BKM506100 - Governance protocol: introduction

The Protocol sets out the escalation process for managing concerns over an individual bank’s Code compliance. The latest Protocol can be found on the Code of Practice on Taxation for Banks collection page on GOV.UK.

In accordance with FA14/S288, any future changes to the Protocol will be subject to consultation before being introduced.

The Protocol covers “participating groups and entities”. These are defined in FA14/S286 as banks which have notified the Commissioners, in writing, that they have unconditionally committed to complying with the Code on or after 31 May 2013.

Where a participating group or entity is part of a larger worldwide group the Code and Protocol only applies to those entities within the charge to UK corporation tax (see BKM503000 for further details on the Code population).

In accordance with FA14/S285(11), small banks are only required to adopt Part 1 of the Code. A copy of the statement published by HMRC in accordance with FA14/S285(11) can be found here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/249644/Small_Banks .pdf. A small bank is a group or entity which has not been assigned a Customer Compliance Manager (CCM) within HMRC (or in the case of banks that are sub-groups or entities of non-banking groups, would not, on a stand-alone basis, be assigned a CCM). This means that while small banks are expected to adhere to all aspects of the Code, for Code purposes they are not required to have a fully documented tax strategy. The considerations and processes set out in the Protocol will apply equally to all banks.

As part of the Protocol, HMRC undertakes to engage with banks in a co-operative, supportive and professional manner and in return expects banks to comply with their commitments under the Code.

The Protocol explains that at any time HMRC may take one of the following views about a bank’s compliance with the Code:

  1. it considers the bank to be compliant with its Code commitments;
  2. it has initial concerns over the bank’s compliance with the Code;
  3. it has an interim view that the bank has breached the Code; or
  4. it has reached a final opinion that the bank has breached the Code.

Where HMRC considers the bank is fully complying with its Code commitments, the Protocol requires the CCM or equivalent to notify the bank of this view either as part of the annual risk review process or on another suitable occasion. The risk review process is set out in the tax compliance risk manual (TCRM3000+) .

The reference to CCM or equivalent reflects the fact that the Protocol applies to all banks that have adopted the Code and not just those with CCMs. The Protocol uses the term “Customer Relationship Manager (CRM)”, the name by which CCMs were known when the Protocol was issued.

For banks which are not low risk this will normally be done as part of the annual risk review.

For low-risk businesses this will normally be done as part of the triennial risk review.

For banks dealt with outside Large Business (LB) this will be done at the end of an enquiry which has included a review of whether the bank is fully complying with its Code commitments within the context of the issues discussed.

When HMRC identifies concerns about a Bank’s Code compliance outside of the annual or triennial risk review process, HMRC will not wait for the scheduled risk review meeting to inform the bank of its concerns.

HMRC will also use the annual or triennial risk review process to notify a bank that:

  • the bank’s compliance with the Code has been reviewed and there are no current concerns;
  • the bank’s compliance with the Code is under review;
  • there are initial concerns over the bank’s compliance with its Code commitments; and
  • there is an interim view that the bank has breached the Code

A bank will be included in the second category where HMRC has insufficient information to determine if the bank is compliant with its Code commitments.

A bank will only be included in the third category where Senior Civil Servant (SCS) grade staff in LB and BAI (Business, Assets and International) have given approval to discuss the concerns with the bank.

A bank will only be included in the fourth category when the case has been considered by the Tax Disputes Resolution Board and the Board has concluded that the bank has breached the Code.

When a bank is being investigated for potential fraudulent or criminal activity, then a Code review may not be carried out until that investigation is complete.

See BKM507000 for further details on how HMRC will check if a bank is fully complying with its Code commitments.