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HMRC to get power to demand changes to tax arrangements

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.”


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. the problem with giving organisations like this complete power without accoutability is that it corrupts allowing them to make decisions without due consultation. No organisation should have powers without haveing accountability. They have already done things in the past without consultation and got away with it. The same applies to the FSA. Power corrupts

  2. In principle this seems OK but unless these powers are properly policed, how long it will be before claims of HMRC misuse are made.

    ‘No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores.

    James Avon Clyde, Lord Clyde, Ayrshire Pullman Motor Services and Ritchie v. IRC (1929) 14 TC 754’.

  3. When the numbskulls in power get it into their heads that tax avoidance is legal (whatever spin they spew forth), whilst tax evasion is not and put their efforts and resources into tackling tax evasion!

  4. Tax avoidance is easy to target rather than evasion as it is legal.

    It would be interesting to see how much tax revenue is lost through tax avoidance and how much is lost through tax evasion and how much is spent on each tackling them.

  5. No doubt these general anti avoidance regulations will prevent the sweetheart deals struck with vodaphone, goldmans, etc…Intersting it is being extended to IHT, I wonder why.

  6. Sadly, one taxpayer’s legitimate planning is another man’s tax avoidance.

    It all kicked off when Gordon Brown declared tax evasion illegal and tax avoidance immoral.

    Why not just have VAT on non-essential items – so that everyone who spends pays tax. The rate could be adjusted to meet revenue requirements. That way, we wouldn’t need such a large HMRC and could sack the lot of them ……

  7. No taxation without representation.

    Without checks and balances, HMRC will construct everything to suit them.

    This is fundamentally WRONG.

    We’ve emigrated to get away from the socialist nonsense in the UK.

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