BKM507600 - HMRC operation of the Code: tax planning

Examples of what Code compliant tax planning looks like
  1. The bank does not engage in tax planning other than that which supports genuine commercial activity.
  2. Transactions are not structured in a way that will have tax results for the bank that are inconsistent with the underlying economic consequences unless there exists specific legislation designed to give that result. In that case, the bank reasonably believes that the transaction is structured in a way that gives a tax result for the bank which is not contrary to the intentions of Parliament.
  3. The bank is only involved in promotion of arrangements to other parties where the bank reasonably believes that the tax result of those arrangements for the other parties is not contrary to the intentions of Parliament.
  4. Remuneration packages for bank employees, including senior executives, are structured so that the bank reasonably believes that the proper amounts of tax and national insurance contributions are paid on the rewards of employment.

HMRC would have concerns where a bank fell into any one of the examples below.

Examples of where a bank’s tax planning may give cause for concern
  1. The bank undertakes tax planning which does not support genuine commercial activity.
  2. The bank has failed to adhere to the tax planning strategy envisaged by the Code in its formal operations and policy.
  3. The bank has failed to adopt the tax planning strategy approach envisaged by the Code in practice; including failure to provide adequate guidance to the bank’s operational staff on how the strategy operates.
  4. The bank has failed to review, prior to implementation, all potentially contentious transactions for compliance with the tax planning strategy, involving an appropriate level of tax expertise and challenge, and documenting the review appropriately.
  5. The bank has failed to prevent implementation of or the promotion of transactions where the tax management function was not satisfied that:
    i. they supported genuine commercial activity,
    ii. the tax results they produced were not contrary to the intentions of Parliament, taking into account both a purposive construction of legislation and whether Parliament could realistically have intended the result, given a track record of acting to close loopholes; or if not,
    iii. the tax planning involved has become established practice.
  6. The bank failed to take reasonable views in coming to decisions under points i. to iii. above.
  7. The bank has failed to ensure remuneration packages for its employees are structured so that it reasonably believes that the proper amounts of tax and NIC are paid.