HMRC has published amendments to its guidance on the general anti-abuse rule (GAAR) with effect from 31 March 2017, mainly to reflect new legislation introduced in Finance Act 2015 and Finance Act 2016. These changes included bringing diverted profits tax and apprenticeship levy within the GAAR, introducing powers for HMRC to make provisional counteractions and specific GAAR penalties from 15 September 2016.
The GAAR has applied to the main direct and stamp taxes from 17 July 2013 and NICs from 13 March 2014.
The guidance was previously updated in January 2015. It is laid out in five main parts: (A) purpose and status of the guidance; (B) summary of the GAAR; (C) specific points; (D) examples; and (E) procedure. See http://bit.ly/1yCl4ve.
o the GAAR applies to diverted profits tax with effect from 1 April 2015 and to apprenticeship levy with effect from 15 September 2016 (B9.2);
o the diverted profits tax (E6.13); and
o the apprenticeship levy (E6.14).
o From 15 September 2016 provisions within FA 2013 s 209A apply to enable an officer of HMRC to make a provisional counteraction under the GAAR. (E3.3.1)
o HMRC is permitted to make a provisional counteraction prior to the procedural requirements within FA 2013 Schs 43, 43A or 43B being completed. However, in the event that there is an appeal against the adjustments specified in the provisional counteraction notice, those procedural requirements must be complied with prior to a final counteraction being made. Where no appeal is made against the adjustments specified in a provisional counteraction notice those adjustments become final. (C6.5.3, E3.2.5)
o Where a provisional counteraction is made and appealed, the procedures above must still be followed including the consideration by the designated HMRC officer and by the GAAR Advisory Panel. (B14.2, C6.5.5)
o There is no appeal against the provisional counteraction notice itself; any appeal is against any assessment or determination etc. that makes the adjustments specified in the provisional counteraction notice. (C6.5.4)
o Provisional counteraction notices (E3.4)
o 12-month period for taking action if an appeal is made (E3.5)
o Next steps after action is taken (E3.6)
o Appeals against provisional counteractions (E3.7)
o Corrective action by the taxpayer (E3.9)
o Where there are a number of similar cases, these may be pooled by HMRC (see para E3.17.2) and the GAAR Advisory Panel may be asked to consider one case from that pool, or in certain circumstances a generic referral may be made by HMRC. The GAAR Advisory Panel’s opinions will then be applied to the similar cases. Where similar cases are identified after the GAAR Advisory Panel has given its opinion they may also be ‘bound’ to the arrangements that the GAAR Advisory Panel considered (see para E3.17.3) and the GAAR Advisory Panel’s opinion can be applied to the similar cases. (B14.1, C6.5.5)
o Where a generic referral is made, there will not be a specific taxpayer to consider but HMRC must set out all the factors of the case so that the GAAR Advisory Panel have as full a picture as possible. (C6.5.7)
o There is a specific provision enabling reference to be made to transactions which were entered into before the relevant date if, but only if, referring to those earlier arrangements would help show that the later arrangements were not abusive. (C10.3)
o There is a closed period relating to arrangements entered on or after 15 September 2016. Where the matter is to be referred to the GAAR advisory panel the taxpayer must not make any GAAR related adjustments in respect of the taxpayer’s tax affairs during the closed period. The closed period for cases within Finance Act 2013, Sch 43 begins on the 31st day after the end of the 45-day period for making representations in relation to the notice of proposed counteraction. It ends immediately before the date on which a notice of final decision is issued after considering the opinion of the GAAR advisory panel. (E3.10)
o Referral to the GAAR Advisory Panel on or after 15 September 2016 (E3.11)
o Pooling and binding of tax arrangements under the GAAR (E3.17)
o Generic referral of tax arrangements (E3.23)
o GAAR penalty provisions have effect in relation to transactions entered into on or after 15 September 2016. (B16.1, B18.4, C10.8)
o For arrangements entered into on or after 15 September 2016, whilst the penalty provisions in Schedule 24 FA 2007 may also apply, the GAAR legislation includes specific provisions, enacted in Finance Act 2016, which impose penalties in certain circumstances (see paragraphs E3.24 - E3.25). Under these provisions a penalty will apply where a taxpayer submits a ‘tax document’ to HMRC relating to a tax arrangement for which HMRC issues a notice of final decision stating that the tax advantage is to be counteracted and then subsequently counteracts the tax advantage by making just and reasonable adjustments. (B16.6)
o Penalties where the GAAR has been applied (E3.24, E3.25, E6.4.1, E6.4.2)
o Example D2.3.2: altered to reflect that legislation was introduced in Finance Act 2015 to remove the tax advantage from special purpose share schemes. The following wording was deleted from the end of the paragraph: ‘and giving choice when a listed company is returning funds to shareholders as to whether those funds come out in capital or in income form (so that certain so-called B share schemes would come into this category’.
o Example D6: note added to reflect that the legislation referred to in the example has been amended since the original publication of the guidance (so that the outcome of the arrangements would now be different). An explanation has been added immediately before D6.1: ‘Please be aware the corporation tax legislation described below has been amended since the original publication of this guidance: this example is included to demonstrate the underlying principles’.
o Example D26: note added to reflect that the legislation referred to in the example has been amended since the original publication of the guidance (so that the outcome of the arrangements would now be different). An explanation has been added immediately before D26.1: ‘Please be aware the IHT legislation described below has been amended since the original publication of this guidance: this example is included to demonstrate the underlying principles’.
