GAAR not panacea, Aaronson tells Lords

by Calum Fuller

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22 Jan 2013

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THE INCOMING General Anti-Abuse Rule will not act as a cure-all in preventing all forms of tax avoidance, members of the House of Lords sub-committee on the 2013 Finance Bill heard.

The rule, which will be included in the Bill, will not be implemented until it receives royal assent in July, rather than April as originally expected.

Graham Aaronson QC, author of the original GAAR recommendations, and Malcolm Gammie QC, leader of the GAAR study group, told committee members the rule will be "one weapon among many available to HM Revenue & Customs to tackle avoidance", adding it "must be seen in that context".

They added that while the legislation could "in theory" be used to "explore stopping multinationals' tax avoidance", it is unlikely to do so in practice.

Other tax regimes and competition make it "inevitable companies will locate activities in countries which suit them best", they said.

On the implementation of an advisory panel to determine which tax arrangements fall within the rule's scope, Aaronson admitted he is "agnostic" on the idea of a Revenue figure's inclusion, but understood the desire of many that the panel remain independent.

He added that guidance notes, produced by HMRC and approved by the panel, will form detailed criteria by which the panel will determine whether a scheme is egregious. Those notes, however, will not be scheduled into the legislation in order to prevent the need to update them in successive Finance Bills. Instead, the advisory panel will continually update the guidance, with the notes enshrined in the legislation.

The sub-committee will re-convene tomorrow (23 January) with further discussions on tax avoidance due to take place. Tax Research UK founder Richard Murphy – who last week took part in Accountancy Age's debate on tax avoidance – and CIoT president Patrick Stevens will provide evidence.

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