HMRC should not have representation on a GAAR advisory panel, warns the CIoT and ATT
THE TAXMAN MUST STAY CLEAR of an advisory panel proposed to determine whether tax schemes are abusive, according to the CIoT and ATT.
In response to the consultation on introducing a general anti-abuse rule (GAAR), the tax bodies warned that the proposals risk handing too much power to HM Revenue & Customs.
A panel for looking into the true purpose of tax schemes – and determining whether they are contrived to avoid tax – should have no HMRC representatives.
“The government have identified its purpose as being to help taxpayers and HMRC identify the borderline of where the GAAR applies,” said CIoT president Patrick Stevens.
“To achieve this, we think it is necessary for it to be genuinely independent, drawing on those with current practical tax experience and with no HMRC representatives.”
The introduction of the GAAR from April 2013 is too soon, the bodies added, particularly as the Finance Bill 2013 would not have been approved by parliament at that point.
“The result would be confusion and unfairness ,” said ATT President Stuart McKinnon. “This guidance material will be crucial and needs to be available at least in final draft form by the time the GAAR comes into effect. Consequently, we think the GAAR should commence only after Royal Assent to Finance Bill 2013, ideally from 1 October. That will allow proper time to get the guidance in place.”
The government should keep safeguards recommended in the Aaronson report, such as the one stating tax consequences must be the “sole or main purpose” of an arrangement and not just “one of the main purposes”.
In PKF’s consultation response, the firm calls for a dedicated unit within HMRC dedicated to dealing with GAAR issues.
“The best way for HMRC to help is to provide a clearance procedure so that people can check if the GAAR applies before submitting their returns. It should also establish a special unit to enforce the GAAR,” said PKF national director of tax Lisa Macpherson.
“This means that the government will have to invest time and money to make the GAAR work properly in practice. If it doesn’t make that investment, the GAAR will simply add to tax uncertainty rather than help clarify it, deterring the cautious but being ignored by those it was designed to catch – the worst tax avoiders.”
Macpherson also raised concerns that HMRC is pushing for taxpayers to ‘self-assess’ when the GAAR applies to them, which would then leave them open to HMRC altering their bill further down the line. The tax bill would “almost certainly” be incorrect when sent, she warned.
“It seems nonsensical that HMRC would encourage taxpayers to submit returns that they know to be wrong – usually, it charges penalties where incorrect returns are submitted.”