'Narrowly Focused’ Anti Tax Avoidance Rule Recommended For UK
A report published in November 2011 by Graham Aaronson QC has recommended that the UK Government should introduce a narrowly focused general anti-abuse rule (GAAR) in order to combat tax avoidance.
Mr Aaronson’s report arrives after an eleven month review and consultation with an advisory committee of industry experts on the possibility of introducing a GAAR in the UK tax system.
Mr Aaronson believes that a narrowly focused GAAR would have a range of benefits.
Advantages Of A Narrowly-Focused GAAR
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Discourages tax avoidance schemes.
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Provides a more level playing field for businesses.
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Reduces the risk of ambiguity for other taxpayers.
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Provides an opportunity to simplify tax laws in the UK.
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Builds trust between the HMRC and taxpayers through greater clarity on acceptable boundaries.
Broad Spectrum GAAR ‘Would Not Be Beneficial’ For UK Tax System
Mr. Aaaronson’s report has warned against the requirement to propose a broad spectrum GAAR as this may challenge the ability of businesses and individuals to undertake responsible tax planning.
The report suggests that a narrowly-focused GAAR should apply to the main taxes, such as income tax, capital gains tax, corporation tax and national insurance contributions. However, the proposal may extend to other taxes such as stamp duty.
David Gauke, Exchequer Secretary to the Treasury, welcomed the report:
“The Government is committed to tackling tax avoidance. We asked Graham Aaronson to consider whether a UK GAAR could deter and counter tax avoidance, while providing certainty, retaining a tax regime that is attractive to businesses, and minimising costs for businesses and HMRC. We welcome the completion of his study and will carefully consider its recommendations against these criteria, alongside the feedback from businesses and tax professionals that we look forward to receiving.”
The UK Government will consider the findings of the report in greater detail and will discuss the implications of the proposed rule with business and tax practitioners.
A response to the report is expected from the Government at Budget 2012 whereby plans for further formal public consultation could be implemented, if appropriate.
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