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GAAR could impose disproportionate burdens on all businesses, says Tax Faculty

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The government’s proposed general anti-abuse rule could create ‘unnecessary uncertainty, thereby imposing disproportionate burdens on all businesses’, according to the ICAEW Tax Faculty. Such an outcome would conflict with the growth agenda and the wider interests of the economy, it said.

The Faculty said today, in its formal response to HMRC’s consultation, that it supported the government’s policy objective ‘to counter abusive tax planning while leaving the “centre ground of tax planning unaffected”’. But it questioned whether the current draft would achieve that objective.

There were particular concerns about the impact of the GAAR on private individuals, trusts and smaller businesses. The focus had been on large corporates but, the Faculty suggested, considerably more work was needed to better understand the potential impact on other parts of the economy.

The Chartered Institute of Taxation has suggested that the proposed advisory panel should be ‘genuinely independent, drawing on those with current practical tax experience and with no HMRC representatives’.

The Tax Faculty said it hoped that the Aaronson Report’s recommendation would be followed and that the panel would ‘always have an independent (of HMRC) chair and a non-HMRC majority membership’. However, some of its members believed ‘very strongly’ that HMRC should not provide any members of the panel.

A case referred to the panel would have passed through stages one to three in paragraph 6.8 of the consultation document. HMRC would already have concluded that the GAAR may apply, the Faculty said.

‘The HMRC panel members are therefore arguably “partis pris” and potentially disqualified from involvement. However, we recognise that this is not likely to be accepted, so suggest that an HMRC panel member should be independent of HMRC’s anti-avoidance unit and should also have experience of alternative dispute resolution methods and approaches.’

The Faculty suggested that a ‘realistic start date’ for the new regime should be 1 January 2014. The CIOT and the CBI have called for commencement, planned for April 2013, to be delayed until after Royal Assent to Finance Act 2013.

An HMRC spokesman told Tax Journal that it would not be appropriate for the department to comment while the consultation responses were being considered.