UK General Anti-Avoidance Rule
28 November 2011
A recent study has been undertaken and subsequent report produced as to whether a general anti-avoidance rule (GAAR) should be introduced into the UK tax system. The report by Graham Aaronson QC of Pump Court Tax Chambers was made available to the general public on 21st November 2011 and makes interesting reading.
At present, the UK has a complex system of specific, targeted anti-avoidance legislation which can create uncertainty for the taxpayer and can lead to inconsistencies when cases are being judged. The burden of weight on the UK tax system is considerable as more and more legislation has to be produced to counter tax planners who are often intent on exploiting every loophole and weakness in statutory definitions. It is felt that a GAAR would simplify matters and lessen the strain on the system.
However, the report does not go so far as to recommend a broad brush approach to anti-avoidance. It recognises that a ‘catch all’ rule would be detrimental to business and put the UK at a further disadvantage in what are already tough economic times. Instead, there is acknowledgement that a ‘moderate rule’ targeted at abusive tax arrangements would be beneficial. Abusive is further defined as contrived or artificial tax schemes.
The important point to note from the conclusions in the report is that a GAAR should not apply to responsible tax planning. At Boston, we have members of the Chartered Institute of Tax on our Board who are instrumental in defining the risk appetite for the business and we act in the long term interests of our clients. This means avoiding short term, high risk tax strategies which this report suggests a GAAR should be used for.
It remains to be seen whether HMRC act upon the report but Boston welcomes the comments and views the recommendations positively and in support of our own attitude to tax avoidance.