In July 2017 the General Anti-Abuse Rule advisory panel (GAP) gave its first opinion in respect of ‘Employee rewards using gold bullion’; it has now released three more opinions, all in HMRC’s favour.

The GAAR is structured in the form of a “double-reasonable test”:

  • It only bites if the arrangements “cannot reasonably be regarded as a reasonable course of action”. 
  • Where the GAAR does apply, Penalties of up to 60% of the counteracted tax can be levied over and above any penalties due under the normal rules. 

The second and third opinions heard on consecutive days in early November 2017 related to schemes substantially similar to the gold bullion rewards scheme considered in the GAPs first opinion. The judges sitting on these occasions agreed with the opinion of the first opinion panel judges, and for the same reasons.

The fourth opinion related to a different type of structure.

This planning was designed to allow a close company participator, and sole director, Mr A, to extract cash (or cash equivalent) from the Company with no charge to income tax on Mr A, and no Loans to participators charges or other Participator benefits charge on the Company. It involved the use of an offshore company and Offshore trust  to enable Mr A to repay his Directors loan account  without an income tax charge (on a Distribution), via a series of steps involving Mr A and the offshore entities.

The panel in finding (with “no difficulty”) that the entering into of the tax arrangements was not a reasonable course of action in relation to the relevant tax provisions and the carrying out of the tax arrangements was not a reasonable course of action in relation to the relevant tax provisions stated:

  • “There is no commercial, non-tax, reason for Mr A and the Company to involve a trust in the desired goal of extracting cash from the Company.”
  • “Using a trust in this way to achieve a commercial goal is both contrived and abnormal.”

We now therefore have four published opinions where tax planning has failed the double reasonableness test, and none where it has passed. GAP opinions are not legally binding, but the Tribunal must take it into account if the case is taken that far. It is interesting that the gold bullion scheme has now been in front of the panel three times given that Finance Act 2016 gave HMRC the power to issue pooling notices and notices of binding so that taxpayers with equivalent arrangements can be counteracted by a single GAAR Advisory Panel decision.


General Anti-Abuse Rule - GAAR (subscriber version) 

External Links:

GAAR Advisory Panel opinion of 17 November 2017: extraction of cash or equivalent through trust interests

GAAR Advisory Panel opinion of 9 November 2017: employee rewards using gold bullion

GAAR Advisory Panel opinion of 10 November 2017: employee rewards using gold bullion



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