HMRC Tightens Tax Code for Banks, Expert Warns
BANKS THAT BREAK a voluntary code on taxation with HM Revenue & Customs (HMRC) will have to publically acknowledge their disagreement, in a tightening of the rules, according to one tax expert.
One month after HMRC closed two "aggressive" avoidance schemes by Barclays, a signatory of the code which was introduced in 2009 to counter tax avoidance, the taxman has explained how it will decide whether a bank is breaching the code.
If HMRC believes that banks are in breach of the code, the banks will have to acknowledge their disagreement with HMRC in any public statements about the tax code of practice - for example in their annual results.
"Where HMRC has told a bank that it considers it to not have complied with its code undertakings HMRC would expect the bank to acknowledge this in any public pronouncements it makes on its operation of the code," HMRC said earlier this week.
Banks will also be obliged to tell HMRC about any "potentially contentious transactions" at the earliest opportunity.
However, one tax expert said that parts of HMRC's latest guidance on how the banking code is applied had been toughened.
Kevin Cummings, partner at law firm Berwin Leighton Paisner, said some tax functions in banks would be "paralysed" by the code under HMRC's latest guidance. "If you have even the smallest iota of doubt about tax or the code and don't talk to the Revenue you will fear that the bank's name will be dragged through the mud."
Previously under the code of conduct banks were encouraged to disclose their tax positions to HMRC but were not penalised if they did not do so, Cummings said. "This [HMRC] document is a sea change."
A spokesman for HMRC told Accountancy Age that it was reiterating how the code is applied, rather than making it stricter.
"HMRC has been applying this approach since the code was introduced. This document is being published to provide banks with assurance that these processes are being applied consistently."
- Mechanic Ordered to Pay Back £208k with Respect to a Tax Fraud
- Large Businesses Tax underpayments increases by 13% to £25bn
- OECD Releases Compliance Ratings on Tax Transparency
- LITRG urges to Act Fast on Missed Tax Credit Renewals
- Legal and Accounting Businesses Contribute £15.5bn in Taxes for UK Treasury
- Chinese Football Association Introduces Rule of 100% tax on Signings of Foreign Players
- Barcelona striker Lionel Messi losses his tax Fraud conviction appeal