GAAR anti-avoidance rules come into force
Today sees the new general anti-abuse rule (GAAR) come into force to tackle aggressive tax avoidance, as Finance Bill 2013 receives Royal Assent, reports small business accountants Harris and Co, who provide accountancy services in Northampton
The GAAR requires tax arrangements to pass what has become known as ‘the double reasonableness test’ to determine whether or not they are judged abusive. This means taking into account all the circumstances, including the principles on which the legislation was based and whether the planning was intended to exploit any shortcomings.
Stephen Coleclough, president of CIOT, said that tax agents will need to start considering whether the GAAR applies when they complete a client’s self-assessment return. Although HMRC guidance makes clear that much commonplace planning will be unaffected, he warned there is likely to be ‘a long period of uncertainty’ whilst the GAAR matures.
‘Where a client has entered into a particular transaction, often on the advice of another party, it will be necessary to consider whether the GAAR applies. Sometimes specialist help will be required to help determine this. The forthcoming revision of the tax profession’s code “Professional conduct in relation to taxation” will include advice about the GAAR,’ Coleclough said.
‘Ultimately, the success of the GAAR will be judged on whether the marketing of abusive schemes is reduced and far fewer taxpayers choose to enter into them. A sustained review of the GAAR’s effectiveness will be crucial,’ Coleclough maintained.