UK’s HM Revenue & Customs (HMRC) wants the power to name and shame banks that do not comply with a voluntary code of conduct.
HMRC made the proposal at the end of last month when it published plans to ‘strengthen’ the voluntary Code of practice on taxation for banks which was first introduced by the then chancellor, Alistair Darling, in 2009.
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Law firm Pinsent Masons said that the proposal to start naming and shaming banks is a significant ratcheting up of the pressure on the banks over their involvement in legal tax planning on their own account or for their clients.
Ray McCann, a non-lawyer Partner at Pinsent Masons said: "This is not the code that banks signed up to – it is a definite tightening of the screw.
"This gives HMRC the power to impose what will in effect be a sanction i.e. to name and shame banks in circumstances where the bank may not be in breach of any statutory requirement. Failing to allow an independent review process is a worrying precedent especially in the light of the commercial harm such action could involve. "
Ray McCann said that it will be clear to the banks what kind of adverse publicity they will face if HMRC announces that a particular bank does not comply with their code of conduct on tax or has not signed up to it.
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By GlobalDataThe changes to code will also require banks to go through a process of re-adopting the code.
To date, 262 banks have adopted the code. Consultation on HMRC’s proposals to strengthen the Code of Practice on Taxation for Banks closes on August 16.
In early June, HMRC finalised its 145-page final guidance notes on the Foreign Account Tax Compliance Act (FATCA) following consultation with stakeholders such as the Investment Management Association.
