SolvedBKLM242620 | Relevant entities and groups: banking groups: conditions to be met to be a banking group: the exempt activities condition: criteria and examples
From HM Revenue & Customs · Bank Levy Manual
Paragraph 13 of Schedule 19
Even where Condition A, B, C or D is met, a group will not be a banking group if it satisfies the exempt activities condition.
The exempt activities condition applies to the trading income of the group in the chargeable period. The group will not be a banking group if either of the following conditions is met:
at least 90% of the group’s trading income for the chargeable period derives from exempt activities (see BKLM242680), or
at least 50% of the group’s trading income for the chargeable period derives from non-financial trading activities (see BKLM242760).
For further information on how to calculate trading income see BKLM242640.
Exempt activities condition examples
Example 1 - At least 90% of group trading income derives from exempt activities
Group X has group trading income for the chargeable period of £8.0 billion.
The group trading income is comprised as follows:
| Income | Trading income |
|---|---|
| Income from insurance activities | £7.0 billion |
| Income from non-financial trading activities | £0.6 billion |
| Income from financial trading activities | £0.4 billion |
| Total group income | £8.0 billion |
As £7.6bn of the group’s £8.0bn trading income (that is 95%) comes from exempt activities the test at paragraph 13(1)(a) is met and so the exempt activities condition is met and the group is not a banking group.
Example 2 - At least 50% of the group trading income derives from non-financial trading
Group Y has group trading income for the chargeable period of £8.0 billion.
The group trading income is comprised as follows:
| Income | Trading income |
|---|---|
| Income from insurance activities | £0.4 billion |
| Income from non-financial trading activities | £4.8 billion |
| Income from financial trading activities | £2.8 billion |
| Total group income | £8.0 billion |
As only £5.2 billion of the group’s £8.0 billion trading income (that is 65%) comes from exempt activities the test at paragraph 13(1)(a) is not met. However, as £4.8 billion of the group’s £8.0 billion (that is 60% of the group’s trading income) comes from non-financial trading income, the test at paragraph 13(1)(b) is met and so the exempt activities condition is met and the group is not a banking group.
Example 3 - the exempt activities condition is not met
Group Z has group trading income for the chargeable period of £8.0 billion.
The group trading income is comprised as follows:
| Income | Trading income |
|---|---|
| Income from insurance activities | £ 0.56 billion |
| Income from non-financial trading activities | £ 3.20 billion |
| Income from financial trading activities | £ 4.24 billion |
| Total group income | £ 8.0 billion |
As only £3.76 billion of the group’s £8.0 billion trading income (that is 47%) comes from exempt activities the test at paragraph 13(1)(a) is not met. As only £3.2 billion of the group’s £8.0 billion trading income (that is 40%) comes from non-financial trading activities the test at paragraph 13(1)(b) is not met either. As neither test is met the exempt activities exclusion cannot apply to the group.