Posted by James Pearson on 01 Jun 2015

The General Anti-Abuse Rules

The General Anti-Abuse Rules (GAAR) introduced by the 2013 Finance Act, together with Accelerated Payment Notices and Follower Notices introduced by the 2014 Finance Act, have changed the arena in which tax avoidance schemes work.

Where a tax avoidance scheme has met all the legal requirements within the relevant legislation applying to the transactions in order to successfully negate the tax for a user of the scheme, the GAAR is a further option available to HMRC to charge that negated tax to the user.

The GAAR applies to ‘tax arrangements’ which are ‘abusive’. In broad terms a tax arrangement is any arrangement which, viewed objectively, has the obtaining of a tax advantage as its main purpose or one of its main purposes.

‘Tax advantage’ in this context is also broadly defined as it is intended to cover any form of tax benefit, for example: increasing deductions or losses; decreasing income or gains; obtaining timing advantages; obtaining or increasing repayments of tax; or ensuring that a potential tax charge does not arise or is reduced.

‘Abusive’ Tax Arrangements

Determining if arrangements are ‘abusive’ can be complicated, but can be broadly stated as arrangements that go beyond anything which could reasonably be regarded as a reasonable course of action, given the purpose of the legislation being used.

The introduction of GAAR means that HMRC can now legally challenge arrangements that they believe go beyond the intent of the legislation to obtain a tax advantage. Furthermore, APNs and Follower Notices can force the taxpayer to pay any disputed tax to HMRC up front whilst the legal position is dealt with. As a result, it is difficult for taxpayers to gain any advantage by using marketed tax avoidance schemes.

Remember, if it seems too good to be true then it probably is! If you are offered the chance to participate in a tax avoidance scheme, and you find yourself tempted, you should always obtain independent tax advice to explain the risks and any hidden costs which may not have been clearly set out by the promoter of the scheme.

Anti-Abuse Rules on Tax Avoidance Services

Tax Innovations can provide independent advice regarding the tax implications of any proposed course of action, and help you to find the best solution for your tax affairs, without the risk of using aggressive or abusive schemes.

If you would like any advice regarding the above article or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or email customerservice@taxinnovations.com.