BKM504650 - The Code commitments – tax planning: technical challenge and legislative change

HMRC decisions on Code compliance relate exclusively to the provisions of the Code. For the purposes of determining whether a transaction is Code compliant, HMRC will assume that the bank’s technical analysis is correct.

Therefore, even in circumstances where a transaction is determined to be Code Green, it is possible that the government or HMRC may seek to take action outside of the Code process to address any undesirable Exchequer or policy consequences. In particular, a Code Green determination does not mean that:

• Ministers may not seek to change the law if they deem the transaction, and any precedent it sets, undesirable from a policy perspective; or
• HMRC cannot dispute the claimed tax result, open an enquiry or ultimately make an assessment on the basis that the right amount of tax to pay is higher than claimed.

If HMRC does identify technical concerns with the proposed transactions it will normally communicate these to the bank. However, it is unlikely HMRC will have had the time and evidence needed to make a detailed technical assessment of the transaction by the time it communicates the Code decision.