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Exclusive: GAAR team to scrutinise case for clearance procedure

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The group studying the case for a general anti-avoidance rule will consider whether a pre-transaction clearance procedure is an absolute necessity, the tax barrister leading the study has told Tax Journal.

Tax experts have argued that a clearance mechanism is essential to minimise uncertainty for taxpayers. 'Unless it is accompanied by a comprehensive and prompt advance clearance procedure I fear that a GAAR is bound to introduce a damaging degree of uncertainty into the tax affairs of businesses,' said David Whiscombe, Partner at BKL Tax, in December. In a report published today, BDO said a reliable and simple clearance mechanism must be a prerequisite to any GAAR.

Almost two thirds of respondents in a Tax Journal survey last September said they would support a GAAR if there was such a procedure. Only 44% said they would support a GAAR ‘in principle’, but 53% would support such a rule if existing targeted anti-avoidance rules (TAARs) were repealed.

Graham Aaronson QC said in an interview with Paul Stainforth, Tax Journal Editor, that to be worthwhile a GAAR ‘should, if anything, reduce uncertainty and HMRC discretion, not increase them’.

‘I’ve heard it said many times that a pre-transaction clearance procedure is an absolute necessity. We will need to consider whether that really is the case,’ he said. ‘There are numerous other tax clearances, what can we learn from those? How could they relate to a GAAR? If it is necessary to have a clearance procedure who should operate it, HMRC or an independent body?’

The study group will examine the relationship of a GAAR with existing TAARs if it concludes that a GAAR could be beneficial in principle, Aaronson said.

He accepted that the group is working to a short time frame but suggested that if, by the end of October, it has not come up with a GAAR ‘that we are sure is worth having’, it will be reasonable to conclude that ‘there is no point talking about a GAAR any more’.

Paul Stainforth’s interview with Graham Aaronson features in tomorrow’s issue of Tax Journal.