UK Tax: General Anti-Avoidance Rule: Graham Aaronson QC’s Study Group Recommends a Narrow GAAR

Sullivan & 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 proposal:

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?