Chancellor George Osborne has announced that UK financial institutions have until next month to sign up to the new Code of Practice on Tax Avoidance, which requires banks to “comply with the spirit, as well as the letter of tax law”.
The Code was introduced in February under former Chancellor Alistair Darling’s watch.
Speaking on BBC One’s Andrew Marr Show on Sunday, however, Osborne said so far only four of the 15 major British banks have signed up to it — Lloyds Banking Group, Royal Bank of Scotland, Northern Rock, and Standard Chartered — and three of them (Lloyds, RBS, and Northern Rock) are still majority-owned by the government.
“We are going to be looking at the Code of Practice that the banks were supposed to sign up to make them good taxpayers,” he told Andrew Marr.
“I am going to be requiring by November that all the banks sign up to the thing that the last government said they were going to be signed up to and pay what is due.”
Signing up to the Code was originally intended to be voluntary and no formal legal penalties exist for institutions that fail to enroll. But Osborne’s comments suggest that banks that do not sign up can expect greater scrutiny from HM Revenue & Customs — and potentially even tougher regulation down the line.
Osborne said banks using elaborate international schemes to avoid paying hundreds of millions of pounds to the British government were now on notice.
Later today, he will outline plans in the public sector spending review to cut government spending by £83bn over the next four years. He says the banks must also play a part in cutting the deficit, particularly as the Bank of England bankrolled the to the tune of £200bn during he credit crunch.
“I completely understand people’s anger on this,” he said. “We have introduced a permanent bank levy and I will be publishing the legislation on that next week.”
- All banks must sign tax avoidance code – Osborne (Reuters)
- Code of practice on taxation for banks (Simmons & Simmons)
- Tax law (Findlaw.co.uk)
- Tax law news (The Solicitor)
- Tax law Q&A (Community)
- Find a tax lawyer (Contact Law)
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