GAAR I hear you ask – what on earth is that?
Well the Government has decided in its wisdom to close all of these tax avoidance loop holes that have been in the Press in one fell swoop with a ‘catch all’ piece of legislation called …..
General Anti-Abuse Rule
The intention of this new law would be to target artificial and abusive tax avoidance schemes and counteract the tax benefit that the scheme gives to the tax payer.
So what does this really mean?
Let me explain by way of an example …
You have a new car. It has a valid tax disc, a certificate of motor insurance and a current MOT certificate. You are driving the car, within the speed limit, down the motorway.
So all legal and above board.
But you get pulled over by the police who fine you.
You haven’t broken the law but they do not like the fact that you have the cheapest (but legal) car insurance policy on the vehicle.
OK that is a bit of an extreme and farfetched example but where does a law like GAAR stop?
Just how can a law reverse actions that you have taken that are within the law?
Surely the law should be changed to make the ‘legal action’ illegal?
Where does it all end? Who controls what becomes an ‘illegal legal act’? (Think about it!)
Just who would define what is “egregious”, “very aggressive” and “highly abusive contrived and artificial”.
Doesn’t personal preference, morals and attitude come into that?
Born this way
Yes of course I will think this way because I am an accountant but where we have a system of self assessment what we need is a clear set of rules for everyone to follow.
And let’s be clear the rules of GAAR say:
“taxpayers would be responsible for considering the application of the GAAR when filing their Self Assessment Tax return”.
So it seems that every individual would need to know the current scope of GAAR.
Rather extraordinary given that the GAAR Advisory Panel, who should give a “quick and cost effective way of identifying where GAAR applies” have no legal standing and their given opinions would not be binding on HMRC.
The consultation paper for GAAR states that it should “lead to a simpler tax regime for the UK”.
Edge of Glory
I am not sure that I follow this logic – no clear rules, a law that can reverse your legal actions making them illegal and a Panel giving advice that can be ignored by HMRC doesn’t seem at all simpler to me.
About the author
The copyright of these blogs belongs to Elaine Clark of CheapAccounting.co.uk and MUST NOT be reproduced without her express permission.
I am seeing numerous copies of my blogs appearing on the web sites and blogs of other firms of accountants. I’m afraid that it is now time for me to take a tough stance on breaches of my copyright!