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E-securities scheme GAAR panel opinion

https://www.gov.uk/government/publications/gaar-advisory-panel-opinion-of-16-december-2020-artificia

Didn't find your answer?

Hardly surprising that they did down this highly dodgy scheme.

https://www.gov.uk/government/publications/gaar-advisory-panel-opinion-o...

I guess any accountant can be sued for recommending it to the extent their client is worse off for doing it (which they are of course re rip-off fees - including kickbacks from promotor). Amusing that the advisor threw in the towel from the start (I don't think I've seen that before and it shows just how rubbish it all was).

Para 9.3 confirms my recent comment that DLAs can be cleared with assets (rather than cash): https://www.accountingweb.co.uk/any-answers/home-office-used-to-clear-directors-loan-account-0

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By Tax Dragon
06th Feb 2021 07:23

A wise contributor (it might even have been you, Justin) once said that I'd never need to worry about GAAR because I wasn't clever enough to find shortfalls in TAARs (or think of ways to exploit any I happened to stumble across). I have of course ever since been trying to find ways to fall foul of GAAR, just to prove you (possibly you) wrong. I have of course failed - I can always find a TAAR to shoot my ideas down.

But has my quest just gotten easier? Am I correct in my reading of this case that HMRC reached for GAAR without exhausting the possible refutations of the planning it might have had under the TAARs? The argument is (I'm looking particularly at 10.2): if the planning 'works', then that can only be because the TAARs (even on a purposive interpretation) are faulty; that (coupled with the contrived and abnormal steps involved in the planning) is enough for GAAR to apply.

Thinking this through, I recall another Justin comment about penalties under GAAR. I've (obviously) never had to worry about them, but I recall your saying they are heavier than 'normal' (TAAR) penalties. So, in the case presented here (and that 10.2 point), I wonder.... are we going to end up (if heavier GAAR penalties arise) with the advisor arguing that the planning was caught by the TAAR? So GAAR wasn't in point?

Strange world we live in now.

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Replying to Tax Dragon:
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By Justin Bryant
06th Feb 2021 09:34

Not sure what you're on about, but this dodgy* e-securities scheme was massively marketed and apparently there are quite a few people queuing up to sue their accountant for recommending it if you do a Google search.

* see also**: https://www.accountingweb.co.uk/any-answers/another-completely-dud-faile...

** a shame that due to the dumb new edit block I no longer post detailed case summaries like that one.

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Replying to Justin Bryant:
Psycho
By Wilson Philips
06th Feb 2021 10:26

The edit block is an edit block, not a post block. I therefore don’t follow why it should prevent you from continuing to post detailed summaries.

And the last point is something of a non-sequitur - no-one was arguing in that thread (or anywhere else as far as I am aware) that a DLA cannot be settled by way of a transfer of non-cash assets. The issue in that thread was whether such transfer of the asset in question might have other tax consequences.

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Replying to Justin Bryant:
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By Tax Dragon
06th Feb 2021 10:21

I see you already made the distribution point I raise below in that other thread.

Sorry, I don't read all about the avoidance-bordering-on-evasion schemes, even when it's your good self posting about them. I wouldn't peddle such tripe to clients, so my interest is only occasional. Just so happened this morning was one such occasion, so I had a read.

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Replying to Tax Dragon:
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By Tax Dragon
06th Feb 2021 09:59

I should say that, on the case discussed, I don't think that either TAAR or GAAR is actually especially relevant. The valuation of Newco at £2m appears to be out by pretty much exactly £2m. Would I pay £2m for a company that had £1k of cash, on the premise that after I bought it, it could call for me to pay it £2m? No of course I wouldn't. Nor would anyone. The whole thing is laughable.

If The Company accepted the shares in Newco as settlement if the debt, then (it seems to me) there was at that time a distribution by The Company.

Why HMRC opted not to tax the distribution and instead reached for GAAR is a mystery. Is it because GAAR gives it a better outcome? And if so does that underscore my point? HMRC is using GAAR when it, in all honesty, shouldn't. And advisors may have to argue that the planning failed on other grounds, to escape heavier penalties.

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Replying to Tax Dragon:
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By Justin Bryant
06th Feb 2021 10:04

Obviously HMRC will use GAAR to defeat a scheme given the choice. Apart form anything else, it's a lot simpler than expensive, resource intensive tax litigation (that's one of the main reasons for GAAR). The pre-GAAR taxpayers will obviously lose at FTT for the reasons stated in the above link.

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Replying to Justin Bryant:
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By Tax Dragon
06th Feb 2021 10:29

But my understanding (and 10.2 kind of supports this) is that GAAR is there to plug the gaps. In this particular case, there weren't any gaps. The whole thing was garbage. HMRC should not be able to use GAAR to beat garbage. What's the point of the rest of anti-avoidance tax law if GAAR can be the first port of call? 10.2 says (or implies) that there needs to be a fault in the TAAR. Where was the fault here?

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