Consultation on a General Anti-avoidance Rule

HM Treasury has launched a consultation on a General Anti-Abuse Rule (GAAR) with a view to tackling ‘artificial and abusive tax avoidance schemes’.

This is the result of a review commissioned by the Treasury from tax specialist Graham Aaronson QC as to whether the introduction of a broad anti-avoidance rule would act as a deterrent against tax avoidance schemes whilst creating a level playing field for businesses. Mr Aaronson’s review concluded that a ‘broad-spectrum general anti-avoidance rule’ would not benefit the UK tax system, but that a rule targeted at artificial and abusive tax arrangements would achieve the desired effect and be practical for both taxpayers and HMRC.

The consultation proposes that the GAAR will apply to the main direct taxes – Income Tax, Corporation Tax, Capital Gains Tax and Petroleum Revenue Tax – and National Insurance, as well as SDLT, some taxes linked to Corporation Tax and Inheritance Tax. The document states that the GAAR would work ‘alongside existing anti-avoidance tools’ and it is proposed that it would consist of a “tax arrangements” test and an “abusiveness” test.

The consultation document, which includes the draft legislation is available on the HMRC website here.

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