Anti-avoidance

The general anti-abuse rule (GAAR)

The Chancellor announced that he will launch a formal consultation in the summer on adopting a general anti-abuse rule (GAAR) similar to the one proposed by Graham Aaronson QC in his report of November 2011. It’s aimed at countering ‘artificial and abusive tax avoidance’ - an intent that few would take issue with. There will be concerns on the uncertainty this may create for normal business transactions because people's views differ on this highly subjective and emotive area. This is something that businesses and people with complicated tax affairs will be worried about – one person's reasonable tax planning is another person's avoidance – so the consultation period will be important.

There was an encouraging sign that the Chancellor recognises the potential for collateral damage to business and mainstream transactions when he indicated the target is the most extreme tax avoidance. If this could be achieved, the benefits would in fact outweigh the cost of the uncertainty it may create.