The measure

The Government has today published a list of 264 banks and building societies which have unconditionally adopted HMRC’s Code of Practice on taxation for banks. HMRC will be required to publish an annual report from 2015, which will name those banks that have, as well as those that have not, adopted the Code. The report may also name any bank that, in HMRC’s opinion, is not complying with the Code.

Who will be affected?

Banking groups, building societies and investment firms


HMRC’s first report will cover the period from 5 December 2013 to 31 March 2015; subsequent reports will be annual.

Our view

The Code was initiated in 2009, although few banks adopted the Code until late 2010, following intervention by the Chancellor.

At Budget 2013, the Chancellor announced an intention to strengthen the Code. Although HMRC has not changed the wording of the Code, it has sought to strengthen the Code in several ways.

There was a perception that some banks were applying the code differently, for example with conditions applied. During the consultation process, HMRC confirmed that the Code was applied consistently. However, to deal with this perception, HMRC requested all banks and building societies operating in the UK to unconditionally adopt the Code in writing.

To improve transparency, HMRC has published a list of those banks and building societies which have unconditionally adopted the Code. The list can be found at:

As some banks have not yet completed their internal governance processes, we expect this list to be expanded. HMRC have committed to republish the list at Budget 2014.

From 2015, HMRC will publish an annual report which will list all adopters and also include a list of banks and building societies which have not adopted.

The most controversial aspect is that HMRC will also have the power to publicly name a bank which, in HMRC’s view, has not complied with the Code. Banks have been extremely exercised about this ‘naming and shaming’ power.

HMRC has, to an extent, listened to the banks’ concerns. HMRC has published its Governance Protocol setting out HMRC’s communication and escalation procedures in cases where HMRC have concerns over a bank’s compliance with the Code.

HMRC will be required to commission a report from an independent reviewer (it is not clear who that might be but the suggestion is that this could be a retired High Court judge, who is independent of both HMRC and the bank). The independent reviewer will be asked to prepare a report setting out the reviewer’s opinion on (i) whether the bank has breached the Code and (ii) whether the bank should be publicly named. The independent reviewer will have to take into account any representations made by the bank and provide a copy of the report to the bank. Where a bank has entered in to a transaction which has received a counteraction notice under the General Anti Abuse Rule, the independent reviewer is only required to consider whether the bank should be publicly named.

HMRC retain the ultimate decision on whether to publicly name a bank as non–compliant, but only in two limited circumstances can HMRC effectively over–rule the independent reviewer’s opinion; that is where they decide the independent reviewer’s opinion was unreasonable or where there are compelling reasons for reaching a different determination.

Finally, HMRC must consult with relevant stakeholders before making any modifications or revocation of the Governance Protocol.

HMRC had accepted that banks were already complying with the Code, so these changes are more about providing some transparency (in particular the list of non–adopters) and locking in good behaviour by the banking sector for the long term.

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