What GAAR proposals?

THIS WEEK has seen reports of ‘government proposals’ for a GAAR – general anti-avoidance rule. I have seen headlines reporting, for example, that: ‘Experts slam avoidance rule‘, and ‘experts‘ all but queuing up to comment on these ‘proposals’.

Just one problem.

There are no proposals. There are no new rules. Indeed, if we read between the lines of the latest announcement, we might perceive a different picture altogether.

A GAAR was identified as a possible way forward in the June Budget document: ‘Tax Policy Making – A New Approach‘.

Now David Gauke, the exchequer secretary to the Treasury, has announced the appointment of Graham Aaronson QC, one of Britain’s most respected tax barristers, to lead a study into a GAAR.

A ‘study’ to “establish whether a general anti-avoidance rule could be framed that would be effective in the UK tax system and, if so, how the provisions of the GAAR might be framed”.

I’m pleased that this ‘study’ is being undertaken in the open and with no inbuilt Treasury or Revenue bias. I do think that’s a good thing.

The Lib Dem’s manifesto committed them to the introduction of a GAAR. (Mind you it also contained a pledge to vote against an increase in student fees). The promise of a study followed by a consultation seems to be further evidence of the ‘new approach’ to tax policy making that the coalition government promised in June.

Indeed, the terms of reference for the Aaronson study contain the following assurance: “Ministers will consider the outcome of this work as part of the Budget decision-making process, and would not introduce a GAAR without further, formal public consultation.”

The study is required to report by 31 October 2011. Given the ‘new approach’, it is possible, but I would have thought unlikely, that a consultation could then take place and the outcome be determined in time for an GAAR to be included in the 2012 Budget. So we’re probably looking at 2013 – if at all.

Unlike the headline writers and many commentators I tend to think that this development reduces the likelihood that a GAAR will be introduced. After all, given the known views of most accountancy and legal commentators, it’s hard to see how such a study and subsequent consultation could conclude that a GAAR would provide the desired certainty, etc. I’ve also heard that HMRC are not keen.

Time will tell.

This article first appeared on the blog of Mark Lee, chairman of the Tax Advice Network


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