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.
