ISSUE 12 - Poledna | Boss | Kurer

Crucially, the government’s proposals differ in other
ways too, and the language in the draft legislation
suggests that it would be wider in scope than
Aaronson’s GAAR.
Over 14,000 consultation responses were received
by the Treasury, and while these revealed support
for the concept of a general anti-abuse rule, many
respondents to the consultation expressed some
alarm at certain key elements of the draft legislation.
One of the main concerns is over the tests to be used
to establish whether a tax scheme is "abusive" or "acceptable"
avoidance, which deviate from the recommendations
of the Aaronson report, and in particular,
the government's "main purpose" test to be used
to define a "tax arrangement." This clause would
ensnare an arrangement if, “having regard to all the
circumstances, it would be reasonable to conclude
that the obtaining of a tax advantage was the main
purpose, or one of the main purposes, of the arrangement.
Suggestions by respondents that a more narrowly-targeted
test, such as a "sole," "dominant" or
"primary" purpose test would be preferable to a main
purpose rule, so as to provide greater assurance to taxpayers
that "centre ground planning" would not be
caught, were rejected by the government, however.
Respondents also pointed out flaws in the “reasonable”
test. Indeed, this was a key concern for nearly
all respondents, a large majority of whom considered
that the proposed "double reasonableness" test
is subjective and that the draft legislation may go
beyond the stated policy aim, its scope potentially
extending across a broad spectrum.
Echoing the views of the CIOT, KPMG 5 says that
the proposed anti-abuse rule, while sounding fine
in principle, is far from perfect, and could end up
merely adding more uncertainty to an already complex
tax system. Consequently taxpayers entering
into any planning at all will have a "sword of Damocles
hanging over their head."
"It's a real shame that the general anti-avoidance
rule… is likely to lead to more, not less, uncertainty
over where the line is drawn between ‘reasonable
tax planning' and ‘unacceptable tax avoidance'
which is often a key bone of contention between
taxpayers and tax authorities when agreeing what is
the ‘right' amount of tax due," commented Chris
Morgan, head of tax policy at KPMG, upon the
publication of the draft GAAR law. "The GAAR
aims to target artificial and abusive tax planning
and is not designed to be a broad spectrum rule
that would sweep up arrangements made in the
normal course of business. The government is to be
applauded for following Graham Aaronson QC's
Report recommending such a targeted approach.
However, looking at the wording of the proposals,
it could go much wider than this as it is based on
what is and is not ‘reasonable' in both the wording
and spirit of the legislation. What is reasonable
to one person is unacceptable to another and ultimately
the Courts will have to decide where the
line is."
Law firm Clifford Chance 6 also doubts that the
"double reasonableness" test will achieve its objective,
observing in a client briefing that: "When the
swipe down ❯
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