United Kingdom
21 November 2011 - Aaronson GAAR study recommends targeted anti-avoidance rule
The final report of the Aaronson GAAR Study has been published. The report recommends the introduction of a narrow GAAR targeted at abusive schemes, rather than a broad GAAR, which it considers would not be beneficial.
The report states that the GAAR should focus on schemes which have abnormal features, which are listed in its Appendix, and that it should exclude arrangements which can be regarded as responsible tax planning. Any arrangements entered into entirely for non-tax reasons should also be excluded.
Importantly, the report also recommends that there should be an authoritative source of guidance as to the sort of cases to which the GAAR should apply, perhaps in the form of guidance notes included as a schedule to the Finance Act which enacts the GAAR. The report proposes that the GAAR should initially only apply to income tax, corporation tax, capital gains tax, petroleum revenue tax and national insurance contributions, with a possible extension to other taxes such as SDLT after experience had been gained of its operation. The introduction of a new penalty regime in connection with tax recovered under a GAAR is not recommended, on the basis that the intention is for the GAAR to be a shield, rather than a weapon to be wielded by HMRC. The report concludes that the proposed GAAR would:
The Government will discuss the implications of the proposed GAAR with business and tax practitioners, and respond fully at Budget 2012, setting out its plans for further, formal public consultation, if appropriate.