On 24 March 2010, the Chancellor of the Exchequer handed down his 2010 Budget. Widely publicised as not containing any 'handouts' in advance of the General Election, the old adage of the devil being in the detail is certainly true for the financial services sector.

This bulletin will be of interest to all financial institutions since many of the measures contained in the Budget, both tax and non-tax related, could have a significant impact on the regulated sector.

This bulletin highlights the key Budget measures that will affect the sector and draws attention to practical issues and considerations that clients will need to have regard to.

Specific measures affecting particular types of clients

Banks:

  • Systemic risk tax
  • Bank Payroll Tax
  • Bank code of Conduct
  • Green Investment Bank
  • Regulatory developments
  • Income verification  

Funds:

  • Collective investment schemes: tax transparent contractual vehicle considered, consultation to alleviate tax cost arising as a result of the FINROF regime, Review of investment trust companies
  • Green Investment Bank launched
  • Bank Payroll Tax developments: definition of bank narrowed
  • Capital distributions: changes to allow receipt of some capital distributions to be treated as exempt in hands of recipient
  • Consultation on allowing AIM-listed shares to be eligible as a tax-advantaged investment for retail savers
  • ISA changes: limits increased
  • Stamp Duty Reserve Tax
  • Real Estate Investment Trusts (REITs): allow UK REITs to issue stock dividends in lieu of cash dividends in meeting the requirement to distribute 90% of the profits

Asset managers:

  • Systemic Risk Tax: Government announced support for 'financial transactions tax'.
  • Green Investment Bank launched
  • Bank Payroll Tax developments: definition of bank narrowed
  • Capital distributions: changes to allow receipt of some capital distributions to be treated as exempt in hands of recipient
  • Real Estate Investment Trusts (REITs): allow UK REITs to issue stock dividends in lieu of cash dividends in meeting the requirement to distribute 90% of the profits

Private equity:

  • Systemic Risk Tax: Government announced support for 'financial transactions tax'.
  • Green Investment Bank launched
  • Bank Payroll Tax developments: definition of bank narrowed
  • Capital distributions: changes to allow receipt of some capital distributions to be treated as exempt in hands of recipient
  • Employee incentive arrangements: anti avoidance changes
  • Consultation on employment related securities and geared growth and future action on the use of trusts and other vehicles to reward employees: rules to stop individuals attempting to treat a receipt as capital when it is employment income  

Life insurance companies:

  • Apportionment of income and gains and transfers of business: anti avoidance rules
  • Transfers of business: changes to ensure that the surplus is not taxed in both the transferor and transferee where there is a transfer of assets in excess of liabilities
  • Deficiency relief: relief available to individuals when life insurance contract ends

These measures are addressed in more detail in our briefing which can be viewed here.