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The introduction of one of the biggest developments in recent years in the fight against tax avoidance is to be delayed, the government announced yesterday.
The long-awaited general anti-abuse rule (GAAR) will take effect following royal assent of Finance Bill 2013 – expected in late July – rather than on 1 April as originally proposed.
The decision to postpone the launch was a sensible one, claimed tax specialist Heather Self of law firm Pinsent Masons. “There is already a risk of the GAAR creating uncertainty, so waiting a few more months until the legislation has passed through Parliament is a good idea,” she said.
The GAAR will not apply to tax arrangements that were entered into before royal assent. Stephen Herring, senior tax partner at BDO LLP, said it was “entirely appropriate” that the rule not be enacted until the summer.
“Any retrospective application of the guidelines would be very unwise for new legislation such as this and would bring too much uncertainty into an area that requires due process and clarity,” he added.
A number of amendments have been made to the proposed anti-abuse rule following consultation – most notably the definition of the double-reasonableness test to establish whether or not the GAAR is applicable to a tax arrangement.
The test was a cause for concern for the majority of respondents. Changes include clarification of the circumstances to be taken into account in determining whether arrangements are abusive, and the inclusion of an additional indicator that arrangements may not be abusive where they are in accord with established practice of which the Revenue has indicated its acceptance.
Stephen Herring applauded the refinements of the double-reasonableness test, which “now promises to be more focused upon the most abusive schemes rather than a less effective (and economically damaging to the UK) scattergun approach”.
He said, “We should all be thankful that, if HMRC has indicated acceptance of a particular planning route, it will not be viewed as abusive and therefore will not be subject to GAAR with retrospective effect.
“Finally, businesses and sensible commentators are sure to welcome reconfirmation... that there is to be a ‘high threshold for showing that schemes are abusive’, again emphasising that the focus will be firmly on closing down those abusive schemes generally marketed by fringe advisers, which clearly have no commercial basis,” claimed Herring.
The Chartered Institute of Taxation’s president, Patrick Stevens, said the GAAR was “evolving sensibly” and its delay was necessary because “we really do need the extra time to debate the examples and the draft guidance and make sure they all get to the right answer.
“From a first look at the draft guidance, it does need work to make sure it helps taxpayers and their advisers with the areas of uncertainty that will inevitably arise under the GAAR,” said Stevens.
