‘Draconian’ GAAR penalties could breach human rights, taxation group warns

THE CIOT has reaffirmed its opposition to the General Anti-Abuse Rule (GAAR) penalty, with one expert fearing that it could breach taxpayer’s human rights.

GAAR was launched in 2013 but has yet to take on a single case, and worries still remain over what taxpayer activities could trigger action from the panel.

The CIoT worries that the penalties associated with the anti-abuse rule will be coming into force before a single case has been heard by its advisory panel, potentially making them incompatible with the European Convention on Human Rights if they don’t comply with the principles of legal certainty.

John Cullinane, tax policy director at the CIoT (pictured), said that more information on GAAR is needed before the tax authority starts handing out penalties.

“We recognise that HMRC needs to take action against artificial and abusive tax schemes. However, there needs to be far more information about what the GAAR panel will consider abusive under GAAR, to create a landscape that enables people to fully assess the risk of penalties applying.

“We think it is illogical that a person can be penalised for an innocent error of judgement in a more draconian manner than someone who has made a deliberate error.

“The imposition of such automatic penalties could have the consequences of making the courts less receptive to arguments that the GAAR applies, because in marginal cases they may consider the imposition of such penalties to be unfair. It is possible that such significant penalties could prove counterproductive for that reason,” continued Cullinane.

Legislation over a new GAAR penalty will be announced within the Finance Bill 2016, and will be triggered when a taxpayer submits a return to HMRC that later comes into the scope of GAAR.

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