BKLM641700 - Anti-avoidance: relevant arrangements that can be ignored when applying the anti-avoidance rule: example
A hedge fund has made a £15bn deposit with a bank that is within the charge to the bank levy. Interest is paid on this deposit at a rate of 5% per annum. »Ê¹ÚÌåÓýapp bank has asked the hedge fund to transfer the £15bn deposit to a special short term money market fund which pays interest of only 1% for the period 24 December 2016 to 4 January 2017. This period covers the end of the bank’s chargeable period. After the 4 January 2017 the £15bn would once again be deposited back with the bank at 4% interest rate.
To compensate the hedge fund for removing this £15bn deposit over the balance sheet date the bank will provide various other services to the hedge fund at a below market price as compensation for the lost interest.
»Ê¹ÚÌåÓýapp above arrangements are not a genuine attempt to reduce the risk profile of the bank’s funding on an ongoing basis. »Ê¹ÚÌåÓýapp main purpose or one of the main purposes of the arrangements is to avoid or reduce a charge or assessment to the bank levy. In such a situation, the anti-avoidance rule at paragraph 47 would apply and the bank levy will be charged or assessed on the bank as it would have been in the absence of these arrangements.