BKM506400 | Governance protocol: rationale for not normally escalating single instances of tax planning

HMRC will not normally escalate a single tax planning transaction where it considers the tax outcome is contrary to the intentions of Parliament.

In consultations with stakeholders prior to the introduction and the strengthening of the Code, it was acknowledged that HMRC was not uniquely positioned to determine the intentions of Parliament. In adopting the Code, a bank commits not to enter into or promote tax planning with an outcome inconsistent with the economic position, unless it reasonably believes that outcome to be consistent with the intentions of Parliament.

Where HMRC reviews an arrangement either as a Code approach or post-transaction and considers the outcome contrary to the intentions of Parliament, it will advise the bank of its view. However, as long as the bank considered the transaction under adequate governance arrangements and reasonably concluded that it was not contrary to the intentions of Parliament, this will not indicate a potential breach of the Code.

Repeatedly proceeding with such transactions, however, indicates that the bank is not considering the intentions of Parliament reasonably, or not in fact operating its purported governance. This is likely to require escalation, unless the bank can demonstrate that it has brought its governance into order.