11 September 2012

The proposed introduction of a general anti-abuse rule

The UK has put in place over many years statutory anti-avoidance provisions which apply in specific areas, along with more general principles derived from case law. However, following a report produced by a study group set up in 2010, HMRC is now consulting on the introduction of a statutory general anti-abuse rule.

This rule, which it is proposed should apply for the purposes of most direct taxes, is not intended to supersede the existing targeted anti-avoidance provisions but rather to sit alongside them as an additional measure. It is suggested that it should apply so as to disallow any tax advantage obtained from an arrangement where it is ‘reasonable to conclude’ that tax avoidance was one of its main purposes. An area of concern is what is meant by “reasonable”, and so far little guidance has been provided.

One of the main criticisms of the proposals is that there is to be no advance clearance system under which taxpayers and their advisers can seek confirmation that a particular course of action will not be caught by the rule, but merely an Advisory Panel able to give non-binding guidance.

It seems likely that there will be a good number of responses as part of the consultation process and that many of them will suggest modifications. However the principle seems to be one to which the UK Government is committed and it remains to be seen whether any improvements to the current proposals will be made.


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