The battle over a General Anti-Avoidance Principle begins

Posted on

The battle lines to come on the review on a General Anti-Avoidance Principle are becoming apparent. And the misinformation is beginning.

On the BBC Saffery Champness, accountants, say:

Contained within [the Budget] are plenty of indications that the coalition will continue looking for more sources of tax.

It is going to consult on bringing in what is known as a general anti-avoidance rule.

This sounds like a very widely worded rule which will give HM Revenue & Customs (HMRC) the power to stop tax avoidance ploys, at their entire discretion.

Taxpayers and advisers will have to wait to see the detail, but it will probably give HMRC the power to stop apparently legal tax dodges without having to get any specific laws changed first.

But that’s tax simplification and the provision of certainty all at the same time. Isn’t that what taxpayers have always demanded? Apparently not. As Accountancy Age reports:

The government has remained committed to its promise to set up an independent board of tax simplification, but questions have been raised about how it will work in practice. Advisers have already warned “simplification” could see reliefs withdrawn. Now the Lib-Cons have gone a step further in publishing “Tax Policy Making: a new approach”, alongside Budget papers, which reinforce previous warnings about a general anti-avoidance rule (GAAR).

These sweeping laws seek to catch the maximum amount of people in thetax net through a principles-based strategy, but the scattergun approach has been criticised by advisers.

“It just removes all certainty in a plan floated as tax simplification in terms of what gets caught,” said Cathy Corns, tax partner at Mercer & Hole.

Corns also voiced concerns about law-abiding taxpayers being caught in the net because of the broad nature of the rules. “They are saying ‚Äòno one can escape tax’,” Corns added.

What thoroughly good news it will be in that case.

You can see why the profession hate it.