The new Tax Code of Conduct for Banks

June 29th, 2009

This is the Tax Code of Conduct for Banks on which the government is now consulting:


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:

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

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

•   comply fully with all their tax obligations; and

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


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.


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

3.1  Where the bank is principal, transactions should not be structured in a way that will have tax results 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 which is not contrary to the intentions of Parliament.

3.2  Where the bank is not principal, but is providing or facilitating transactions undertaken by other parties, there should be no promotion of arrangements unless the bank reasonably believes that the tax result of those arrangements is not contrary to the intentions of Parliament.

3.3  Remuneration packages for bank employees, including senior executives, should be structured so that the proper amounts of tax and national insurance contributions are paid on the rewards of employment.


4.  Relationships with HMRC should be transparent and constructive, based on mutual rust wherever possible.

4.1  The features of this relationship should include:
•   disclosing fully the significant uncertainties in relation to tax matters;
•   focusing on significant issues;
•   seeking to resolve issues before returns are filed whenever practicable;
•   engaging in a co-operative, supportive and professional manner in all interactions;
•   working collaboratively to achieve early resolution and hence certainty.

4.2  Where the bank believes its proposed transactions may be contrary to the intentions of Parliament, the bank will explain its plans in advance with HMRC.

4.3 If, exceptionally, the bank discovers a transaction or arrangement has taken place where the tax result may be contrary to the intentions of Parliament, it will disclose the circumstances to HMRC at the earliest available opportunity, without waiting for the relevant tax filing date.

This can be contrasted with the Code I wrote for the Tax Justice Network and Association for Accountancy and Business Affairs which says:

A Code of Conduct for Taxation


This Code of Conduct relates to the payment of taxes due to a State or other appropriate authority designated by it.


This Code applies to:

  1. Governments and their agencies in their role as tax legislators, assessors and collectors;
  2. Taxpayers, whether individuals, corporate bodies or otherwise;
  3. Tax agents, whether they are undertaking tax planning or assisting with tax compliance.


It is intended that this Code be voluntarily adopted by States and should be used to guide the conduct of taxpayers and their agents who choose to comply with it whether or not they reside in a State which has adopted the Code.

The Code

The Code is divided under six sections, each of which includes three statements of principle.

1. Government

a. The intention of legislation is clear and a General Anti-Avoidance Principle (‘Gantip’) is in use;

b. No incentives are offered to encourage the artificial relocation of international or interstate transactions;

c. Full support is given to other countries and taxation authorities to assist the collection of tax due to them.

2. Accounting

a. Transparent recording of the structure of all taxable entities is available on public record;

b. The accounts of all material entities are available on public record;

c. Taxable transactions are recorded where their economic benefit can be best determined to arise.

3. Planning

a. Tax planning seeks to comply with the spirit as well as the letter of the law;

b. Tax planning seeks to reflect the economic substance of the transactions undertaken;

c. No steps are put into a transaction solely or mainly to secure a tax advantage.

4. Reporting

a. Tax planning will be consistently disclosed to all tax authorities affected by it;

b. Data on a transaction will be consistently reported to all tax authorities affected by it;

c. Taxation reporting will reflect the whole economic substance and not just the form of transactions.

5. Management

a. Taxpayers shall not suffer discrimination for reason of their race, ethnicity, nationality, national origin, gender, sexual orientation, disability, legal structure or taxation residence; and nor shall discrimination occur for reason of income, age, marital or family status unless social policy shall suggest it appropriate.

b. All parties shall act in good faith at all times with regard to the management of taxation liabilities;

c. Taxpayers will settle all obligations due by them at the time they are due for payment.

6. Accountability

a. Governments shall publish budgets setting out their expenditure plans in advance of them being incurred, and they shall require parliamentary approval;

b. Governments shall account on a regular and timely basis for the taxation revenues it has raised:

c. Governments shall account for the expenditure of funds under its command on a regular and timely basis.


States seeking to comply with the Code will voluntarily submit themselves to annual appraisal of their Conduct. These appraisals will in turn be reviewed by a committee of independent experts appointed by participating States. Differences of opinion will be resolved by binding arbitration.

Any taxpayer or agent wishing to comply with the Code may do so. A State should presume that a person professing compliance with the Code has done so when dealing with any tax return they submit. In consequence the administrative burdens imposed upon that person should be reduced. In the event of evidence of non-compliance being found any consequential penalty imposed should be doubled.

The next blog will highlight some of the issues that arise from the government’s plans.

Written by Richard Murphy

Follow @FinTrCo