The profession successfully resisted government plans for an anti-avoidance rule for corporation tax when it was proposed in 1998, describing the plans as too wide-ranging and unworkable in practice. The move was shelved by the govenrment in last year’s Budget.
But writing on Accountancy Age.com this week, Frank Haskew, technical manager at the English ICA’s tax faculty, says the new tonnage tax amounts to the ‘stealthy introduction of mini-GAARs’.
He writes: ‘Shipping companies can elect to be taxed by reference to ship tonnage. However, the company must not be a party to any transaction or arrangement that is an abuse of the tonnage tax regime.
‘An abuse can include a tax advantage being obtained for another company, or a tonnage tax company in respect of its non-tonnage tax activities, or where the tonnage tax profits are artificially reduced.
‘The provision is both wide-ranging and extremely vague in its application. If a company falls foul of this provision then, in addition to a number of tax consequences, companies are not allowed to re-enter the tonnage tax for a period of ten years, a highly unusual and draconian penalty.’
You can read Frank Haskew’s piece, ‘The son of GAAR’, by clicking here, or visiting AccountancyAge.com’s comment area.
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