In November last year, a government-commissioned report led by Graham Aaronson QC was published which suggested that the introduction of a “moderate rule, which does not apply to responsible tax planning, and is instead targeted at abusive arrangements, would be beneficial to the UK tax system”.
In particular, the report said the introduction of a GAAR targeting arrangements abusing income tax, corporation tax and capital gains tax, would be beneficial.
However, the report also said introducing a “broad spectrum general anti-avoidance rule would not be beneficial for the UK tax system”.
Julie Hutchison, head of international technical insight at Standard Life International, says IFAs and clients using legitimate tax planning tools should not worry.
“Aaronson’s report recognises sensible and responsible tax planning and so, for bread and butter tax planning, such as the use of ISAs, the making of pension contributions and inheritance tax planning – which is out of scope anyway – people should not be concerned,” said Hutchison.
“There are, of course, fears that there may be some legislative ‘creep’, as we saw with the Disclosure of Tax Avoidance Schemes legislation in the last decade, and it may be that in the future we see a GAAR, if it is introduced, extended to incorporate Stamp Duty Land Tax. However, even if it was then extended to IHT planning, responsible and sensible tax planning is unlikely to be the target.”
Similarly, Louise Somerset, tax director at RBC Wealth Management, says properly advised taxpayers should still be able to act with confidence if these proposals are implemented.
“The commission has explained that its intention is for the GAAR only to affect taxpayers who, at the time they acted, knew that they were involved in highly artificial and aggressive tax avoidance,” said Somerset.
“We therefore think the vast majority of taxpayers will be unaffected if a GAAR is introduced along the lines proposed by the commission.”
There was, however, a word of warning from David Heaton, a partner at Baker Tilly, who said while most taxpayers should welcome the proposals, this is on the provision that this is not the “thin end of an HM Revenue & Customs wedge”.
It is currently anticipated by the tax industry that a draft GAAR of some description will be proposed in this year’s Budget in March.
