TaxCorporate TaxAutumn Statement: GAAR to gain extra teeth as HMRC efficiencies reinvested

Autumn Statement: GAAR to gain extra teeth as HMRC efficiencies reinvested

Penalties of up to 60% of tax due could be levied on tax avoidance schemes caught by GAAR

A PENALTY of up to 60% of tax due is to be added to the General Anti-Abuse Rule’s arsenal as the government continues its crackdown on tax avoidance.

The move announced during the chancellor’s Autumn Statement address also sees small changes to the GAAR’s procedure to improve its ability to tackle marketed avoidance schemes.

When the GAAR rule was launched it was one of the government’s first and biggest moves in its battle against tax avoidance, but since its introduction in 2013 the body tasked with enforcing the rule has been distinctly quiet despite claims that companies and their accountants are perpetrating tax avoidance on an ‘industrial scale’.

Patrick Mears, the former partner and head of tax at law firm Allen & Overy who chairs the GAAR panel, HMRC’s key weapon against tax avoidance, told Accountancy Age in February the panel “may well not get a case this year“.

However, according to today’s Autumn Statement document projects the rule will garner an extra £10m next year, to around £65m in penalties by 2021.

Despite that possibility, the newly-announced penalty strengthens the HMRC’s hand when cases eventually arrive in the panel’s inbox.

George Osborne (pictured) also announced that while HMRC is making savings of 18% in its own budget through efficiencies, some £800m is to be reinvested in the tax authority as it clamps down on tax abuses. That move, he said would see the taxman collect “ten times the original investment” – around £8bn.

Alvarez & Marsal Taxand managing director Kevin Hindley said: “As usual, a raft of anti-avoidance measures have been introduced to combat tax planning that HMRC has become aware of. Specific areas include ‘deep in the money’ options used to transfer shares to a depository receipt issuer or clearance service, planning around the corporate intangibles regime using partnerships and two types of avoidance schemes using capital allowances and leasing.

“This a regular feature of Budget and Autumn Statements and is not unexpected. In addition, there will be consultation on company distribution rules, amendments to the draconian transactions and securities regime and the introduction of a targeted anti-avoidance rule on schemes to turn income into capital.”

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