It’s nearly ten years since the government proposed a general anti-avoidance rule – but largely backed off. This was probably because the then Inland Revenue did not want the cost of providing the clearance mechanism that business and professional bodies argued they would need to cope with the uncertainty.

Since then, the number of detailed rules designed to counter specific avoidance schemes has increased greatly, fuelled in particular by the 2004 rules requiring disclosure of tax avoidance.

Whatever one may think of these, as a matter of plain English construction they are ‘targeted’ at the specific avoidance schemes they are designed to counter. Students of official-ese will therefore not be surprised to learn that the term ‘TAAR’ (targeted anti-avoidance rule) has crept in to the language to describe not these, but rules which, though specific to one area of the tax system, are pretty much general in terms of their scope and effect.

The idea may have been sparked off with the unallowable purpose rules, which have spread throughout the corporate tax system since 1996, and now apply in areas such as debt, derivatives, intellectual property, management expenses and now capital losses.

These rules restrict tax relief, where transactions have a main purpose of securing a tax advantage (a very wide term). But the TAAR label crept in via the 2005 pre-Budget report to describe the raft of proposals restricting the use of companies’ capital losses. Now in the 2006 PBR a capital losses TAAR is introduced for individuals, trusts and partnerships as well.

The HMRC guidance says the capital gains tax TAAR will only affect those who try to use capital losses that do not arise from ‘genuine losses on genuine disposals’.

The guidance says, for example, that selling some shares before a tax year end to realise a loss and to shelter a gain that is realised earlier is not caught – but on the words of the draft legislation, it is not totally clear why this escapes the TAAR.

The answer seems to be that the Sword of Damocles is kept in reserve to counter schemes whose exact nature hasn’t yet been disclosed or even considered. It’s about as targeted as a blunderbuss and about as likely to cause collateral damage on the unwary.

John Cullinane is president of the Chartered Institute of Taxation and partner at Deloitte LLP