Taxman releases GAAR consultation

by Calum Fuller

More from this author

12 Jun 2012

  • Comments
hmrc-entrance

A CONSULTATION DOCUMENT on the general anti-abuse rule has been released by HM Revenue & Customs, as it looks to clamp down on the practice of tax avoidance.

In his foreword to the document, Exchequer secretary David Gauke said the government "accepts" Graham Aaronson's conclusions on the rule and added a "'broad spectrum' would not be beneficial for the UK tax system".

The rule would apply to income tax, corporation tax, capital gains tax, petroleum revenue tax and national insurance contributions, while VAT will be excluded due to potential difficulty over the way it interacts with abuse law. Inheritance tax and stamp duty land tax would also be included.

It will operate by using a "main purpose or one of the main purposes" test, which will be used to determine whether a scheme is artificial.

The test will recognise that incidental steps taken to minimise tax liability in arrangements will not usually constitute a main purpose. Whether a purpose is main or not is a question of fact under the test.

The government, the document said, "must ensure sufficient certainty... vital to provide confidence to do business in the UK", and the rule will apply where "tax arrangements" and "abusiveness" tests are met.

The proposed rule is intended to have a narrower scope than other similar legislation in other countries, and is designed to leave what the report describes as the "centre ground of tax planning".

Tax arrangements are considered abusive if:
- An arrangement cannot be regarded as a reasonable course of action, with regard to all relevant tax provisions, the substantive results of the arrangements, any other schemes of which the arrangement forms a part
- Any principles upon which they are based, whether expressed or implied, their policy objectives and any shortcomings in them are intended to exploit
- The arrangement results in a profit for tax purposes which is significantly less than the amount for economic purposes
- The arrangements result in deductions or losses of an amount for tax purposes that is significantly greater than the amount for economic purposes
- The arrangements result in a claim for the repayment or crediting of tax (including foreign tax) that has not been, and is unlikely to be, paid
- The arrangements involve a transaction or agreement the consideration for which is an amount or value significantly different from market value or which otherwise contains non-commercial terms.

Grant Thornton's head of tax, Francesca Lagerberg, claimed it is crucial the framework effectively identifies abusive schemes.

She said: "The key will be what is found to be 'abusive' and whether it will be possible to easily differentiate the commercially complex from the purely tax motivated scheme. The indications of what will or won't be caught are likely to be picked over in the courts for many years to come."

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

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.