Welsh general anti-avoidance rule (Welsh GAAR)

Produced by Tolley

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

  • Welsh general anti-avoidance rule (Welsh GAAR)
  • Introduction to Welsh GAAR
  • Definitions and scope of Welsh GAAR
  • Counteraction of tax advantages
  • Mechanism of counteraction
  • The right of appeal
  • Welsh GAAR penalties
  • Other guidance notes on GAAR

Introduction to Welsh GAAR

The UK general anti-abuse rule described in the General anti-abuse rule (UK GAAR) guidance note, does not apply to the Welsh devolved taxes. Instead, a separate general anti-avoidance rule (GAAR) applies to devolved taxes in Wales from 1 April 2018 (ie land transaction tax and landfill tax).

Welsh income tax is only partially devolved because the National Assembly for Wales can only set Welsh rates of income tax, although it has not done so and Welsh taxpayers continue to pay income tax at the same rates that apply to the rest of the UK (excluding Scotland). HMRC administers and collects Welsh income tax and the UK general anti-abuse rule continues to apply to income tax.

The Welsh GAAR is generally considered to be wider in scope than the general UK GAAR because it is an anti-avoidance rather than an anti-abuse rule. It does not look at ‘abusive tax arrangements’ in the same way as the GAAR that applies in the rest of the UK. Rather, it applies when the obtaining of a tax advantage is 'the main purpose, or one of the main purposes, of an arrangement’. The Welsh Revenue Authority guidance on the Welsh GAAR warns that taxpayers should expect that the Welsh Revenue Authority will seek to proactively apply a wide interpretation of the GAAR.

The Welsh GAAR does not apply when the arrangement was consistent with generally prevailing practice and the Welsh Revenue Authority had indicated its acceptance of that practice. The Welsh Revenue Authority have regard to case law that indicates what constitutes generally prevailing practice. If a set of arrangements that obtains a tax advantage is considered by taxpayers or advisers to be generally prevailing practice, it will not afford taxpayers protection from action under the GAAR if the Welsh Revenue Authorit

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