GAAR delay to 2000

The Inland Revenue has delayed the introduction of a general anti-avoidance rule until 2000 at the earliest.

The Revenue, which on Monday unveiled its long-awaited consultative document exploring how a GAAR would work, also said it would hold further consultation on the precise wording of any rule before introducing it.

Tax experts expressed relief at the Revenue’s cautious approach, but said some aspects of the consultation paper were disappointing.

Richard Baron, deputy head of the policy unit at the Institute of Directors, said: ‘The basic definition of tax avoidance is heavily skewed in favour of the Revenue. It would be easy for the Revenue to show avoidance, so the burden of proof would fall on companies.’ He welcomed the fact that a GAAR would initially apply only to the companies.

But he was worried by a proposed clearance system, where companies could submit transaction details to the Revenue for confirmation they would not be subject to a GAAR.

The Revenue said it was considering charging for these clearances and would undertake to give them in a 30-day period.

Baron added: ‘If you are looking at a company takeover, 30 days is far too long.’ His comments were echoed by PwC partner John Whiting, a member of the Chartered Institute of Taxation’s technical committee, who described the paper as fundamentally disappointing. He expressed concerns over the 30-day turnaround time for clearances and that companies would have to pay for this.

But Whiting said it was good the Revenue seemed willing to have a ‘long hard consult’ on the issue. This intention was reflected in comments by Dawn Primarolo, financial secretary to the Treasury, as she unveiled the proposals.

She said: ‘The government is determined to make the tax system fairer.

A GAAR might have an important role to play in achieving that. But it’s important to ensure that such a rule, which would be the next step in tax law, would be effective and efficient in its application.’

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