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CIOT: A general anti-avoidance rule runs the risk of affecting all tax planning

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‘We have to question what it is that the introduction of a GAAR would really achieve,’ the CIOT has told HMRC.

Writing to set out the CIOT’s position following HMRC’s ‘GAAR workshop’, Tax Policy Director John Whiting, said: ‘Our basic position is that we are happy to discuss the concept of a GAAR. Indeed, we think it is something that should be periodically re-examined to see if it is something that should be introduced in the UK.

'However, if one is to be introduced, it should be part of a general reform of anti-avoidance law and not simply as an additional layer.’

But Whiting asked: ‘What is the problem that a GAAR would solve and which cannot be solved by more traditional means? Given the extensive developments on the anti-avoidance front in recent years – especially DOTAS and the use of TAARs – coupled with the GAAR-like attitude of the Courts, we cannot see that there is an obvious gap for a GAAR to fill.’

It is ‘far from clear’ how the Courts would view an actual GAAR, he added, and such a rule ‘runs the risk of affecting all planning and not just artificial avoidance’.

‘What is needed is more anti-evasion efforts: the new “Tax Gap” analysis is surely proof of this. A GAAR does nothing in this direction; indeed, there are suggestions that the burden and uncertainty of a GAAR could encourage concealment/evasion.’

He added: ‘Fundamentally, a GAAR seems to go against many of the principles in the “Tax Policy Making” paper, creating uncertainty instead of delivering certainty in particular.’

Responding to the recent announcement of additional resources for tackling tax avoidance, evasion and fraud, Whiting suggested that ‘a good deal’ of the supposed avoidance is ‘dependent on obfuscation and concealment and better classed as evasion’.

Tax Journal survey
In a recent survey of Tax Journal readers, 44% of the 175 respondents said they would support a GAAR in principle; 53% would support a GAAR if existing targeted anti-avoidance rules were repealed; and 64% would support a GAAR if there was a pre-transaction clearance procedure.