AS THE FINANCE BILL MAKES its journey through the parliamentary process, HMRC has this week released guidance on one of its most important and much-anticipated payloads.
This year’s bill contains the General Anti-Abuse Rule (GAAR), designed to prevent contrived tax avoidance schemes and will come into force once it receives Royal Assent in the summer.
A huge amount has been expected of the rule by some – particularly in the mainstream media, wider public, and indeed some MPs – treating it as some kind of panacea to the issue of tax avoidance.
The latest guidance confirms what Graham Aaronson QC – original author of the rule – and other tax experts have repeatedly told government; the rule’s scope will not extend beyond these shores and will only affect the most contrived of arrangements – ones that have no other purpose but to leave the Exchequer out of pocket.
As such, the practices of multinationals such as Starbucks, Google and Amazon that so outraged the public, media and government alike will be largely unaffected by the rule.
It’s a careful exercise in reining in unreasonable expectations and introducing greater certainty over what the rule will in fact affect.
Whether the guidance is timely enough remains to be seen, with considerable uncertainty over the kind of transactions and arrangements that will attract the GAAR having built up substantially over the past year-to-18-months, a single set of guidance is unlikely to dissipate that feeling in one fell swoop. Indeed, many eminent practitioners have consistently called for a clearly-defined line in the sand on what contrived schemes are and what a “fair and just tax” is during that time.
This move is unlikely to dampen those vociferous complaints entirely, but it does start to address those concerns.
In truth, though, it is likely to take a period of years before the profession and its clients know exactly where they stand with GAAR, and no amount of detailed guidance will entirely placate those searching for something more cast-iron. After all, it’s just that: guidance. As with all new laws, it needs to be tested.
What can be certain in such circumstances is that our friends, the lawyers, are likely to be quids in.
Calum Fuller is the tax correspondent for Accountancy Age and Financial Director.
Companies must report on their complex financial structures including offshore accounts and notify HMRC
An examination by the Public Accounts Committee (PAC) has revealed serious concerns relating to HMRC’s plans
The mornings after the night that was the British Accountancy Awards; and Andrew Tyrie's latest thoughts on Making Tax Digital timing
Andrew Tyrie suggests there will not be enough time to implement Making Tax Digital (MTD) by April 2018