HMRC hails success of tax avoidance clampdown on UK banks
HMRC said the amount of money in tax avoidance schemes has fallen from £3.2bn in 2013 to £1bn
All but two UK-registered banks have signed up to a Government scheme encouraging lenders to avoid using tax avoidance schemes.
Some 303 lenders, including banks and building societies, have now signed up to the Code of Practice on Taxation for Banks, according to HM Revenue & Customs’ first annual report into the measure.
The total is up from 262 in early 2013, when the Government put more pressure on banks to sign up after HMRC was publicly criticised by the Parliamentary Public Accounts Committee over tax settlement deals with US bank Goldman Sachs and British telecoms giant Vodafone.
The code, launched in its current form in 2013, is just one of numerous measures HMRC is taking to clamp down on corporate tax avoidance. The voluntary code is expected to be applied to other sectors of the economy in the near future.
As part of efforts to increase the number of institutions signing up to the code, HMRC took the step of publicly naming lenders that didn’t participate.
Canara Bank, an Indian state-owned bank with operations in the UK, as well as German-owned Portigon AG are now the only two banks that have not signed up to the voluntary code.
Between December 2013 and March 2015, the period covered by the report, a total of six banks had not signed up; but four have since agreed to follow the guidelines.
HMRC said the amount of money in tax avoidance schemes has fallen from £3.2bn in 2013 to £1bn.
In April 2013, 92 legacy bank tax avoidance schemes were being looked at by HMRC. By the end of March last year, this had fallen to 55.
The code, which was first introduced in 2009 before being tightened in 2013, encourages banks and organisations that provide banking services in the UK to be transparent and open in their own tax affairs, and not to promote or knowingly facilitate tax avoidance by others.
Some of the City’s best-known names, including Barclays, Lloyds Banking Group and Royal Bank of Scotland, were among early adopters of the code.
In the 15 months to March 2015, banks referred 30 deals that potentially strayed into grey areas to the Revenue to check whether they broke the spirit of the law. HMRC said that all but four were fine.
The banks did not go ahead with the schemes and no lenders were found to have broken the code of practice last year.
HMRC said there had been a notable improvement in lenders’ views on tax avoidance. The Revenue plans to issue new guidance on tax behaviour in the next few months.
HMRC is currently embarking on the biggest overhaul in its history. The department is closing 170 regional offices and replacing them with 13 larger hubs over the next decade in a bid to shift more customers to online tax services.
However, HMRC says cracking down on tax avoidance remains one of its key priorities.
The organisation is also considering a new “Special Measures” regime, similar to that used by the education watchdog Ofsted, which would single out and monitor companies that pursue aggressive tax planning.
Earlier this week, HMRC said it had had its “most successful year ever” by bringing in record-breaking revenues of £517bn in 2014. However, senior MPs accused HMRC of being “complacent” and said that HMRC should not waste time with “self-congratulatory back slapping”.