Accountancy Age has noted that the new General Anti-Abuse Rule panel of independent experts has been appointed. All six are tax professionals. None come from civil society. None some to have a non-business background.
Why is this important? Simply because under the Rule as it has become law no one on the panel who now offer advice on the use of the Rule before an action can proceed may come from HMRC and none need sit in a judicial capacity. They must, however, be tax experts. And now, as predicted, it is clear that this means that the inevitable consequence is that this panel is drawn from the private sector tax profession and from the tax department's of big business and like it or not, (and without knowing anyone on the new panel) experience suggests that such people are likely to be more tolerant of tax avoidance than the population at large. Despite this the panel's task is to determine whether it is reasonable to think any scheme the Revenue wish to challenge is abusive or not. The consequence is that an incredibly select view of what is reasonable will be applied to any attempt to use the General Anti-Abuse Rule.
It is, admittedly, the case that the opinion of this panel will only be considered advisory, but given the status afforded to it the chance that HMRC would proceed with a case if even one member of the panel thought the taxpayer's actions reasonable, especially given that the taxpayer and any subsequent appeal hearing will have to be told this, is very low indeed. This does in effect give any member of this panel the chance to veto any action to stop tax abuse. The chance that HMRC will take the risk of being found to get their judgement on this issue wrong very often is also very low, so they will as a result be very risk averse in making any decision to use the Rule and risk seeking a ruling from the panel. In that case the structure of and power afforded to this panel is a clear obstacle to the effectiveness of the General Anti-Abuse Rule.
The moral is a simple one: you can't outsource the operation of tax law but the General Anti-Abuse Rule, and that is why it will have to be replaced.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Frankly who else was ever going to freely give their time to be on this panel unless they had a career in tax to advance or an axe to grind – this is currently such a hot political topic that it was never going to be possible to produce a balanced panel.
It was obvious from day one that the big issue with the GAAR would be the question of what could “reasonably be regarded as reasonable”. If the panel didn’t include these sorts of people you would be able to argue more effectively that something could “reasonably be regarded as reasonable” even if the panel went against you. As it stands that will be rather more difficult.
It will be very interesting to see how the whole thing develops. There will be legislative creep, but which way will it go? There will be things that are seen as unreasonable, but will small changes make them reasonable? Likewise if something is seen as reasonable how much can it be adjusted before it becomes unreasonable? There will be some very large grey areas.
It will be many years before the courts have clarified what is “reasonable”. For now the GAAR will be a major source of uncertainty and I have no doubt HMRC likes it that way.
“experience suggests that such people are likely to be more tolerant of tax avoidance than the population at large”
I would imagine that tax professionals are more tolerant towards those accussed of tax avoidance in the same way that men of science in the 18th century were more tolerant towards those accused of witchcraft.
The levels of knowledge of the ‘population at large’ on both subjects being about the same.
Utter nonsense
Men of science did not practice witchcraft
“Men of science did not practice witchcraft”
Although I’m sure plenty were accused of doing so by ‘the population at large’.
I think he means that it was the rise of men of science (the word scientist came from the US in 1800s) which lessened the feeling against witchcraft. When the educated and more powerful stopped believing in it, prosecutions stopped.
Or did Andrew mean if the “population at large” were properly educated,they would view tax professionals as “scientists” and not “witches”? If so, I wouldn’t bet on it! 😉
Whether of not we call tax science or withcraft I would point out that there always both white witches and black witches !
I think Richard’s concern is the panel may consist of two many black witches 😉
An even if you don’t agree with that opinion, there should be some concern in any reasonable peron’s mind that even if they aren’t black they are most surely grey.
Why no HMRC representation to ensure balance? Silly me, sorry I forgot, there would be little point as HMRC is currently subject to corporate capture.
All we’ll have is a panel of biased experts who will immerse themselves in tax minutiae and will fail conspicuously to see the bigger picture.
Meanwhile outside what will in effect be an “intellectual trivial pursuit bubble”, more people will rely on food banks, services for the less fortunate in society will be cut and libraries will close.
As long as the modern bread and circuses (food banks cable/satellite TV) continue there will be no change!
Even as one of my roles is as tax practitioner, even I can see that tax is not just the preserve of tax practitioners. When a Jury is appointed in a legal case, the members are not legally trained – probably just as well!
Of course they should be some lay members, you don’t have to be a wild life expert to know something that looks, waddles and quacks like a duck, is ad duck and is not a swan. Tax has been made to look like a science, it’s not, it’s about raising revenue by consent and that can never just be by the law alone.
Thanks
I agree
Indeed, I think it’s essential such voices are heard