The impact of the actions on opposition could mean greater impact.
New loss limitation measures outlined in the 2016 Budget could decrease the competitiveness of UK banking.
Under new guidelines set by the authorities the industry faces the reduction of the amount of profit banks can offset with pre-2015 losses from 50% to 25%, starting 1 April 2016.
PwC banking tax partne Peter Mayberry, says that the consequent effects the new measures will have on competitors could mean higher costs.
Peter Mayberry said: “The problem with these measurers is that if you add this with the bank levy then what is effectively happening is that it is reducing the competitiveness of the UK banking business compared to other territories.”
This in turn means that the cost of capital for custodian banks in the UK is going to be higher which makes it more expensive for banks to raise capital and provide the services that clients will want.”
The measures can also come as a blow to HSBC as a result of its selection in Feb to keep its headquarters in London.
Mayberry also considers that the United Kingdom banking sector might see added ramifications of the loss limitation measures as a consequence of present corporation tax rules. Other Budget suggestions contained new curiosity reduction actions limiting the number of reduction for curiosity to 30% of taxable earnings in the United Kingdom.
Mayberry suggests that it will be challenging to forecast the effect of those new measures as they aren’t specific to a banking sector, says Trade News.
“There will be a timing effect as it will take banks longer to use their losses so they will pay more tax in earlier years and arguably less tax in later years when those losses have been used up,” he adds.
“It will also mean that as the corporation tax rate is falling, then if you get relief for losses in a later year that’s at a lower tax rate than the relief in the current year which is at a higher tax rate.”