Trust Bloomberg Tax's Premier International Tax offering for the news and guidance to navigate the complex tax treaty networks and business regulations.
By Ben Stupples
The U.K. government has stepped up plans to name and shame banks that break their sector’s tax code of conduct.
Her Majesty’s Revenue and Customs, the U.K. tax authority, has been using recruiters to line up an independent reviewer who will assess future cases of a lender breaking its code of tax conduct for banks. HMRC must seek the reviewer’s opinion before it can publicly name a misbehaving bank.
The U.K.’s tax agency used the recruitment agency “to identify people interested in being an independent reviewer,” an HMRC spokesman told Bloomberg Tax in a Nov. 8 statement.
“We spoke to a number of people so that the Commissioners will be in a position to identify someone with the necessary experience, but who is nevertheless independent from both HMRC and the banking sector, if it becomes necessary to commission a review into a potential breach.”
The disclosure comes after HMRC warned banks over aggressive tax planning last month.
Over the past year, a “small number” of lenders have concerned the U.K.’s tax agency over their tax affairs, HMRC said in its Oct. 18 annual report on The Code of Practice on Taxation for Banks. “A subset of these continue to push the boundaries of acceptable tax planning.”
A total of 314 banks are currently signed up to the tax code, including the U.K.’s four largest: HSBC Holdings Plc, Lloyds Banking Group Plc, Barclays Plc, and the Royal Bank of Scotland Group Plc.
With banks well-positioned to promote or facilitate abusive tax planning, Gordon Brown’s Labour government introduced the tax code in 2009 to change lenders’ behavior towards avoidance.
To comply with the code, lenders must ensure they have adequate measures in place to protect against facilitating abusive tax planning, and maintain a transparent relationship with HMRC.
HMRC can ultimately name and shame a bank in its next annual report if it fails to comply.
Yet before it can finally determine whether a bank has breached the code, HMRC must refer the case to an independent reviewer, according to November 2016 guidance. If the reviewer agrees with the tax authority, they must then decide if HMRC can name the bank in its next annual report on the code.
“Our expectation is that cases will come to the fore sooner rather than later,” Jason Collins, a London-based partner and head of tax at global law firm Pinsent Masons, said in an Oct. 20 news release on HMRC’s banking tax code annual report. “If HMRC suspects any bank of not playing by the rules, or not being fully transparent, it has made it clear that it intends to name and shame.”
According HMRC’s report, all the lenders signed up to the tax code ultimately complied it in the latest financial year. Where HMRC did have concerns over a bank’s tax planning during this period, the tax authority addressed them with the lender “without the need for escalation.”
In total, HMRC collected 4.8 billion pounds ($6.3 billion) in corporation tax in the year ended March 2017, plus 1.1 billion pounds from the U.K.'s special levy on banks, the report added. Over the previous 12 months, banks paid almost 50 percent less to in U.K. corporation tax.
HMRC’s will publish its next banking tax code annual report before the end of 2018.
To contact the reporter on this story: Ben Stupples in London at email@example.com
To contact the editor responsible for this story: Penny Sukhraj at firstname.lastname@example.org
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)