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Tax professionals divided on merits of a general anti-avoidance rule

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A wide range of views on the pros and cons of a general anti-avoidance rule has been reflected in Tax Journal’s ‘One minute with ...’ series of interviews with leading practitioners.

In the weeks leading up to Graham Aaronson’s report, published today by HM Treasury, we asked our interviewees: ‘Where do you stand on the introduction of a GAAR?’

► Most businesses will not be worried by well-targeted anti-avoidance rule, says IoD

This is how our experts viewed the prospect of a GAAR before Aaronson recommended a narrowly targeted ‘anti-abuse rule’:

‘It’s long overdue. We have got to have something as a new starting point, rather than lurching from one judgment, which is impossible to reconcile with the previous case law, to another.’
Philip Baker QC, Tax Barrister, Gray's Inn Tax Chambers: 15 September 2011

‘A GAAR that simply chops out ridiculous planning that should never succeed has a chance of being an acceptable way forward. But anything that’s worded more broadly would cause business confusion – it would be a nightmare for tax administration and a disaster for the UK economy.’
Bill Dodwell, Head of Tax Policy at Deloitte: 21 September 2011

‘I’m not against a GAAR in principle, but I think GAARs ultimately disappoint – either because the courts develop them in a way that nobody predicted or because the Courts never get the chance to apply them because no-one is prepared to litigate. I also do not think it will achieve the desired result of simplifying other anti-avoidance legislation – if I did, I might be in favour!’
Sara Luder, Head of Tax, Slaughter and May: 28 September 2011

‘In favour, probably; but I await Graham Aaronson QC’s report with interest.’
Michael Conlon QC, Barrister, Temple Tax Chambers: 13 October 2011

‘I’m against. I think that a GAAR would actually lead to more litigation. Even assuming there’s an HMRC clearance system, inevitably there’ll be many transactions, probably the majority, for which there’s not time to get clearance. So you’ll have people taking a view which gets challenged, and where does that get resolved? Either by negotiation, ADR or in the Tribunal. So I don’t personally see how a GAAR would help. What I am in favour of is principle-based legislation. I think that will achieve the same end and be more effective. I suspect that's a minority view.’
James Bullock, Partner, McGrigors: 19 October 2011

‘I am a sceptic. I welcome the discussion but I worry that it will continue to run alongside anti-avoidance legislation and may bring uncertainty that will make the UK a less competitive place to do business.’
Francesca Lagerberg, Head of Tax, Grant Thornton: 26 October 2011

‘I am an agnostic on the overall concept. But I have a real concern that the administration of a GAAR would fail, given HMRC’s attitudes in recent years. HMRC has taken, or been given, too much power and has also managed to have enacted a lot of legislation which effectively taxes everything unless HMRC says so. Giving HMRC a GAAR would, in my view, be the worst thing possible for the administration of the tax system.’
Pete Miller, Partner, The Miller Partnership: 11 November 2011

‘I have strong views on this. Graham Aaronson QC is the leading tax advocate of his generation – but there is a trap that he has to avoid – a trap into which barristers can fall – which is thinking that a problem can be solved by a turn of phrase. A “turn of phrase” can work well in an opinion or in argument, but be much less successful in a judgment. We have a precedent for this with MacNiven v Westmoreland Investments Ltd. Lord Hoffmann’s attempt to define the limits of Ramsay using a distinction between legal concepts and commercial concepts took us nowhere. In my opinion there is no simple formulation of words which could claim to answer this complex question without falling into a “Hoffmann” trap.’
Stephen Hoyle, Head of Tax, DLA Piper: 18 November 2011