The Chartered Institute of Taxation (CIOT) and Association of Taxation Technicians (ATT) have expressed concern as to the benefit of introducing a General Anti-Avoidance Rule (GAAR) into the UK’s tax code.

Under proposals mooted by Graham Aaronson QC and reported last Autumn a GAAR would tackle only abnormal or artificial arrangements.

Key features could be:

  • Targeting anti-abuse, rather than anti-avoidance.
  • A reasonableness test: an arrangement that constitutes reasonable tax planning would not be caught.
  • A panel to review contentious decisions.
  • Eventual simplification of the existing anti-avoidance rules

The CIOT/ATT express considerable concerns about most aspects of Aaronson's proposals:

  • The GAAR is politically motivated however it is likely to disappoint: HMRC have already considerable powers under the DOTAS scheme and have already allowed other well publicised “abusive” schemes to go unchecked for years.
  • The reasonableness test: who will be in a position to decide what is reasonable in tax planning? Who measures this, HMRC, a tax adviser, “the person on the Clapham omnibus”?
  • Safeguards: the panel– who would staff the panel?
  • Right of appeal – to a tribunal or judicial review?
  • Guidance: who will write the guidance and will it be reliable given that HMRC’s guidance cannot be relied in Court.
  • HMRC’s behaviour: would HMRC use the threat of counteraction under a GAAR in an abusive way.
  • Complication: it will take years to see if a GAAR is working and the existing anti-avoidance rules cannot be removed until then,;this will all add to an already complex tax code in the UK.

Whilst it is clear that neither the CIOT or ATT supports the type of contrived anti-avoidance scheme that a GAAR would ideally target. It looks as if they believe that proposals would leave too much at HMRC’s discretion and make it difficult to do business in the UK.

Verdict: seems like a thumbs down, for now.