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Code of practice on taxation for banks annual report

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HMRC says it still finds a small number of banks ‘push the boundaries of acceptable tax planning’, in its third annual report on the operation of the code of practice on taxation for banks, covering the period from 1 April 2016 to 31 March 2017.

Most banks saw an increase in their tax liabilities following the introduction of the bank surcharge on 1 January 2016. Banks paid £1.1bn in bank surcharge in 2016/17. The further restriction on the use of carried forward bank losses, which took effect from 1 April 2016, also increased liabilities for many banks, which paid £4.8bn in corporation tax for 2016/17, compared with £3.2bn for the previous year.

Findings in this report include:

  • 314 banks had adopted the code as at 31 March 2017, which included 309 from the year ended 31 March 2016 and five adopting in the year ended 31 March 2017;
  • eight groups or entities listed as adopters at 31 March 2016 are no longer covered by the code at 31 March 2017, either because they were no longer a bank and withdrew their code adoption, or because they ceased trading;
  • none of the banks which had adopted the code by 31 March 2017 has been found to be in breach during the period covered by this report; and
  • banks did not disclose any schemes under the DOTAS regime in the period of the report.

HMRC still has concerns over the behaviour of a small number of banks in relation to governance, tax planning or the bank’s relationship with HMRC, some of which ‘continue to push the boundaries of acceptable tax planning’.

Most concerns over compliance were resolved in discussions with HMRC’s customer relationship managers. The report says that interventions completed in the reporting year prevented tax losses of around £85m.

During 2016/17, banks made 19 pre-transaction code approaches to HMRC (compared with 16 in the previous reporting period). Two of these approaches would have led to a tax result contrary to the intentions of Parliament and the transactions did not go ahead. There were eight approaches in respect of products offered to customers, twice the number in the previous year, all of which were found to be code-compliant.

HMRC’s average turnaround time for dealing with pre-transaction code approaches was 20 days, compared to ten days in the previous reporting period.

See http://bit.ly/2yMPKDT.

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