General anti-abuse rule (GAAR)

By Tolley

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

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


The general anti-abuse rule (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 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, Part 5.

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.

This guidance note refers to the GAAR as the ‘UK GAAR’ to distinguish the provisions from the Scottish general anti-avoidance rule (Scottish GAAR) which came in to effect on 1 April 2015 in relation to the devolved taxes. See the Scottish general anti-avoidance rule (Scottish GAAR) guidance note.

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
  • diverted profits tax
  • capital gains tax
  • petroleum revenue tax
  • inheritance tax
  • stamp duty land tax
  • annual residential property tax
  • the

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