General anti-abuse rule (GAAR)

By Tolley

The following Trusts and Inheritance Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • General anti-abuse rule (GAAR)
  • Background
  • Scope
  • What happens under the GAAR?
  • Abusiveness test
  • Meaning of tax advantage
  • How is the GAAR applied?
  • The GAAR Advisory Panel
  • HMRC guidance
  • GAAR penalties
  • Interaction with other arguments in enquiry cases
  • How to gauge whether GAAR is likely to apply


The GAAR was introduced in Finance Act 2013 as part of the Government’s wider efforts to tackle tax avoidance. The shape and mechanism of the GAAR was developed following on from an independent study into the merits of a GAAR in the UK, led by Graham Aaronson QC who recommended that a GAAR properly targeted at abusive avoidance arrangements would be beneficial to the UK tax system. The draft rules for the GAAR and the draft HMRC guidance relating to it were subject to public consultation before final enactment in FA 2013, ss 206–215.

The GAAR applies to arrangements entered into on or after 17 July 2013. This includes arrangements that are part of wider arrangements entered into before that date, although the GAAR cannot be applied to such parts of the wider arrangements entered into before that date. Any such wider arrangements are, however, to be taken into account if they would help establish that GAAR should not be applied.

Despite little evidence of the UK GAAR being used in practice, Finance Act 2016 included provisions to ‘strengthen the GAAR further’, including the introduction of penalties in respect of arrangements which have been counteracted under the GAAR.


The taxes covered by the GAAR are:

  • income tax
  • corporation tax
  • capital gains tax (CGT)
  • diverted profits tax
  • the apprenticeship levy
  • petroleum revenue tax (PRT)
  • inheritance tax (IHT)
  • stamp duty land tax (SDLT)
  • annual residential property tax (ARPT)

The GAAR also applies to National Insurance contributions with effect from 13 March 2014.

National Insurance Contributions Act 2014, s 10 (subscription sensitive)
What happens under the GAAR?

If tax arrangements are abusive (see below

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