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UK Consults On Banks Tax Code

07 June 2013   (0 Comments)
Posted by: Author: Amanda Banks
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Author: Amanda Banks

HM Revenue and Customs has issued a consultation document on strengthening the Code of Practice for Taxation of Banks, focusing on the process around determining non-compliance, the processes and criteria around deciding to name a bank as non-compliant, and the nature of an annual report to be published by HMRC.

The Code, which was introduced in 2009, sets out that banks should have strong governance around tax, that they should follow "the spirit of the law" in addition to the letter, and that there should be a "mutually open and transparent" relationship with HMRC.

However, HMRC believes that the Code currently lacks public transparency, and that there are no codified consequences for non-compliance. Further, concerns have been raised that some banks may be interpreting the code differently, despite the consistent application of the Code by HMRC across the banking sector.

The strengthened Code will remain voluntary, but the Government intends in its Autumn Statement to publish a full list of those banks that have adopted it. Further, from 2015 there will be an annual list of banks that have adopted the code, and of those that have chosen not to.

The consultation document includes a number of questions. It asks whether it remains tenable for smaller banks to be required to adopt only Section 1 of the Code, which is concerned with transparency, and whether the three months or so before the Autumn Statement is a sufficient amount of time for banks to become fully appraised of, and satisfied with, the strengthened Code.

Further questions concern whether the proposals provide the necessary safeguards around the naming of non-compliant banks, whether the proposals offer sufficient transparency for the public around how the rules will operate, whether examples of transactions given by the HMRC provide sufficient guidance, and whether the draft legislation gives sufficient coverage.

The document also notes that requirements relating to tax planning under the Code will remain in place after the General Anti-Avoidance Rule (GAAR) is introduced. These requirements have a wider scope than the GAAR, and a designation of non-compliance will be made in relation to a transaction where the HMRC, having taken account of representations from the bank and advice from the GAAR Advisory Panel, has issued a notice of counteraction. The consultation asks whether naming such transactions as "potentially abusive" is an appropriate descriptor for transactions within the ambit of the GAAR.

HMRC says that the Code "has been a significant factor" in changing attitudes about tax avoidance. However, there was controversy in May when a High Court judge noted that HMRC had taken a threat from a bank to withdraw from the Code into consideration when deciding to write off a tax debt.









Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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