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2015 Autumn statement: GAAR gets more teeth

George Osborne has given the General Anti-Abuse Rule (GAAR) more teeth with new penalties in the Autumn Statement 2015.

Corporation tax was barely mentioned in the speech, although various anti-abuse measures were highlighted.

In his statement Osborne revealed the introduction of a new penalty of 60% of the tax due to be charged in all cases successfully tackled by the GAAR. The government will also make small changes to the GAAR’s procedure to improve its ability to tackle marketed avoidance schemes.

However, commenting on the increase to 60% in the potential penalties for breaches of the GAAR, Philip Fisher of BDO said the “tinkering around avoidance” was “unlikely to re-float the economy, since to date it is not clear that a single tax (not) payer has been caught in the GAAR net.”

Tina Riches of Smith & Williamson added that taxpayers were still very much in the dark on what is caught by the GAAR.

“To date HMRC has not reported on any cases going to the GAAR panel formed after the 2013 legislation, so it seems rather premature to bring in GAAR penalties,” she said.

Also revealed in the Autumn Statement, new rules will be introduced to stop avoidance of stamp tax where ‘deep in the money’ options are used to transfer shares to a depositary receipt issuer or clearance service.

To help reduce opportunities for income to be converted to capital to gain a tax advantage, the government will also shortly publish a consultation on the company distributions rules.

It will also amend the transactions in securities rules and introduce a ‘Targeted Anti-Avoidance Rule’, according to Treasury papers.

The Autumn Statement documentation also stated: “The government is aware of tax planning around the intangible fixed assets regime used to obtain more generous corporation tax relief than is intended by the legislation. It will therefore amend the regime to stop arrangements that use partnerships to obtain relief that was not intended.

“The government will also amend legislation to counter two types of avoidance involving capital allowances and leasing, which involve businesses artificially increasing the value of their capital allowances or lowering the amount of tax which they pay,” the statement reads.

Lucy Brennan, partner at Saffery Champness also commented on the anti-avoidance measures: “Although efficiency measures such as a combined centre and digitalisation will assist with this one has to ask, with the GAAR in place, where further avoidance will come from, given we are still waiting for the first GAAR cases to be heard.”

Chas Roy-Chowdhury, ACCA head of taxation, added: “This past year saw a fall in corporation tax collected through anti-avoidance measures; this would imply that they are moving in to areas where collection is more difficult and time consuming. The new penalties announced under the GAAR are a further announcement of tax creep, which is unwelcome.

“The failure of the government to get the tax credits cut through the House of Lords has taken away near enough all of the Chancellor’s room for manoeuvre, so relying on the latest anti-avoidance expectation would be dangerous,” Roy-Chowdhury said.

Finance Bill 2016 measures with immediate effect from 25 November 2015 focus on the following policy measures:

 

  • Corporation Tax: loans to participators, trustees of charitable trusts
  • Corporation Tax and Income Tax: capital allowances and leasing - anti-avoidance
  • Corporation Tax: related party rules, partnerships and transfers of intangible assets


On capital allowances and leasing, the measure is in two parts: Preventing a person using an artificially low disposal value for capital allowances purposes on the disposal of plant or machinery where tax advantage is one of the main purposes of the arrangements which include that disposal; and it brings into tax as income, if not already so taxed, any consideration receivable by a person, or a connected person, for agreeing to take over payments under a lease for which that person can claim tax deductions.