The general anti-abuse rule

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When does the GAAR apply?

The UK's general anti-abuse rule (the GAAR):

  1. •

    counteracts (by the making of adjustments on a just and reasonable basis by HMRC or the taxpayer)

  2. •

    tax advantages that would, ignoring the GAAR, arise from abusive tax arrangements, and

  3. •

    has applied since 17 July 2013 (the date of Royal Assent to the Finance Act 2013 (FA 2013)) except that, in respect of National Insurance contributions (NICs), it has only applied since 13 March 2014

The GAAR only has effect in relation to arrangements that are entered into on or after the commencement date (17 July 2013 or, for NICs, 13 March 2014). If the arrangements form part of a wider set of arrangements that include pre-commencement arrangements, the GAAR ignores the pre-commencement arrangements unless they can demonstrate that the post-commencement arrangements are not abusive.

See Practice Note: The general anti-abuse rule (GAAR) and Flowchart: Does the GAAR apply?

The GAAR forms part of the UK's anti-avoidance framework

The GAAR:

  1. •

    takes priority over other parts of tax legislation, and

  2. •

    forms part of the UK's anti-avoidance framework that includes:

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Latest Tax News

Tax weekly highlights—19 March 2026

This week's edition of Tax weekly highlights includes: (1) the enactment of Finance Act 2026 on 18 March 2026, (2) News Analysis on the Court of Appeal’s decision in Muller UK and Ireland Group LLP that amortisation debits were correctly disallowed by HMRC, (3) News Analysis on the UT’s decision in Putney Power Limited on the issue of whether the appellants had begun to trade by the relevant date for EIS relief purposes, (4) new HMRC guidance on multinational top-up tax and domestic top-up tax reporting software, and (5) News Analysis on the FTT’s decision in Countrywide Partners Limited to uphold a penalty for failure to comply with a stop notice issued under the promoters of tax avoidance schemes (POTAS) rules.

Upper Tribunal denies EIS relief as trade not commenced (Putney Power and Piston Heating v HMRC)

Tax analysis: The Upper Tribunal (UT) has held that the First-tier Tax Tribunal (the FTT) made a material error of law in its approach to determining when a trade has ‘begun to be carried on’ by a company for the purposes of qualifying for Enterprise Investment Scheme (EIS) relief under section 179(2)(b) of the Income Tax Act 2007 (ITA 2007). The FTT had identified a set of principles by reference to factors which were of relevance in previous cases and applied those ‘legal’ principles to determine that neither Putney Power Limited (‘Putney’) nor Piston Hearing Services Ltd (‘Piston’) had begun to carry on a trade by the relevant date of 4 April 2018. The UT set aside the FTT’s decision on the basis that the FTT had sought to apply a principles-based test which did not exist as a matter of law. The proper approach requires a multi-factorial evaluation of all of the circumstances in the case at hand. The UT re-made the decision but ultimately reached the same conclusion as the FTT, dismissing the appeals of both Putney and Piston and holding that neither company had commenced trading by the relevant date. The decision is significant because it clarifies that there is no strict legal test for when a trade commences: the question remains highly fact sensitive and will be determined by reference to the particular facts and circumstances of each case. Written by Kate Ison (partner at Macfarlanes LLP) and Victoria Braid (associate at macfarlanes LLP).

FTT upholds £1m penalty for stop notice breach (Countrywide Partners Ltd v HMRC)

Tax analysis: In Countrywide Partners Ltd v HMRC, the First-tier Tax Tribunal (FTT) upheld HMRC’s £1m penalty on the taxpayer for breach of a stop notice under section 236A of the Finance Act 2014 (FA 2014), holding that the appellant continued to promote the arrangements by organising and managing them (including issuing payslips and making payments) for existing users.

Court of Appeal upholds UT decision disallowing amortisation debits (Muller UK and Ireland Group LLP and others v HMRC)

Tax analysis: In Muller UK and Ireland Group LLP and others, the Court of Appeal dismissed the appellants’ appeals against the Upper Tribunal (UT)’s decision that amortisation debits were correctly disallowed by HMRC.

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