HMRC wants the power to name and shame banks if it feels that they are not complying with the voluntary “Code of Practice on Taxation for Banks”, says Pinsent Masons the International law firm.

Pinsent Masons says that the proposal to start naming and shaming banks is a significant ratcheting up of the pressure on the banks over their involvement in legal tax planning on their own account or for their clients.

The Code of Practice on Taxation for Banks was launched in 2009 by Alistair Darling and was portrayed at the time as a “gentlemen’s agreement” by which the banks undertook to reduce their use of tax planning schemes.

Assisting a bank’s customers to undertake legal tax planning and failing to follow the “spirit of the law” as it relates to tax could be seen by HMRC as a failure to comply with the code.

Under HMRC’s proposals banks will have no statutory right of appeal to prevent HMRC naming them to the public.

Comments Ray McCann, Partner* at Pinsent Masons: “HMRC wants to revise the Code of Practice so that they can in effect name and shame banks if they feel that bank has stepped out of line with HMRC’s view of what is legitimate tax planning.”

“This is not the Code that banks signed up to – it is definite tightening of the screw.”

“This gives HMRC the power to impose what will in effect be a sanction i.e. to name and shame banks in circumstances where the bank may not be in breach of any statutory requirement. Failing to allow an independent review process is a worrying precedent especially in the light of the commercial harm such action could involve. ”

Ray McCann says that it will be clear to the banks what kind of adverse publicity they will face if HMRC announces that a particular bank does not comply with their code of conduct on tax or has not signed up to it.

The changes to Code will also require banks to go through a process of re-adopting the Code.

Tax return-companySays Ray McCann: “No bank wants an activist group trying to camp out in their lobby or to be vilified in the press over what might include perfectly legal work.”

“The debate over tax avoidance has become so heated and contentious that it is unlikely that a bank that is named and shamed by HMRC will be then be given a fair hearing from the public.”

“It is disingenuous for HMRC to assert that banks will have "normal recourse to judicial review"; there is nothing "normal" about judicial review, as HMRC itself has found out in the recent past. It's very costly and can take years to conclude – years after the damage has been done to their reputation.”

Consultation on HMRC’s proposals to strengthen the Code of Practice on Taxation for Banks closes on August 16.


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