GAAR comes another step closer

Updated details have been released of the government’s new general anti-abuse rule (GAAR), which could see more people becoming the subject of tax investigations.

The government published amended legislation and draft guidance on the GAAR on 11 December, as part of its draft Finance Bill 2013. The GAAR will take effect following the granting of royal assent to the Finance Bill, expected in July 2013, and will not apply to any tax arrangements entered into before that date.

Exchequer Secretary David Gauke said the GAAR would “provide a significant new tool to tackle abusive tax avoidance schemes and deter those who are tempted to engage in them”.

The GAAR is designed to come into operation when the application of other tax rules fail to prevent a tax advantage arising from abusive or artificial tax arrangements. It will apply to:

  • corporation tax (and any amount chargeable or treated as if it were corporation tax)
  • income tax
  • capital gains tax
  • petroleum revenue tax
  • inheritance tax
  • stamp duty land tax
  • the annual residential property tax.

Separate legislation will be introduced later to apply the GAAR to National Insurance contributions.

Although the GAAR will not take effect until the summer, HM Revenue & Customs announced in December a programme of specific activity from January-May 2013 that could also lead to an increase in tax investigations.

A longer-term action plan including launching 20 new taskforces every year between now and 2015 to garget high risk groups or sectors and increasing the annual number of prosecutions for evasion by 2014-15, compared with 2010-11.

With tax investigations likely to become more frequent, in the event of a tax investigation, working with the experts at Taxation-Investigation can help to clarify the taxpayer’s position, identify their options and help to mitigate the outcome.