On Monday HMRC published a document which sets out the governance process around communication and escalation procedures in any case where HMRC has concerns about a particular bank’s compliance with its commitments under Code of Practice on Taxation for Banks.

In line with its statement of 9 December 2009, HMRC has published annual details of progress in implementing the Code, split into the following categories:

• the top 15 banks
• the rest of the banks in the Large Business Service
• banks in Local Compliance

HMRC has also published further guidance on the terms ‘promote’ and ‘facilitate’ and how these should be read in regard to the Code of Practice on Taxation for Banks.

In summary the Code covers:

1. HMRC may at any time take one of three views about a bank’s compliance with
   the code of practice:
   1. it has not expressed concerns over a bank’s compliance with the code
   2. it has expressed concerns over compliance which are being discussed
   3. it’s concerns over compliance have not been adequately addressed and it
      considers that the bank has not complied with the code
2. If HMRC has concerns about compliance with the code then the CRM or
   equivalent will raise them with the bank at the earliest opportunity, once this
   action has been approved at deputy director level
3. If discussion between the CRM and the bank does not resolve the concerns,
   HMRC (normally at or above deputy director level) will escalate them to the
   bank’s Board for further discussion at this level
4. HMRC will only take the view that the bank has not complied with the code if
   its concerns still remain unresolved. If this is the case, it will
   1. tell the bank that it considers that the bank is not complying with its
      undertakings under the code; and
   2. explain what it considers the bank should do in order to comply
5. Where HMRC has told a bank that it considers it to not have complied with its
   code undertakings HMRC would expect the bank to acknowledge this in any
   public pronouncements it makes on its operation of the code
6. Some smaller banks have been asked to adopt section 1 of the code only. This
   allows them a more flexible approach to documenting and governing their
   strategy towards tax. However the principles underpinning that strategy should
   be the same as for larger banks that adopt the code in its entirety