The Banking Code - Response Published by the Chartered Institute of Taxation

September 24th 2009

In his speech on 21 September the Financial Secretary to the Treasury Mr Stephen Timms MP said that the Government’s response to what it regards as unacceptable tax avoidance will give a prominent place to codes of behaviour.

The Banking Code of Practice to which he referred is intended to be voluntary. If Banks do sign up to the final version than according to the Financial Secretary it is likely other bodies will be confronted with similar voluntary Codes.

HMRC had published A Consultative Document on a Code of Practice on Taxation for Banks on 29 June 2009 http://www.tax.org.uk/attach.pl/8285/9731/CodeOfPracticeOnTaxationForBanks300609.pdf

and responses were requested  by 25 September 2009.

As the Consultative Document places considerable emphasis on banks abiding by the intentions of parliament as well as the letter of the law it has aroused considerable comment and concern.

On 22 September the Chartered Institute of Taxation published its response to the Banking Code of Practice Consultation Document.

http://www.tax.org.uk/attach.pl/8285/10070/BankingCOP%20final220909.pdf

The Chartered Institute of Taxation says,

” We strongly oppose a code that tries to override statute as the governing force of taxation in the UK. We have long objected to “tax by law, untaxed by concession”; we similarly oppose a code that seems to attempt to “tax by code that which is untaxed by law”. …, we believe that taxation by intention of Parliament, in the sense that we understand is meant by HMRC in the COP, is impractical.”

And go on to say,

“Lord Hoffmann, in his 2004 Goode lecture, set out very clearly the view of the judiciary on any arguments over looking behind the letter of the taxing statute: “The only way that Parliament can express an intention to impose a tax is by a statute which means that such a tax is to be imposed.” We wholly support this stance and consider that HMRC have not made a case for departing from it.”

The Chartered Institute of Taxation makes the telling point:

“The challenge in operating a code that is dependent on terms such as “intention of Parliament” is to give taxpayers the certainty they need for their commercial operations. This extends to making sure that the UK is not disadvantaged. Banking is a very international business; if the UK comes to be seen as an uncertain jurisdiction, prone to change its tax rules and so lacking certainty for businesses, business will leave the UK.”