GAAR’s arrival met with lukewarm reception

by Calum Fuller

More from this author

13 Jun 2012

  • Comments
HM Revenue and Customs

THE HIGHLY ANTICIPATED general anti-abuse rule consultation began yesterday, with tax advisors broadly welcoming the proposed legislation.

In particular, the use of the word ‘abuse' instead of ‘avoidance' has soothed many anxious nerves, removing the potential for a blunderbuss effect discouraging legitimate business transactions.

In doing this, the government appears to have borne the attractiveness of the UK to investors and entrepreneurs very much in mind, much to the approval of many tax experts.

The proposal was largely true to Graham Aaronson's original recommendations, although concerns have been expressed that it may have deviated slightly and become marginally broader in its targeting of artificial schemes in the re-wording.

Words, though, appear to be the crux of most issues generated by the consultation. Specifically, the continued use of the word ‘reasonable' has engendered doubts among some experts of the due to the subjective nature of the word, especially given its pivotal role in the legislation, conceivably leaving it open to much interpretation.

It is that uncertainty which seems to be the biggest issue. The government was at pains to stress it wanted a clear line drawn, but while ambiguous terms remain in the proposals, the potential for a chilling effect on reasonable tax planning and other such transactions remains. For many tax advisors, hours of valuable time could well be wasted fretting over whether a transaction is within the rules or not.

There is disappointment, too, that Exchequer secretary David Gauke expects GAAR will effectively form an extra layer of legislation over existing rules, rather than superseding the ones with which it crosses over. That, in turn, could create further complexity, particularly if the new law interacts badly with existing ones.

Reference cases will, of course, emerge over time and could eventually provide clarity in this area, but until those cases arrive and build a clearer picture of the law in action, ambiguity will remain.

In the detail, there are suggestions further adjustments may be necessary. Clauses 4.1 and 4.2 deal with counteracting tax advantages, which for some – BDO's Stephen Herring in particular – surprisingly omits the threat of a minor fine, whether fixed or proportional.

For Herring, this plays into the way in which aggressive tax schemes are marketed, often advising prospective clients that they cannot be worse off for engaging in such practices. A fine, he says, would impinge on that.

Additionally, the subsequent clauses 4.3 and 4.4 apportion liability to people "whether or not they are party to the arrangements" which is a further cause for concern for many, with clarification desired.

The concern for some is where the momentum is taking the consultation, with some fearful it could become broader still.

A clearance system is one device which has been mooted, whereby the taxpayer would agree in advance with HM Revenue & Customs whether their scheme is acceptable or not, eliminating the potential for costly proceedings and hours spent agonising over the legitimacy of the scheme in question.

Broadly, though, support for the measure is there, albeit tentative. That, however, is what consultation periods are for and there is plenty of time for fine-tuning.

Visitor comments

blog comments powered by Disqus
display:none

Add your comment

We won't publish your address


By submitting a comment you agree to abide by our Terms & Conditions

Your comment will be moderated before publication

Submit
  • Send

conservatoire-for-dance-and-drama

Finance-Director-part-time

Conservatoire for Dance and Drama, London, Permanent, Part Time, £60,000 pro rata

 

 

Newsletters

Get the latest financial news sent directly to your inbox

  • Best Practice
  • Business
  • Daily Newsletter
  • Essentials

Careers

Search for jobs
Click to search our database of all the latest accountancy roles

Create a profile
Click to set up your profile and let the best recruiters find you

Jobs by email
Sign up to receive regular updates with the latest roles suitable for you

Briefings

budget-management

Why budgeting fails: One management system is not enough

If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.

cchcover

iXBRL: Taking stock. Looking forward

In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.