The Government has set out proposals for new powers to tackle “artificial and abusive” tax avoidance that would enable HMRC to require people to change their tax arrangements.
The Treasury’s consultation paper on the General Anti-Avoidance Rule says the power is designed to counter tax arrangements the “main purpose or one of the main purposes” of which is to reduce tax liabilities.
Under the proposals, once those criteria are met, HMRC will be able to require “just and reasonable” adjustments to existing arrangements.
It proposes the rule will apply to income tax, corporation tax, capital gains tax, fuel tax, national insurance and stamp duty as announced in the Budget. The paper also proposes extending it to cover inheritance tax and the Bank Levy which the Treasury says it is treated in the same way as corporation tax.
The paper says: “The GAAR is intended to be capable of altering the tax consequences of abusive arrangements if the consequence claimed is one that manifestly would not have been countenanced by Parliament, had it foreseen the arrangement and the claimed tax consequences.”
If a taxpayer disputes HMRC’s assessment and proposed changes, they can appeal through a tribunal or the courts which will be able to make their own conclusions.
Treasury exchequer secretary David Gauke says “The introduction of a GAAR will strengthen our anti-avoidance strategy, complementing the tools HMRC already has at its disposal and acting as a deterrent to those engaging in artificial and abusive avoidance schemes. The rule we are consulting on from today will effectively tackle such schemes, while minimising the impact on the vast majority of taxpayers who pay a fair share.”