HSBC Faces New Hit Under Labour Bank Levy

HSBC faces an additional bill running to several hundred million pounds under Labour plans to increase a tax on the balance sheets of Britain's biggest lenders.

Sky News understands that HSBC would face the heaviest incremental tax burden under a future Labour Government, which has pledged to generate an additional £800m annually by raising the yield from the Bank Levy.

The hike would be likely to come on top of an increase announced in last month's Budget by the Chancellor, George Osborne, who said the tax was "here to stay".

Mr Osborne's comments, and Labour's plans to increase the Bank Levy still further, are fuelling disquiet among some of HSBC's largest shareholders, who are pressing its board to re-evaluate the growing cost of its UK domicile.

One investor, who asked not to be named, said the growing tax burden on the bank meant that the case was becoming "unanswerable" for HSBC to conduct a further formal review of the location of its headquarters.

"We don't expect the bank's management to make decisions on issues as far-reaching as its domicile on a five-year basis," the investor said.

"But we do think that with the Bank Levy now regarded as a permanent fixture of the tax system and the burden on HSBC only likely to increase, that we have a responsibility as shareholders to ask management to do what they can to protect the returns that accrue to the bank's owners."

HSBC, which did not rely on direct taxpayer support to come through the 2008-09 banking crisis, has already shouldered the heaviest financial burden since the Bank Levy was introduced in 2010.

Analysts expect that it will have to pay a substantial increase in 2015 on the $1.1bn (£740m) it paid last year after Mr Osborne's latest move, the ninth increase since the tax's introduction.

In the last two years alone, it has paid $2bn (£1.34bn) to the Treasury through the levy, .

Labour's policy of raising an extra £800m through the Bank Levy to pay for expanding free childcare for working parents of three- and four-year olds was unveiled in 2013.

Ed Balls, the Shadow Chancellor, repeated the commitment in a speech on Tuesday.

Sources close to the party said on Tuesday that the party was minded to press ahead with a further hike to the tax, which would mean that it could raise in total more than £3.5bn annually under a Labour Government.

HSBC historically conducted a review of its UK domicile every three years, but has departed from that timetable because of the scale of uncertainty about post-crisis banking reforms.

Rules to require the separation of UK lenders' retail and investment banking arms prompted HSBC to announce last month that its ring-fenced operation will be based in Birmingham.

Douglas Flint, HSBC's chairman, last year wrote to the Chancellor and Bank of England Governor Mark Carney urging them to delay the implementation of ring-fencing until the outcome of a competition probe into parts of the industry.

HSBC, which has faced a firestorm of criticism in the last two months over historical tax evasion at its Swiss private bank, would find the relocation of its legal headquarters fiendishly complex and expensive.

Investors in Standard Chartered (HKSE: 2888.HK - news) , the London-based emerging markets lender, have called on its new management to look again at the issue.

An HSBC spokesman declined to comment.