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12 June 2012

Government consults on new general anti-abuse rule for tax

The Government has today launched a formal consultation on a new general anti-abuse rule (GAAR) to tackle artificial and abusive tax avoidance schemes.  This follows the Budget 2012 announcement that such a rule will be introduced in 2013.

The Government is introducing the GAAR following an independent review led by Graham Aaronson QC, who concluded that the introduction of a targeted rule would deter artificial tax avoidance schemes and contribute to providing a more level playing field for business.  As well as considering Mr Aaronson’s report in detail, the Government has held informal discussions with business, tax practitioners and representative bodies in order to hear their views prior to drawing up the consultation and draft legislation, both published today.

In line with Graham Aaronson’s recommendations, the proposed GAAR will apply to the main direct taxes and National Insurance.  As announced at the Budget, it will be expanded to cover Stamp Duty Land Tax (SDLT).  The consultation also proposes an extension of the GAAR to Inheritance Tax and makes clear that the Government will consider including further taxes if appropriate.

The consultation confirms that the Government is to establish an advisory panel, members of which will come from both HMRC and business, to give opinions on cases where HM Revenue & Customs proposes to apply the GAAR and to develop, update and approve guidance on its use.
David Gauke, Exchequer Secretary to the Treasury, said:

“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.”

Notes for Editors

1. The consultation can be found on the HMRC website (opens in new browser window).

2. The Government is strongly committed to tackling tax avoidance and, as part of its new approach to tax policy making set out proposals for a more strategic approach to the risk of avoidance.  A key element of these, detailed in Tackling Tax Avoidance, was the consideration of a GAAR.

3. In December 2010 the Government asked Graham Aaronson to lead an independent study to consider whether a GAAR could deter and counter tax avoidance, while retaining a tax regime that is attractive to businesses. 

4. In his independent report, Mr Aaronson concluded that a general anti-abuse rule would deter artificial tax avoidance schemes and would contribute to providing a more level playing field for businesses.

5. The GAAR will apply to the main direct taxes – Income Tax, Corporation Tax, Capital Gains Tax and Petroleum Revenue Tax – and National Insurance, as well as SDLT, some taxes linked to Corporation Tax and Inheritance Tax.

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