BKM507250 | HMRC operation of the code: Code Green decision

HMRC will tell the bank if it concludes the transaction is Code Green.

As explained in BKM504650, HMRC assumes that the bank’s technical analysis is correct when deciding whether a transaction is Code compliant.

The bank should not therefore assume that a Code Green decision means HMRC agrees with the bank’s tax analysis or will not seek to challenge the arrangements. If the bank wishes to discuss the legal/tax analysis with HMRC it should speak to the CCM or equivalent.

A Code Green decision does not mean HMRC regards the arrangements as acceptable transactions or that Ministers will not seek to change the law.

As explained in BKM504700 where one or more purpose tests are relevant to a transaction HMRC accepts the bank’s purpose as fact and gives its view on whether the transaction is Code compliant based on the stated purpose. If, HMRC subsequently find the bank had a “bad” main purpose the transaction would be Code Red unless the bank had a reasonable belief that tax avoidance was not a main purpose of the transaction, or that the anti-avoidance legislation in question was not intended by Parliament to apply to it. Code Green decisions will include a note to this effect.

HMRC will not be able to comment on the GAAR position at the time of the Code approach, and decisions will include a note to this effect.