GAAR will “cause confusion and chaos”, say advisers

A LACK OF CLEAR DEFINITION within the incoming General Anti-Abuse Rule is likely to cause “considerable uncertainty”, advisers have warned.

The GAAR, designed to catch and prevent contrived tax avoidance schemes, was included in the 2013 Finance Bill and will take effect once it has received Royal assent in July, although many practitioners have been treating it as if it came in on 1 April.

But there are now calls for the rule’s implementation to be put back until it has been made clearer, the Telegraph reports, with many concerned about the legislation’s ambiguity.

Partner at solicitors Pannone, Jane Lee, said: “There is scope within the GAAR legislation for it to be used far more widely than the original government report had previously suggested.

“The drafting of the legislation and the fact that the guidance produced by HMRC is not legally binding means that there is scope for considerable uncertainty as to the type of arrangements which may be targeted by HMRC,” she said.

There have also been concerns raised over the public’s expectations of the new rule, with a widespread misconception that the GAAR will impact on an international level.

Chair of the House of Lords committee on the Finance Bill Lord MacGregor said that simply is not the case.

He said: “There is a misconception that GAAR will mean the likes of Starbucks and Amazon will be slapped with massive tax bills.

“This is wrong and the government needs to explain that to the public. GAAR is narrowly defined and will only impact on the most abusive of tax avoidance.”

He added: “We accept the narrowly focused GAAR as a starting point. We recommend that the scope of the GAAR should be reviewed after five years as part of a wider post-implementation review, which would look, in particular, at how the double reasonableness test had been applied in practice and its deterrent effect.”