General anti-abuse rule (UK GAAR)

By Tolley
General anti-abuse rule (UK GAAR)

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

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

Background

The GAAR (general anti-abuse rule) is a general approach to tackling tax avoidance. It seeks to counteract tax advantages arising from abusive tax arrangements. The counteraction is exercised by making adjustments on a just and reasonable basis. 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.

FA 2013, ss 206, 209

The UK 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.

Scope and priority of UK GAAR

The UK GAAR takes priority over any other part of tax legislation and forms part of the UK’s anti-avoidance framework.

FA 2013, s 212

The taxes covered by the UK 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 apprenticeship levy with effect from 15 September 2016

FA 2013, s 206(3)

The UK GAAR also applies to national insurance contributions with effect from 13 March 2014. See Simon’s Taxes A2.126 for more on the scope of the UK GAAR.

National Insurance Contributions Act 2014, ss 1011

As noted above, the Scottish GAAR applies

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