Published on 29 Nov 2011 • United Kingdom |
"Coalition policies and the general political climate, as well as the talents brought together for the GAAR report, have already led us to assume that this time it's serious."
"The notion of a reasonable exercise of choices of conduct afforded by the legislation to define the safeguard for reasonable tax planning will be difficult to apply. Invariably, tax legislation does not provide that a taxpayer may do A or B. In many cases whether or not a choice is available and the parameters within which it may legitimately be exercised will be subtle matters of inference and judgement ... ... the challenge is to define the elephant, the boundary between the centre ground of "responsible" tax planning and unacceptable tax avoidance without creating too much uncertainty. In practice, there will be some clear cut cases where the illustrative GAAR, rightly, will apply but there will be many normal commercial transactions where doubts as to its applicability will linger."
"The problem is that the question of what is acceptable tax planning and what is avoidance is as political and philosophical as much as it is legal. There are some who still hold to the traditional view that a taxpayer has the absolute right to arrange his or her affairs to minimise tax. There are others who believe that we all have a duty to contribute to society by paying the "right" amount of tax (whatever that is)."
"And is the first adopter of a scheme at an advantage (because at that stage there is insufficient awareness of the scheme for it be "widely regarded" as anything)? Or is it better to wait until the scheme is being widely adopted in the marketplace, so the scheme is demonstrably regarded, at least by its adopters, as a reasonable "choice of conduct?"
".. although there may be a case for another weapon against "egregious" tax schemes, it is of concern if the GAAR does cause additional uncertainty and costs in practice for UK and international business, individuals and advisers ... we suggest that the existence of the GAAR and the Advisory Panel will only act to increase the costs of tax disputes which may be good for advisers but adds to the unattractiveness of the UK tax system for taxpayers."
"Many of the biggest multinationals build tax planning around commercial change and therefore should not be affected by a UK general anti-avoidance rule. The real fear is that those companies whose tax planning may be assessed more subjectively will be put off by the uncertainty."
"If indeed it is the case that fewer specific anti-avoidance rules are introduced in the future, then this would be laudable and help to redress the balance back towards simplicity. It would also be (as the report mentions) a real opportunity to sweep away the complexity of many of the existing specific anti-avoidance rules – although unfortunately one which I doubt will be taken any time soon."
" I am not at all convinced that a GAAR in the form proposed would lead to the simplification of tax legislation past or present. If the GAAR succeeds in its aim of leaving the middle ground untouched, I would expect HMRC to want to retain its current arsenal of TAARs. Why would they give those up if the GAAR really is a nuclear weapon only for use in the extremes? And is there really that much egregious planning left which is not deterred by the current hostility of the courts to anything perceived as tax avoidance or which, if it does go ahead, then survives the court process? "
"Sadly, however, in recent years we have not only lost certainty, we have got to the stage where the success or failure of a tax-avoidance scheme has become a lottery - it seems sometimes that almost everything depends on which judge or judges happen to hear the appeal ... Faced with such a lottery, a GAAR (especially a GAAR tightly focused like that recommended by Graham's committee) can only help tax advisers to predict how a scheme is going to fare in the Courts."
"The novel aspect of the GAAR will be to allow the Advisory Panel to opine on whether planning is reasonable. This will not be a judicial hearing. The expectation is that the decisions of the Panel will set practical boundaries to tax planning. It would be remarkable if a business's structuring for planning laws, competition law or employment law were made subject to a discretionary override. The GAAR really will take tax law that far out of the legal system."
"... the real killer for me ... is the idea that some triumvirate advisory panel on which HMRC and an industry specialist sits should pronounce aye or nay. The phrases “conflict of interest”, “chance to stick the knife into your competition” and “nice little earner” spring to mind. How is this supposed to sit beside the usual Tribunal process? Even if it is just labelled an advisory panel it’s almost bound to usurp or pervert or interfere with the judgment of the courts, and I’m not sure I like the sound of that."
"We should either have a proper clearance system for the GAAR available to all with all rulings published in anonymised form or we need to ensure that no one benefits from a clearance or concession, whether official or unofficial, from HMRC on the GAAR."
"The lack of a clearance process is inevitable, but global businesses are not going to invest on the basis that the GAAR may be looked at in 5 years time if there are problems - they will simply look at other territories where there is clarity ... HMRC will have to come up with a way to provide assurance on a real time basis that a particular transaction is outside the GAAR."
"One of the problems with a GAAR is that it can take many years for case law to develop as an aid to an understanding of its scope. The authoritative guidance might usefully seek to address this point at the outset by considering what the application of the GAAR would be to cases that have gone before. So for example: the taxpayer in Mayes would lose (for reasons that would be explained) but the taxpayer in BMBF v Mawson would still win (for reasons that would also be explained). Of course, once you start doing this many cases can be considered. The most useful approach is perhaps to address some of the modern taxpayer successes (e.g. consider First Nationwide, if it is then final, or Bank of Ireland, rather than Duke of Westminster). There aren’t that many recent taxpayer successes to work through…"
" ...if a GAAR is on the cards, the proposals in the report of Graham Aaronson's study group achieve a good balance between protecting the right of taxpayers to structure their affairs to minimise their burden of tax and the rights of the tax authorities (and, by extension, other taxpayers) to make sure that no one uses artificial structures to shirk their obligation to pay a fair share towards the public services on which we all depend."