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.”

Patrick Stevens, president of the Chartered Institute of Taxation, said: “The government is right to be proposing a narrowly-targeted GAAR aimed at truly artificial schemes, as recommended by Graham Aaronson.

“It is important that the Government takes the proposal forward as the balanced package that the Aaronson report set out. However, there is much that still needs to be done to assure taxpayers that the new rule will not lead to uncertainty and unpredictability in tax, with all the damage that that could do to our economic competitiveness.

“If a GAAR can be framed that stops abusive practices without preventing legitimate tax planning – such as making use of tax reliefs deliberately put in place by government – or introducing damaging uncertainty that will be a very welcome step.”

The GAAR consultation runs until 14 September.

Link: GAAR consultation