BKM504450 - The Code commitments – tax planning: established practice

The transaction may still be Code Green even if it the tax result is contrary to the intentions of Parliament. This will be the case where the tax planning has become established practice.

The established practice test will be met when HMRC has indicated its acceptance of that practice, for instance in guidance or in correspondence with a taxpayer or an adviser. In such circumstances, until such time as HMRC has withdrawn that guidance or there is a statement by the government that such practice is no longer acceptable such a transaction defaults to Code Green.

However, an arrangement is not established practice just because the Government has not yet changed the law. The bank has to be able to reasonably believe that HMRC has accepted this practice. This would typically be evidenced by some form of action by HMRC.

If the bank makes a Code approach (see BKM504550 for more information) and HMRC believes that while the tax result is contrary to the intentions of Parliament the tax planning has become established practice, it will consider the transaction to be Code Green. HMRC will notify the bank that it considers the tax result to be contrary to the intentions of Parliament but the transaction is considered to be Code compliant because it has become established practice.

Guidance about Code approaches where HMRC believes that a tax result is contrary to the intentions of Parliament and that the planning has not become established practice is set out in BKM504500.