HMRC have recently issued their draft consultation document in respect of the General Anti-Abuse Rule, along with draft legislation. For those interested, the document can be found on their website atwww.lexisurl.com/gaarcondoc.
The Consultation period will remain open until 14th September 2012 and interested parties are encouraged to email their responses to: firstname.lastname@example.org.
Following Graham Aaronson QC’s Study Report back in November 2011, his recommendations have been taken on board and the GAAR will be brought in with effect from April 2013 aimed primarily at “abnormal arrangements” which are designed to produce an “abusive tax result”.
The GAAR will apply to all the main direct taxes along with NIC and SDLT. It is also proposed that IHT should also be included.
“Reasonable” tax planning will be accepted, along with planning that is not entered into to avoid tax.
Tax Clearances can be obtained from an Advisory Panel.
The concept of a GAAR is fine in principal if it is indeed narrowly targeted at the various artificial schemes that seem to continue to be sold by a mushrooming number of tax boutiques (many of whom have no real knowledge, training or understanding of tax), however if all the report does is lead to increased uncertainty, that clearly has the potential to lead to a significant competitive disadvantage to UK Plc’s economy.
Quite clearly we already have a plethora of anti-avoidance legislation (some of which is being challenged through the EU Courts) and the Dotas Provisions to safeguard HMRC, so it will be interesting to see whether the GAAR simplifies anything and adds any further marginal security to HMRC or merely brings with it increased frustration for those seeking genuine bespoke tax planning based on their own personal circumstances.
We suspect that it is simply another missed opportunity and will only add to the confusion as to whether HMRC will challenge any planning, and if they do, how the Courts will ultimately interpret the GAAR.
How can a document that defines an abusive tax planning arrangement as one that “cannot reasonably be regarded as a reasonable course of action” do anything than create confusion??
What is “reasonable” will quite clearly be subjective and we fear this subjectivity will only lead to an increased number of Tribunal cases, which will no doubt be further exacerbated by more ridiculous press debate/discussions on the avoidance debate, written by those with no real understanding of tax.
Interesting and (more) confusing times ahead!!