Any bank told that HMRC considers it has not complied with the Code of Practice on Taxation for Banks will be expected to acknowledge HMRC’s view in any public pronouncements that the bank makes on its operation of the code, according to a new ‘governance protocol’ published on HMRC’s website last week.
The announcement came a month after Barclays insisted that its tax arrangements were within ‘the letter and spirit’ of the code. HM Treasury had announced retrospective legislation to close two ‘highly abusive’ tax avoidance schemes, noting that ‘these are not transactions that a bank that has adopted the code should be undertaking.’
The governance protocol sets out 11 reasons why HMRC might be concerned about a bank’s strategy or governance. They include evidence that ‘the strategy, and compliance with it, is not considered at an adequately senior level consistent with the scale of risks being managed’.
Where a bank’s approach ‘ignores [the code’s] overall intent of constraining destabilising tax avoidance transactions that are likely to trigger a need for Parliament to consider legislative change’, HMRC may regard the approach as evidence of ‘possible systematic or wilful failure’ to meet the bank's undertakings in relation to tax planning.
‘A bank that does not adopt the code, or adopts but does not implement the code properly, will not be considered as low risk. HMRC allocates resources to risk; if HMRC regards a bank that does not adopt or does not implement the code as higher risk, additional scrutiny is likely,’ the guidance note says at question 25.
HMRC said last week that 225 banks had signed up to the Code, but a spokesman was unable to tell Tax Journal yesterday how many banks had not done so. The Financial Services Authority published a list of banks on its website last August.
‘Singled out’
‘Banks continued to be singled out by the Chancellor with a further hike in the bank levy,’ Kevin Cummings, Tax Partner at Berwin Leighton Paisner, wrote in the 23 March issue of Tax Journal. ‘The rise is as much political as it is revenue-raising, and stops the banking sector from enjoying falling corporation tax rates,’ Cummings said in his immediate response to the Budget.
Any bank told that HMRC considers it has not complied with the Code of Practice on Taxation for Banks will be expected to acknowledge HMRC’s view in any public pronouncements that the bank makes on its operation of the code, according to a new ‘governance protocol’ published on HMRC’s website last week.
The announcement came a month after Barclays insisted that its tax arrangements were within ‘the letter and spirit’ of the code. HM Treasury had announced retrospective legislation to close two ‘highly abusive’ tax avoidance schemes, noting that ‘these are not transactions that a bank that has adopted the code should be undertaking.’
The governance protocol sets out 11 reasons why HMRC might be concerned about a bank’s strategy or governance. They include evidence that ‘the strategy, and compliance with it, is not considered at an adequately senior level consistent with the scale of risks being managed’.
Where a bank’s approach ‘ignores [the code’s] overall intent of constraining destabilising tax avoidance transactions that are likely to trigger a need for Parliament to consider legislative change’, HMRC may regard the approach as evidence of ‘possible systematic or wilful failure’ to meet the bank's undertakings in relation to tax planning.
‘A bank that does not adopt the code, or adopts but does not implement the code properly, will not be considered as low risk. HMRC allocates resources to risk; if HMRC regards a bank that does not adopt or does not implement the code as higher risk, additional scrutiny is likely,’ the guidance note says at question 25.
HMRC said last week that 225 banks had signed up to the Code, but a spokesman was unable to tell Tax Journal yesterday how many banks had not done so. The Financial Services Authority published a list of banks on its website last August.
‘Singled out’
‘Banks continued to be singled out by the Chancellor with a further hike in the bank levy,’ Kevin Cummings, Tax Partner at Berwin Leighton Paisner, wrote in the 23 March issue of Tax Journal. ‘The rise is as much political as it is revenue-raising, and stops the banking sector from enjoying falling corporation tax rates,’ Cummings said in his immediate response to the Budget.
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