New GAAR

The Government has launched a consultation on a new general anti-abuse rule (GAAR) to tackle artificial and abusive tax avoidance schemes. This follows the Budget 2012 announcement that such a rule will be introduced in 2013. The closing date for comments if 14 September 2012.

The Government is introducing the GAAR following an independent review led by Graham Aaronson QC, who concluded that the introduction of a targeted rule would deter artificial tax avoidance schemes and contribute to providing a more level playing field for business.

In line with Graham Aaronson’s recommendations, the proposed GAAR will apply to the main direct taxes and National Insurance. This includes Income Tax, Corporation Tax, Capital Gains Tax and Petroleum Revenue Tax.

As announced at the Budget, it will be expanded to cover Stamp Duty Land Tax (SDLT). The consultation also proposes an extension of the GAAR to Inheritance Tax and makes clear that the Government will consider including further taxes if appropriate.

The consultation confirms that the Government is to establish an advisory panel, members of which will come from both HMRC and business, to give opinions on cases where HMRC proposes to apply the GAAR and to develop, update and approve guidance on its use.

Responses will be taken into account in developing the legislation with a summary of responses published in autumn 2012 after the consultation closes. There will be a further consultation on proposed draft legislation in the autumn with a view to introducing legislation in Finance Bill 2013.

The consultation document is available from HMRC.