BKM402675 | Banking surcharge: definition of banking company: excluded entities - asset managers who are deposit takers

CTA10/S269DO (6)

Where a company only undertakes the kind of regulated activities described in the investment banking activity test for its asset management business it will not normally be subject to the banking surcharge as it will usually meet the definition of an excluded entity at s269BA(1)(e).

There are a small number of asset management companies who are authorised to take deposits under FSMA 2000. If the company would be an excluded entity but for the fact it is authorised to accept deposits it will still be an excluded entity for the purposes of the banking surcharge where:

1. the asset management company would not accept deposits but for the fact that it carries on asset management activities, and

2. the deposit taking is ancillary to those activities.

This means that where a company that undertakes asset management activities also accept deposits, provided it does this as a fundamental part of its asset management activities it will pass the test at (1) above. If that company later went on to offer deposit taking as part of range of banking services offered to new and existing clients of the asset management business, it would not pass the test at (1) as the deposit taking is no longer directly related to the asset management activities.

Deposit taking is considered as ancillary where it represents only a small proportion of the overall asset management business. The nature of an asset management business means that it is not possible to apply a balance sheet ratio test. We would consider the deposit taking to be ancillary to the asset management business for a chargeable period where deposits were small by reference to assets under management or where the income generated from holding the deposits was an insignificant proportion of the whole. Other measures may also be appropriate in some limited circumstances, for instance where the measures outlined above do not present a consistent or reliable approach.

We do not expect there to be many companies which are both asset managers and deposit takers. Given the subjective nature of the tests HM Revenue and Customs will need to consider each case on its merits.