UK Tax: General Anti-Avoidance Rule: Graham Aaronson QC’s Study Group Recommends a Narrow GAARSullivan & Cromwell LLP - December 6, 2011
Late last year the UK Government asked leading tax barrister Graham Aaronson QC to lead a study programme to establish whether the UK should introduce a general anti-avoidance rule and – if so – what it should look like. Mr Aaronson has now reported. He recommends introducing a “narrow” GAAR, which catches only “highly abusive contrived and artificial schemes which are widely regarded as intolerable”.
The key features of the proposed GAAR are these:
- “reasonable tax planning” would not be caught;
- an Advisory Panel would provide non-binding opinions on what was “reasonable”;
- HMRC would bear the burden of proof;
- there would be no general advance clearance procedure;
- initially it would apply to:
- income tax;
- corporation tax;
- capital gains tax;
- petroleum revenue tax; and
- national insurance contributions;
- later it might be extended to other taxes, like stamp duty and stamp duty land tax (“SDLT”).
The proposal raises two main questions:
- where will the line between “reasonable tax planning” and “abusive schemes” be drawn; and
- will the taxpayer be able to predict that with any certainty, especially without an advance clearance procedure?