The Coalition Government in the UK is currently discussing the possibility of introducing such a rule which, if implemented, would radically alter the tax planning landscape and have far reaching consequences for those using legitimate methods to avoid tax.
In view of this, LexisNexis asked 175 “tax experts” for their thoughts on the introduction of a GAAR and, surprisingly, found many were in fact in favour of its introduction but many only on the basis certain other measures are met.
In total, 44% of those polled supported the implementation of a GAAR in principle, perhaps higher than expected. However, this figure grew to 53% in favour if existing targeted anti-avoidance rules were repealed, while 64% would support it if there was a pre-transaction clearance procedure.
Despite the higher levels of support than expected, a selection of anonymous comments made by the respondents gave a good insight into the concerns of the industry.
One respondent wrote: “This is a ridiculous proposal and would give HMRC officials the ability to simply deem any tax mitigation actions as illegal. Most tax avoidance is entirely legitimate and indeed it is right and proper that taxpayers should be able to minimise their tax liabilities in accordance with the law. HMRC continue to conflate "avoidance" and "evasion" – this must stop.”
Another had concerns about the impression gaining pre-clearance on a case may give to clients.
“GAAR would mean that accountants would have great difficulty advising their clients. I do not want to be in a position where I say to a client I will have to write to the Revenue first before I can comment on any particular course of action.”
Other notable concerns from respondents include the ability of HMRC and the government to introduce effective legislation and the workability of its administration.
