, see PLC Tax, Legal update, 2011 Budget: key business tax announcements. PLC has also produced a landing page linking to all of its 2011 Budget coverage.