Small lenders battle tax on bank profits
A SECRETIVE lobby group set up by Britain’s challenger banks will attempt to persuade the Treasury to back down over higher t axes at a crunch meeting next month. Chancellor George Osborne has repeatedly clashed with lenders over his decision to impose an 8pc surcharge on their UK profits, on top of corporation tax.
The move, which was announced during the emergency Budget in July and came into force last month, has incensed executives at many firms, including TSB, Nationwide and Virgin Money.
The bank levy is being cut as part of the reforms, in a sop to High Street giant HSBC which has complained bitterly about having to pay far more than anyone else due to its size. But Nationwide has claimed the new surcharge will saddle it with a £300m bill over the next five years, while a succession of bank bosses have warned it will reduce their capacity to lend.
Representatives of 12 challenger banks will meet with Treasury officials to attempt to persuade Mr Osborne to water down the changes when he delivers his Budget on March 16.
The 8pc charge kicks in on UK profits of more than £25m, meaning even some of the smallest lenders are affected. This comes on top of corporation tax of 20pc.
The challenger banks are l i kely to argue that the threshold for the tax should be raised to at least £250m or that the levy should be phased in more gradually.
Charles Roxburgh, the Treasury’s top f i nancial services official, will host the meeting. He chairs the Challenger Bank High Level Advisory Group which was set up to discuss key issues affecting Britain’s challenger banks.
The challenger banks’ efforts will be spearheaded by Paul Lynam, the boss of Secure Trust Bank who also chairs the British Bankers’ Association’s Challenger Bank Panel. Bosses of TSB, Tesco Bank, Shawbrook, Close Brothers and Paragon will also attend.
The boss of one challenger bank said he was ‘stunned’ when a Treasury official informed him on Budget day last July that the new levy would kick in at just £25m. ‘I assumed it was a mistake and that they meant to say £250m,’ he added.
The Treasury has so far refused to budge in the face of a growing backlash, but bank bosses remain hopeful of a reprieve. The Government is anxious to avoid being accused of stunting lending and has promised to champion challenger banks to help boost competition on the High Street.
The BBA has claimed that the banking sector will have shelled out almost £40bn in five extra taxes – on top of corporation tax and national insurance – between 2010/11 and 2020/21. These include the bank levy and restrictions on lenders being able to use losses in previous years and misconduct fines to cut their tax bill.