BKM507500 - HMRC operation of the Code: potential tax planning issues identified during risk assessment

Case teams in LB or Mid-Size may identify transactions in the course of risk assessment or risk working which have not been the subject of a Code approach but need to be considered under the tax planning part of the Code.

Where the case team is concerned that a transaction it identifies in this way could involve tax avoidance, then in addition to any investigation of the issue under HMRC’s usual compliance powers, the CCM or equivalent will raise the question of Code compliance with the bank. This will include finding out if the transaction was considered as part of the bank’s Code governance and, if it was, the outcome. If the bank didn’t consider the Code in relation to the transaction, this may give rise to a concern under the governance commitment.

When the case team has more understanding of the transaction, the CCM or equivalent will consider if they are still concerned that it may give a tax result that is contrary to the intentions of Parliament. If they are, the case team will undertake a comprehensive review of the bank’s compliance with the Code, including its governance.

When this is complete and the views of HMRC technical and policy specialists have been obtained, the Responsible Officers (see BKM506200) will reach a decision on whether in their view the tax planning gave a result that was contrary to the intentions of Parliament and has not become established practice. If they conclude it did, they will investigate the governance process employed by the bank and the reasonableness of the beliefs it formed about the transaction’s compliance with the Code, and then consider whether the transaction should be escalated for a director level meeting. See BKM506200 for the factors to be taken into account in making this decision.

If the Responsible Officers reach a decision that the tax planning does not give a result that was contrary to the intentions of Parliament but finds there are unaddressed concerns in respect of the governance and/or relationship commitments, it is likely that Responsible Officers will conclude this case should be escalated for a director level meeting with the bank. At each stage, there will be discussion between the bank and HMRC, and the bank will have reasonable opportunities to rectify their position in line with the Governance Protocol.