BKM507300 | HMRC operation of the code: The Code and DOTAS

Disclosure under the Code does not remove the statutory obligations under the Disclosure of Tax Avoidance Schemes (DOTAS) and Promoters of Tax Avoidance Schemes (POTAS) regimes.

However, banks do not need to notify arrangements under the Financial Products hallmark of the DOTAS regime if HMRC has confirmed, or could reasonably be expected to confirm, that the arrangements are acceptable under the Code. If a transaction is exempted from the Financial Products hallmark, it also does not need to be notified under the Standardised Tax Products hallmark.

These exemptions do not apply to arrangements that HMRC has advised are Code Red unless HMRC subsequently accept that the bank did have a reasonable belief that the transaction is not contrary to the intentions of Parliament or has become ‘established practice’ (as defined in BKM504450)Where the exemption does not apply banks will need to consider whether the hallmark conditions are met to determine whether they need to notify the arrangement under DOTAS.

A bank cannot assume a scheme that has been disclosed (whether under DOTAS or not) but not legislated against is acceptable. There may be a number of reasons why the law has not been changed.