- Published on
Legal Terms - General Anti-Abuse Rule (GAAR)
The Finance Act 2013, section 209, establishes the General Anti-Abuse Rule (GAAR) alongside anti-avoidance rules to address particular arrangements, thereby imposing or augmenting tax liabilities through adjustments for "abusive" tax arrangements. Unlike the conventional method in English revenue law, which emphasizes activities, the fundamental aspect of the GAAR is the *intent of the individual liable for tax (or who would be liable if not for the measures undertaken). Consequently, "tax arrangements" refer to those arrangements for which it is plausible to determine that the acquisition of a tax advantage was the primary aim, or one of the primary purposes. Likewise, "abusive" arrangements are defined as those that "cannot be reasonably considered a prudent course of action concerning the pertinent tax provisions." This method is analogous to that of the European Court of Justice about *abus de droit. The statute delineates indicators of abusive tax evasion as follows: (a) taxable income, profits, or gains substantially lower than the "amount for economic purposes"; (b) tax deductions or losses markedly exceeding the "amount for economic purposes"; and (c) a request for tax repayment or credit (including foreign tax) that has not been, and is improbable to be, remitted. This list is stated to be non-exhaustive. The GAAR has faced criticism from numerous commentators on two accounts. Initially, it introduces an extra layer of ambiguity in a legal domain where it is prudent to seek clarity. Secondly, it confers quasi-judicial authority to HM Revenue and Customs: Section 156 of the Finance Act 2016 expands the Finance Act 2013 by permitting an HMRC officer to issue a "provisional counteraction notice," resulting in the immediate obligation to pay additional tax prior to the adjudication of an appeal. The GAAR functions similarly to the issuance of a *Follower Notice or actions directed at a *Promoter of Tax Avoidance Schemes.
The Finance Act 2013, section 209, establishes the General Anti-Abuse Rule (GAAR) alongside anti-avoidance rules to address particular arrangements, thereby imposing or augmenting tax liabilities through adjustments for "abusive" tax arrangements. Unlike the conventional method in English revenue law, which emphasizes activities, the fundamental aspect of the GAAR is the *intent of the individual liable for tax (or who would be liable if not for the measures undertaken). Consequently, "tax arrangements" refer to those arrangements for which it is plausible to determine that the acquisition of a tax advantage was the primary aim, or one of the primary purposes. Likewise, "abusive" arrangements are defined as those that "cannot be reasonably considered a prudent course of action concerning the pertinent tax provisions." This method is analogous to that of the European Court of Justice about *abus de droit. The statute delineates indicators of abusive tax evasion as follows: (a) taxable income, profits, or gains substantially lower than the "amount for economic purposes"; (b) tax deductions or losses markedly exceeding the "amount for economic purposes"; and (c) a request for tax repayment or credit (including foreign tax) that has not been, and is improbable to be, remitted. This list is stated to be non-exhaustive. The GAAR has faced criticism from numerous commentators on two accounts. Initially, it introduces an extra layer of ambiguity in a legal domain where it is prudent to seek clarity. Secondly, it confers quasi-judicial authority to HM Revenue and Customs: Section 156 of the Finance Act 2016 expands the Finance Act 2013 by permitting an HMRC officer to issue a "provisional counteraction notice," resulting in the immediate obligation to pay additional tax prior to the adjudication of an appeal. The GAAR functions similarly to the issuance of a *Follower Notice or actions directed at a *Promoter of Tax Avoidance Schemes.
0 Comments