HMRC has published amendments to its guidance on the general anti-abuse rule (GAAR) with effect from 31 March 2017, mainly to reflect new legislation introduced in Finance Act 2015 and Finance Act 2016. These changes included bringing diverted profits tax and apprenticeship levy within the GAAR, introducing powers for HMRC to make provisional counteractions and specific GAAR penalties from 15 September 2016.
The GAAR has applied to the main direct and stamp taxes from 17 July 2013 and NICs from 13 March 2014.
The guidance was previously updated in January 2015. It is laid out in five main parts: (A) purpose and status of the guidance; (B) summary of the GAAR; (C) specific points; (D) examples; and (E) procedure. See http://bit.ly/1yCl4ve.
o the GAAR applies to diverted profits tax with effect from 1 April 2015 and to apprenticeship levy with effect from 15 September 2016 (B9.2);
o the diverted profits tax (E6.13); and
o the apprenticeship levy (E6.14).
o From 15 September 2016 provisions within FA 2013 s 209A apply to enable an officer of HMRC to make a provisional counteraction under the GAAR. (E3.3.1)
o HMRC is permitted to make a provisional counteraction prior to the procedural requirements within FA 2013 Schs 43, 43A or 43B being completed. However, in the event that there is an appeal against the adjustments specified in the provisional counteraction notice, those procedural requirements must be complied with prior to a final counteraction being made. Where no appeal is made against the adjustments specified in a provisional counteraction notice those adjustments become final. (C6.5.3, E3.2.5)
o Where a provisional counteraction is made and appealed, the procedures above must still be followed including the consideration by the designated HMRC officer and by the GAAR Advisory Panel. (B14.2, C6.5.5)
o There is no appeal against the provisional counteraction notice itself; any appeal is against any assessment or determination etc. that makes the adjustments specified in the provisional counteraction notice. (C6.5.4)
o Provisional counteraction notices (E3.4)
o 12-month period for taking action if an appeal is made (E3.5)
o Next steps after action is taken (E3.6)
o Appeals against provisional counteractions (E3.7)
o Corrective action by the taxpayer (E3.9)
o Where there are a number of similar cases, these may be pooled by HMRC (see para E3.17.2) and the GAAR Advisory Panel may be asked to consider one case from that pool, or in certain circumstances a generic referral may be made by HMRC. The GAAR Advisory Panel’s opinions will then be applied to the similar cases. Where similar cases are identified after the GAAR Advisory Panel has given its opinion they may also be ‘bound’ to the arrangements that the GAAR Advisory Panel considered (see para E3.17.3) and the GAAR Advisory Panel’s opinion can be applied to the similar cases. (B14.1, C6.5.5)
o Where a generic referral is made, there will not be a specific taxpayer to consider but HMRC must set out all the factors of the case so that the GAAR Advisory Panel have as full a picture as possible. (C6.5.7)
o There is a specific provision enabling reference to be made to transactions which were entered into before the relevant date if, but only if, referring to those earlier arrangements would help show that the later arrangements were not abusive. (C10.3)
o There is a closed period relating to arrangements entered on or after 15 September 2016. Where the matter is to be referred to the GAAR advisory panel the taxpayer must not make any GAAR related adjustments in respect of the taxpayer’s tax affairs during the closed period. The closed period for cases within Finance Act 2013, Sch 43 begins on the 31st day after the end of the 45-day period for making representations in relation to the notice of proposed counteraction. It ends immediately before the date on which a notice of final decision is issued after considering the opinion of the GAAR advisory panel. (E3.10)
o Referral to the GAAR Advisory Panel on or after 15 September 2016 (E3.11)
o Pooling and binding of tax arrangements under the GAAR (E3.17)
o Generic referral of tax arrangements (E3.23)
o GAAR penalty provisions have effect in relation to transactions entered into on or after 15 September 2016. (B16.1, B18.4, C10.8)
o For arrangements entered into on or after 15 September 2016, whilst the penalty provisions in Schedule 24 FA 2007 may also apply, the GAAR legislation includes specific provisions, enacted in Finance Act 2016, which impose penalties in certain circumstances (see paragraphs E3.24 - E3.25). Under these provisions a penalty will apply where a taxpayer submits a ‘tax document’ to HMRC relating to a tax arrangement for which HMRC issues a notice of final decision stating that the tax advantage is to be counteracted and then subsequently counteracts the tax advantage by making just and reasonable adjustments. (B16.6)
o Penalties where the GAAR has been applied (E3.24, E3.25, E6.4.1, E6.4.2)
o Example D2.3.2: altered to reflect that legislation was introduced in Finance Act 2015 to remove the tax advantage from special purpose share schemes. The following wording was deleted from the end of the paragraph: ‘and giving choice when a listed company is returning funds to shareholders as to whether those funds come out in capital or in income form (so that certain so-called B share schemes would come into this category’.
o Example D6: note added to reflect that the legislation referred to in the example has been amended since the original publication of the guidance (so that the outcome of the arrangements would now be different). An explanation has been added immediately before D6.1: ‘Please be aware the corporation tax legislation described below has been amended since the original publication of this guidance: this example is included to demonstrate the underlying principles’.
o Example D26: note added to reflect that the legislation referred to in the example has been amended since the original publication of the guidance (so that the outcome of the arrangements would now be different). An explanation has been added immediately before D26.1: ‘Please be aware the IHT legislation described below has been amended since the original publication of this guidance: this example is included to demonstrate the underlying principles’.
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