UK and International Tax news

GAAR Condoc Issued

Monday 18th June 2012

In December 2010, Graham Aaronson QC was asked by the Government to report on whether a general anti-avoidance rule would be beneficial for the UK tax system. Graham Aaronson’s report was published on 21 November 2011. He concluded that introducing a broad spectrum general anti-avoidance ruleĀ  would not be beneficial to the UK tax system, and instead recommended the introduction of a rule which is targeted at abusive arrangements.

The Government announced in the 2012 Budget that it accepted this recommendation and would consult with a view to bringing forward legislation that was both effective in tackling artificial and abusive avoidance schemes and also practical both for taxpayers and HMRC.

Following publication of Graham Aaronson’s report [see our UK Tax News item of 22 November 2011], HMRC has had informal discussions regarding the implications of the conclusions set out in the report with business, tax practitioners and other representative bodies.

HMRC has now issued a consultative document on the proposals to introduce a general anti-abuse rule (GAAR) targeted at artificial and abusive tax avoidance. This consultation seeks comments on the details of the proposal to introduce a GAAR, including draft legislation.

According to HMRC, the GAAR aims to target artificial and abusive tax avoidance schemes which, because they are often complex and/or novel, could not have been contemplated directly when formulating the tax legislation. The GAAR will apply to counteract, on a just and reasonable basis, the tax advantage that would otherwise be obtained.

The proposed GAAR is intended to have narrower application than most general anti-avoidance rules found in other jurisdictions, which usually have potential application to a broad spectrum of tax avoidance.

Comments from businesses, individuals, tax advisers, professional bodies and other interested parties have been requested by 14 September 2012 and these will be taken into account in developing the legislation with a summary of responses published in the autumn after the consultation closes. There will be a further consultation on proposed draft legislation in the autumn with a view to introducing legislation in Finance Bill 2013

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