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General anti-avoidance rule may disappoint public opinion, says CIOT

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The draft anti-avoidance rule being considered by the government does not allay concerns over uncertainty and may disappoint public opinion, according to the Chartered Institute of Taxation.

In a joint submission to HMRC last week, the CIOT and the Association of Taxation Technicians suggested that some recent political decisions may have precluded ‘sensible technical discussion’.

Graham Aaronson’s report suggested a targeted ‘anti-abuse’ rule rather than a broad anti-avoidance provision. The government is expected to launch a consultation alongside the 21 March Budget, after David Cameron and Nick Clegg expressed support for such a rule.

The CIOT and ATT warned that the proposed GAAR would not solve ‘the high-profile problems’ identified in the tax system, which was ‘already over complex’. But there was a risk that ‘saying anything against the GAAR, however constructive, will be portrayed as supporting avoidance’.

The authors said it was ‘very telling’ that Private Eye had recognised that a GAAR would not meet the aims of the politicians and would ‘disappoint public opinion’.

Private Eye – a vocal critic of corporate tax avoidance – noted in its 13 January issue that a general anti-abuse power would not touch ‘big-time offshore avoidance’ which was considered ‘mere planning’.

‘We need to end the merry go round of promoters marketing tax avoidance schemes followed by detailed anti-avoidance provisions as HMRC plays catch up,’ the tax bodies said. ‘It seems to us that there is a need for the profession and HMRC to work together to achieve a solution that enhances rather than damages the UK’s tax code and general standing.’