Experts doubt impact of new GAAR legislation

A new general anti-abuse rule (GAAR) will probably reduce extreme forms of tax avoidance but critics say that the legislation may be hard to apply and won’t deal with the controversial tax arrangements of big business.

Although there is broad support for GAAR among tax professionals there are concerns about whether the new body can remain independent from the taxman.

Partners at Big Four accountancy firms have been excluded from the final GAAR “advisory panel”, which will advise HMRC about whether an avoidance scheme falls foul of the GAAR, in order to avoid the perception of a “conflict of interest”, according to a person familiar with the recruitment process.

Politicians have recently accused Big Four firms of...

Register with AccountingWEB for free to read the rest of the article, which includes:

  • Abusive arrangements
  • Tax deterrent
  • Out of court

Continued...

» Register now

The full article is available to registered AccountingWEB members only. To read the rest of this article you’ll need to login or register.

Registration is FREE and allows you to view all content, ask questions, comment and much more.

Comments
ShirleyM's picture

It's better than nothing

ShirleyM | | Permalink

It should catch the artificial avoidance schemes where the only purpose of the convoluted arrangement is to avoid tax. Time will tell if GAAR makes it quicker & cheaper than present methods of closing these schemes.

Anne Isabella Ritchie, daughter of William Makepeace Thackeray    1 thanks

mikefleming3028 | | Permalink

 

Give HMRC a fish and you feed it for a day, give HMRC a GAAR and they will fish to their hearts content.

I'd apply...

Ian McTernan CTA | | Permalink

to be on the advisory panel but I'm pretty sure they wouldn't want me on it.  I'm too direct and forthright in my opinions, never a good thing on a committee...

Good to be having the GAAR, which I think is a step in the right direction, along with the recent 'we will co operate to ensure businesses pay tax where they earn their profits' announcement from the G20.

Of course, the devil is in the detail, and we shall wait to see what comes from all of this.

Poor

chEEK | | Permalink

This seems a very weak attempt at such legislation.

I expected to see something along the lines of a rule applied to each person's tax return, such that the minimum tax bill is X% of declared income from all sources. Not entirely unlike the benefits cap on welfare.

Things like charitable donations can still be exempt, but with a "sensibility check" so that you don't give all income to charity and then try to live on £5k.

I'm sure the tax dodges described previously (such as donating to a charity of which you are the president and only worker) could be dealt with in other legislation as being simply tax evasion, or fraud, but some kind of sensibility check would have been useful.

What they have done seems silly - trying to address the schemes when it's easier to go for the individual tax returns. That would be a catch-all solution in that you can join any scheme you like, but if your total tax falls below, say, 18% of income after personal allowances then you're caught, and you pay enough to make it up to 18%.

@cHEEK

pauljohnston | | Permalink

I am not sure what you want.  Our current system is built by parliment who then complain that people legally avoid tax.  There are really only two systems that you can employ.  Fixed rate ie all income is taxed at 20% or our current system that is time and time again tampered by Parliment.  Any other scheme will be exploited

The easiest is the fixed rate.

Foolishness

Carl B | | Permalink

This is all very well, but the problem that HMRC must surely want to address is the creation of artificial losses, whereby participators in these schemes receive the benefit of losses they do not economically incur.  I don't think that targeted legislation to cover this was too much to ask, was it?

What we now have is a system which will restrict to £50,000 all losses, including perfectly genuine losses, and a vague rule which purports to attack all arrangements which a "reasonable person" might "reasonably expect" to be motivated by tax avoidance. Farcical.

TaxTeddy's picture

...yes but....

TaxTeddy | | Permalink

OK, 20% - fine. But how do you measure "income"? This is how CGT came about in 1965, because there were too many 'gains' and too little 'income'.

So that's your first layer of complexity - and before you know it we're back to sqare one.

Have to agree though, it's a bit rich if those who make the law complain when we apply it to our advantage? Shurely shome mishtake?