What the banks have signed up to

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The banks who have signed agreements with the Treasury and HM Revenue & Customs on tax avoidance have agreed to this Code:

Code of Practice on Taxation for Banks

OVERVIEW 
1. The Government expects that banking groups, their subsidiaries, and their branches operating in the UK, will comply with the spirit, as well as the letter, of tax law, discerning and following the intentions of Parliament. 

1.1 This means that banks should: 

o adopt adequate governance to control the types of transactions they enter into; 

o not undertake tax planning that aims to achieve a tax result that is contrary to the intentions of Parliament; 

o comply fully with all their tax obligations; and 

o maintain a transparent relationship with HM Revenue & Customs (HMRC). 

GOVERNANCE

2. The bank should have a documented strategy and governance process for taxation matters encompassed within a formal policy. Accountability for this policy should rest with the UK board of directors or, for foreign banks, a senior accountable person in the UK.

2.1 This policy should include a commitment to comply with tax obligations and to maintain an open, professional, and transparent relationship with HMRC. 

2.2 Appropriate processes should be maintained, by use of product approval committees or other means, to ensure the tax policy is taken into account in business decision making. The bank’s tax department should play a critical role and its opinion should not be ignored by business units. There may be a documented appeals process to senior management for occasions when the tax department and business unit disagree. 

TAX PLANNING 

3. The bank should not engage in tax planning other than that which supports genuine commercial activity.  

3.1 Transactions should not be 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 should reasonably believe 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 

3.2 There should be no promotion of arrangements to other parties unless the bank reasonably believes that the tax result of those arrangements for the other parties is not contrary to the intentions of Parliament. 

In many ways rather like my definition of tax compliance, which is that tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.

But let’s be quite clear: HSBC can’t sign this and maintain a private bank in Switzerland. It’s just not possible.

So how are they going to reconcile that?

And since offshore, by definition, conflicts with the location in which a transaction takes place they must now close down all their offshore operations.

I’m not holding my breath — but this will come back to haunt them.


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