Tax experts call for more work on GAAR
Tax specialists have welcomed the launch of a government consultation on a general anti-abuse rule (GAAR) but said that work was still needed on the proposals.
The government launched a consultation on the proposed GAAR on 12 June, which would apply to the main direct taxes and to national insurance and stamp duty land tax. It also proposes an extension of the rule to inheritance tax.
The GAAR is based on recommendations made in a report by Graham Aaronsen to HM Treasury last November. He said that while sensible and responsible tax planning was “an entirely appropriate response to the complexities of a tax system such as the UK’s”, a moderate GAAR would “deter contrived and artificial schemes.”
David Gauke, Exchequer Secretary to the Treasury, said: “The introduction of a GAAR will strengthen our anti-avoidance strategy, complementing the tools HM Revenue & Customs already has at its disposal and acting as a deterrent to those engaging in artificial and abusive avoidance schemes…while minimising the impact on the vast majority of taxpayers who pay a fair share.”
However John Kinsella, tax partner at Watson Buckle, says: “Although the introduction of GAAR has been welcomed by the CBI, I am highly doubtful.
“I do not believe that GAAR will be workable, and will create unnecessary uncertainty which will undermine the UK’s tax competitiveness.
“Firstly it is highly doubtful that GAAR would reduce the complexity of existing Targeted Anti-Avoidance Rules (TAARs) for at least five years until HMRC is completely confident that GAAR is working properly in practice.
“Secondly there is a significant middle ground between so called ‘egregious’ tax avoidance and reasonable tax management. All this would do is increase the number of cases reaching the courts and tribunals. There would be litigation for many years to come – harming UK businesses’ ability to compete with a sound tax system.
“I just hope the Government takes on board the consultations it will have over the next few months, before implementing GAAR as it plans to do as part of the 2013 Finance Bill.”
The GAAR consultation runs until 14 September.
Link: GAAR consultation