The government has remained committed to its promise to set up an independent
board of tax simplification, but questions have been raised about how it will
work in practice.
Advisers have already warned “simplification” could see reliefs withdrawn.
Now the Lib-Cons have gone a step further in publishing “Tax Policy Making: a
new approach”, alongside Budget papers, which reinforce previous warnings about
a general anti-avoidance rule (GAAR).
These sweeping laws seek to catch the maximum amount of people in the tax net
through a principles-based strategy, but the scattergun approach has been
criticised by advisers.
“It just removes all certainty in a plan floated as tax simplification in
terms of what gets caught,” said Cathy Corns, tax partner at Mercer & Hole.
Corns also voiced concerns about law-abiding taxpayers being caught in the
net because of the broad nature of the rules. “They are saying ‘no one can
escape tax’,” Corns added.
Lawyers thought the introduction of a GAAR would come as a particular
disappointment to business. The GAAR would only create uncertainty by placing
the onus on companies to seek permission from HMRC every time they want to carry
out a transaction – and has failed to work in countries like Australia and
Canada, said one leading lawyer.
Michael Wistow, head of tax at law at Berwin Leighton Paisner, said: “We very
much hope that the government will conclude that a GAAR is unnecessary. Indeed,
it would be counterproductive if the government carries through with its welcome
commitment to simplify the corporate tax system.”
The document also suggests three months to discuss proposals before they are
set in stone.
But the down side would mean those individuals and companies carrying out the
aggressive tax planning GAARs are supposed to combat would be able to switch
tack. “The major point is that, in knowing what’s coming, people can think about
arranging their plans,” said Andy Greenwood, tax partner at Alvarez & Mars
Does Darwin's theory apply to taxation? Colin ponders...
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