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The proposed UK GAAR
Belema Obuoforibo CTA
IBFD
The Netherlands
IBFD
Scope of the presentation
 The proposed UK GAAR – introduction
 The pre-GAAR landscape
 Background to the GAAR
 The focus of the GAAR
 The operation of the GAAR
 Will the GAAR work?
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The proposed UK GAAR - introduction
• General Anti-Abuse Rule included in Finance Bill 2013
• Effective for arrangements on or after the date of Royal
Assent
• Stated target: not avoidance, but abuse
• Pre-GAAR landscape:
• Anti-abuse doctrine developed by the courts
• Targeted anti-avoidance rules (TAARs)
• Disclosure of Tax Avoidance Schemes
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Background to the GAAR
• Study Group of Tax Experts (report published:
November 2011)
• Recommendation: a narrowly focused GAAR
• Budget 2012: recommendations accepted
• “Taxpayer’s ingenuity” approach rejected by the
GAAR
• Fisher’s Executors v CIR
• Duke of Westminster v CIR
• Ayrshire Pullman v CIR
• Limit placed on “ingenuity”
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The focus of the GAAR
Taxes covered:
(1) Finance Bill 2013
• (i) Income tax; (ii) Capital Gains Tax; (iii) Inheritance
Tax; (iv) Corporation Tax; (v) Any amount chargeable as
if it were corporation tax, e.g. CFC charge, the Bank
Levy, the Supplementary Charge and Tonnage Tax; (vi)
Petroleum Revenue Tax; (vii) Stamp Duty Land Tax; and
(viii) The Annual Tax on Enveloped Dwellings.
(2) Forthcoming legislation
• National Insurance Contributions
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The operation of the GAAR
• Targets “abusive” arrangements
• “Avoidance” may be challenged under other rules
• “Counteraction” of a “tax advantage” arising from an
abusive scheme
• HMRC may make a “just and reasonable” tax
adjustment
• HMRC Guidance: GAAR is narrowly drawn; does not
catch tax planning options available to a taxpayer
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The operation of the GAAR (2)
• Burden on proof on HMRC to demonstrate
abuse
• “Tax advantage” (inclusive definition):
• relief or increased relief from tax;
• repayment or increased repayment of tax;
• avoidance or a reduction of a charge to tax or an
assessment to tax;
• avoidance of a possible assessment to tax;
• a deferral of a payment of tax or an advancement of a
repayment of tax; and
• avoidance of an obligation to deduct or account for tax.
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The operation of the GAAR (3)
• “Double reasonableness test”: HMRC to show
that the scheme “cannot reasonably be
regarded as a reasonable course of action”
• Before applying the GAAR, HMRC must consult
the GAAR Advisory Panel
• Opinion of panel not binding but may form part
of evidence
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GAAR: interaction with other rules
• Tax treaties: GAAR will apply to abusive schemes
aimed at exploiting tax treaties
• TAAR: GAAR will operate independently of TAARs
• Existing anti-avoidance rules still applicable in many
cases, as GAAR restricted to abusive schemes
• HMRC still entitled to rely on case law
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Will the GAAR work?
• One view: too narrowly focused – abuse, not
avoidance
• Another view: too broad – encroaches into tax planning
territory
• Another view: too uncertain (double reasonableness
test plays havoc with certainty)
• The role of the Advisory Panel: adds more uncertainty.
The law should be capable of working on its own.
• Bill currently before Parliament.
• After Royal Assent, time will tell.
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Thank you
Belema Obuoforibo
[email protected]
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