The CIOT has warned the government that the new GAAR penalty proposed in draft Finance Bill 2016 may be counterproductive. The Institute argues that the severity of the penalty, which would charge 60% of the tax due where an arrangement is found to come within the scope of the GAAR, might incline a GAAR panel or court towards leniency and might also be deemed incompatible with the European Convention on Human Rights. The penalty will not deter abusive schemes if the GAAR panel is expected to find in favour of the taxpayer.
CIOT tax policy director John Cullinane, said: ‘There needs to be far more information about what the GAAR panel will consider abusive under GAAR … We think it is illogical that a person can be penalised for an innocent error of judgement in a more draconian manner than someone who has made a deliberate error.’
The CIOT has warned the government that the new GAAR penalty proposed in draft Finance Bill 2016 may be counterproductive. The Institute argues that the severity of the penalty, which would charge 60% of the tax due where an arrangement is found to come within the scope of the GAAR, might incline a GAAR panel or court towards leniency and might also be deemed incompatible with the European Convention on Human Rights. The penalty will not deter abusive schemes if the GAAR panel is expected to find in favour of the taxpayer.
CIOT tax policy director John Cullinane, said: ‘There needs to be far more information about what the GAAR panel will consider abusive under GAAR … We think it is illogical that a person can be penalised for an innocent error of judgement in a more draconian manner than someone who has made a deliberate error.’
