CIOT is warning that government proposals to strengthen the current code of practice on taxation for banks risk creating a 'dangerous precedent' in extending HMRC's powers with regard to compliance issues.

The institute's comments are made in its response to an HMRC consultation on changes to the code, which was originally launched in 2009. These would require HMRC to publish an annual report, from 2015, on the operation of the code which could include the naming of any bank that HMRC considers has not complied with their code commitments as well as a full list of all banks that have, or have not, adopted the code.

CIOT argues that by giving HMRC the power to determine and publicly announce non-compliance with the code without any right of appeal the proposals lack proper safeguards and balance.

CIOT President Stephen Coleclough said: 'Our principal objection to these proposals is that they place HMRC in a quasi judicial capacity without statutory oversight or taxpayer protection. It is proposed that there should be no right of appeal against HMRC's view of compliance with the code. Instead the only remedy available to the taxpayer is judicial review after the fact. This requires the taxpayer to show not simply that HMRC have reached the wrong judgement but that they have done so in an unreasonable way - an excessively high hurdle.'

In its response, CIOT says that this is neither 'necessary or sensible', and argues that the newly introduced General Anti-Abuse Rule (GAAR) provides a more balanced approach via the 'double reasonableness' test and the use of an independent advisory panel.

Coleclough said: 'Granting HMRC a power to determine and publicly announce non-compliance with a code without any right of appeal for taxpayers sets a dangerous precedent. If enacted, these proposals would undermine the certainty and reliability of the operation of UK law. There is a risk companies in other industries will look at them and think: today the banks, tomorrow us? This could deter investment in the UK.'