Taxation – GAAR threat looms large

The threat of a general anti-avoidance rule (GAAR) to combat tax dodges loomed large this week, after Gordon Brown clamped down on a capital gains tax scheme.

Tax experts warned Brown could include draft clauses in Tuesday’s Budget.

Ernst & Young wrote a last-minute letter to the chancellor urging full and proper consultation.

Brown aroused fears a catch-all clause would be brought forward after he surprised the tax world by banning CGT avoidance on trusts brought into the UK .

Douglas Fairbairn, E&Y’s national head of tax, said in the letter: ‘There is a vital need for a full and open debate … or it will be meaningless and the resulting law would not command the support of the taxpaying community.’

John Whiting, Price Waterhouse’s head of direct tax, added: ‘There will probably be a consultation document issued. There’s a lot to debate and we must have a proper clearance mechanism.’

Richard Hall, a KPMG tax partner, said the Inland Revenue wanted a GAAR based on taxpayer intent, while Customs & Excise was considering a series of targeted measures.

Budget preview, page 10

Opinion, page 14.

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