News
Banking protocols are affecting company loans
05 May, 2011
The banking protocols that were put into place after the 2008 crisis for banks to encourage responsible lending, included rules to avoid the funding of tax avoidance schemes. Banks are now being overly cautious of tax avoidance arrangements when considering loans and businesses are suffering.
Nigel May, a member of MacIntyre Hudson's management board, recently warned that the difficulty of implementing the rules was differentiating between what is and what is not tax avoidance and the pressure on banks' legal departments to consider the "relatively alien landscape of tax law", has led to some banks questioning legitimate tax planning.
He said that the current environment in dealing with the banks was in any case really quite difficult, and that this had been exacerbated in instances where there was anything at all unusual about a firm's structure.
Nigel gave the example of two instances where firms had been required to go to significant lengths to prove that their plans to recapitalise were not tax avoidance schemes. He felt that it is well accepted that normal tax planning is not synonymous with tax avoidance, but that it was quite difficult in practice to get the banks to see which side of the line a proposal was falling.
Other leading professionals echoed his feelings, saying that banks had become more cautious about tax avoidance schemes and that they were overly conservative when it comes to lending to partnerships.
In response a spokeswoman for the British Bankers Association said that anyone who has been refused a loan had recourse to appeal to more senior members of the bank. She said that the primary concern for banks is the client's ability to pay back the loans, although other checks are required by law, i.e. counter terrorism and money laundering checks would be taken into account.
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