Author – Charlotte Lewis Published – 14:00 22 June 2012
The introduction of a general anti-avoidance rule was first mentioned in Chancellor George Osborne’s 2012 Budget speech and is to be legislated for in the 2013 Finance Act; Regarding tax evasion and ‘aggressive’ tax avoidance as ‘morally repugnant’, Osborne and the government have made no attempt to hide their plans to attack tax avoidance schemes seen to be taking advantage of the tax system.
“On coming into office, I asked Graham Aaronson QC to establish whether a general anti-avoidance rule could work in the tax system. He recommended that such a rule would improve our ability to tackle tax avoidance without damaging the competitiveness of the UK as a place to do business. We agree. So we will introduce one,” stated Osborne in his 2012 Budget speech on 21 March.
Following the independent review from Graham Aaronson QC government officials supposedly held informal discussion sessions, prior to drafting the consultation document and GAAR legislation, to hear what tax practitioners, businesses and representative tax bodies had to say.
Initial taxes to be affected by the general anti-avoidance rule are Income Tax, Corporation Tax, Capital Gains Tax, Petroleum Revenue Tax, National Insurance (NI) and Stamp Duty Land Tax (SDLT). The GAAR consultation document also proposes that the rule be extended to Inheritance Tax and makes clear government intentions to include further taxes where appropriate.
Exchequer Secretary to the Treasury, David Guake, said:
“The introduction of a GAAR will strengthen our anti-avoidance strategy, complementing the tools HMRC already has at its disposal and acting as a deterrent to those engaging in artificial and abusive avoidance schemes. The rule we are consulting on from today will effectively tackle such schemes, while minimising the impact on the vast majority of taxpayers who pay a fair share.”
To approve HMRC’s application of the GAAR, the government will establish an advisory panel made up of members from HMRC and businesses, to give their opinions, approval and guidance on the development of cases where HMRC plan to apply the general anti-avoidance rule.
Since the publication of the Treasury’s GAAR consultation document the Chartered Institute of Taxation (CIOT) has warned that ‘much
work is still needed’ in the general anti-avoidance rule proposals. The CIOT highlighted the need for the government to ‘be clear on what the GAAR will, and will not, achieve’, stating that those targeted for tax avoidance by the media and campaigners ‘would not be caught by the GAAR’.
BBC presenters Chris Evans and Jeremy Paxman are some of the UK’s famous faces that have been accused of tax avoidance in the national press in the last few weeks. Comedian Jimmy Carr and Take That members’ Gary Barlow, Howard Donald and Mark Owen have also come under media scrutiny for saving tax through offshore and music industry tax avoidance schemes.
In a recent statement HMRC made clear that no-one, ‘no matter who they are’, is safe from the taxman in the government’s tougher stance on tax avoidance, tax evasion and tax fraud; A statement which they are currently reinforcing through the exposure of famous faces in the national press. Only time will tell if outing celebrities and businesses for their involvement in tax avoidance arrangements and introducing the general anti-avoidance rule is the correct answer to the government’s ongoing battle against ‘aggressive’ tax avoidance.
Kevin Kinsella, of KinsellaTax, said:
“Well I think this is a fingers crossed approach to handling tax evasion. I don’t think it will make one bit of difference; academic rather than practical.”
The government plan to legislate the general anti-avoidance rule in the 2013 Finance Act. The GAAR will determine what constitutes ‘artificial’ and ‘abusive’ tax avoidance schemes, set up with the sole purpose of avoiding tax.
HMRC will work to shut down ‘aggressive’ tax avoidance arrangements. If you have a query about a tax avoidance scheme you have entered our team of ex-HM Inspector of Taxes and ex-HM Custom and Excise Officers can help.
To discuss a tax avoidance enquiry in confidence call 0800 471 4546 or alternatively you can submit your tax enquiry online.