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Tax naming and shaming could be extended to banks under HMRC plans

BANKS face the prospect of being named and shamed if they are found to be providing assistance for tax avoidance schemes, under HM Revenue & Customs plans.

The move would come as an escalation of the pressure on banks over their involvement in legal tax planning on their own account or for their clients.

Last year, Barclays closed its controversial tax planning unit in a bid to repair its battered reputation following a succession of scandals including rigging the Libor rate at which banks lend to each other.

It was later reported that the bank’s tax planning unit generated £1bn annually between 2007 and 2010.

A Code of Practice on Taxation for Banks was launched in 2009 by then-chancellor Alistair Darling and was treated at the time as a ‘gentlemen’s agreement’ in which the banks undertook to reduce their use of tax planning schemes.

Assisting a bank’s customers to participate in legal tax planning and failing to follow the ‘spirit of the law’ 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.

Pinsent Masons partner Ray McCann said: “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. “

A spokesman for HMRC said:”The use of tax avoidance schemes by banks is at an historically low level but it is vital that we build on that progress.

“The consultation aims to strengthen the code by setting out the legal basis for naming those banks that choose to ignore the code whilst delivering greater transparency for those banks that have adopted it and whose behaviour is in line with its values.

“The code remains voluntary; HMRC are asking banks to reaffirm commitment to the code obligations in full knowledge of the proposed changes.”

 

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