General anti-abuse rule (UK GAAR)

Produced by Tolley

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

  • General anti-abuse rule (UK GAAR)
  • What is GAAR?
  • Scope and priority of UK GAAR
  • What happens under the UK GAAR?
  • Abusiveness test
  • Meaning of tax advantage
  • How is the UK GAAR applied?
  • Notice of proposed counteraction
  • Protective GAAR notice and provisional counteraction notice
  • Pooling and binding notices
  • More...

General anti-abuse rule (UK GAAR)

What is GAAR?

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 into effect on 1 April 2015 in relation to the devolved taxes. See the Scottish general anti-avoidance rule (Scottish GAAR) guidance note.

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.

The taxes covered by the UK GAAR are:

  1. income tax

  2. corporation tax

  3. capital gains tax

  4. petroleum revenue tax (PRT)

  5. diverted profits tax

  6. the apprenticeship levy

  7. inheritance tax

  8. stamp duty land tax (SDLT), and

  9. annual residential property tax (ARPT)

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.

As noted above, the Scottish GAAR applies to the devolved taxes, which are presently land and buildings transaction tax (LBTT) and Scottish landfill tax (SLFT). The number of devolved taxes will increase once the recommendations of the Smith Commission are implemented, see the Devolved taxes in Scotland ― the current position [updated] news item. The Scottish rate of income tax is not a devolved tax and remains under the control of HMRC, and therefore

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