Scottish general anti-avoidance rule (Scottish GAAR)

Produced by Tolley in association with Andrew Ford of Barr & Ford Limited

The following Owner-Managed Businesses guidance note Produced by Tolley in association with Andrew Ford of Barr & Ford Limited provides comprehensive and up to date tax information covering:

  • Scottish general anti-avoidance rule (Scottish GAAR)
  • Background
  • Operation of Scottish GAAR
  • Artificial tax avoidance arrangements
  • Countering the tax advantage
  • Appeals
  • Revenue Scotland guidance
  • Commentary
  • Circumstances where both the Scottish GAAR and UK GAAR could apply

Scottish general anti-avoidance rule (Scottish GAAR)


The Scottish GAAR is contained within RSTPA 2014, ss 62–72. The stated purpose of the rule is to protect revenue through counteracting tax avoidance arrangements, and is intended to work in tandem with the targeted anti-avoidance rules contained within the legislation implementing the devolved taxes.

The Scottish GAAR is effective from 1 April 2015 and applies to devolved taxes. A devolved tax is a tax specified as such by Scotland Act 1998, Part 4A. The devolved taxes 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. Air departure tax and the aggregates levy are expected to be devolved at some point in the future. The Scottish rate of income tax is not a devolved tax and remains under the control of HMRC, therefore is not within the Scottish GAAR.

The legislation governing the operation of the Scottish GAAR is at first glance self-explanatory and straight-forward, but the apparent lack of complexity means that the rules have broad application. Commentary on the practical implications of the rules are set out below. Revenue Scotland guidance is also given greater import by the legislation, and key points from the guidance are also set out below.

Operation of Scottish GAAR

The first point to note is that Scottish GAAR is a general anti-avoidance rule, and therefore has a potential wider application than the UK general anti-abuse rule (UK GAAR). The purpose of the Scottish GAAR is to counter tax advantages arising from tax avoidance arrangements that are artificial. The meaning of these terms is therefore key and are discussed below.

Artificial tax avoidance arrangements

For the Scottish GAAR to apply there must be an ‘arrangement’ which is:

  1. a tax avoidance arrangement

  2. artificial

RSTPA 2014, s 62

An ‘arrangement’ is widely defined and includes anything from a promise or undertaking through a specific action, event or transaction. The fact

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