August 20th, 2015
Revisions to the tax levy for lenders, introduced during George Osborne’s budget last month, have been called into question by the chief executive of Nationwide. Graham Beale suggested that the changes made would cost the society upwards of £300m during the next five years, and proposed that the levy would have a “disproportionate effect” on lenders at the lower end of the market.
After banks had voiced their own concerns that the levy was raised at a prolific scale, Osborne produced a revised table for scaling back these charges, with the requirement for the current 0.21% charge to be reduced to 0.18% by January 2016. Further reductions would then take the charge to 0.17% in 2017 and to a final 0.10% level by January 2021.
The assessment of the levy was historically based on the performance taken from global balance sheets, but will be adjusted from 2021 to focus instead upon UK operations only. To bolster the revenue loss from the levy, the chancellor also introduced a new surcharge on bank profits of 8% per year. It has been estimated by financial experts that this change will help larger international banks operating in the UK to save £1bn in tax per year. This would provide positive news for the likes of HSBC, as the lender openly raised concerns about operating from the UK during the general election.
Nationwide, currently the UK’s largest building society, revealed an increase in their pre-tax profits during the first quarter of 2015, stating a rise from £235m from 2014 to £379m across the April to June period this year.
Graham Beale pointed to the adversity the updated levy would raise for UK building societies, noting the benefits to the larger international operating banking organisations that are based in the country. He said: “The proposed changes to the bank levy and introduction of the tax surcharge on banking companies announced in last month’s budget may benefit UK headquartered international banks but will have a disproportionate effect on building societies such as Nationwide,”
Beale also suggested that the Government had overlooked the positive effect that building society’s bring to the UK banking sector. He suggested that: “This represents a missed opportunity to support diversity by acknowledging that building societies are different to banks and to recognise the contribution Nationwide and other mutuals make by lending to the UK economy, and the housing market in particular.”
The ire created by the revision to a surcharge was also clear, as Beale noted that, “We continued to lend through the financial crisis – we didn’t take any losses or draw on taxpayers’ money. Instead of having a surcharge of 8% for the large mutuals, to acknowledge that we’re different with a different risk profile, it could have been 4%,”
Over the first quarter of the lenders financial year, Nationwide raised over a quarter of the total net lending for the British housing market. It saw its gross mortgage lending rise by 17% to a total £6.8bn.
Article By: Simon Butler, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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