A good deal has been written about the general anti-abuse rule and the decisions of the GAAR Panel to whom HMRC can refer cases where it feels that the taxpayer has entered into a transaction which involved contrived or abnormal steps and that the arrangements did not represent a reasonable course of action – with the intention of securing a tax advantage.
Such a reference to the GAAR Panel is of course only made if the transactions are in accordance with the law. If they are not in accordance with the law, then HMRC would obviously challenge them before the tribunal.
Decisions of the GAAR Panel are not binding and have no particular force – but the Panel is comprised of tax professionals of impeccable skill and reputation, so their decisions will always be taken seriously.
However, they do not interfere with the right of the taxpayer to appeal against an assessment or counteraction notice issued by HMRC.
It is therefore interesting to find that although it has been operational since 2013, the case of Wired Orthodontics Ltd and others v HMRC [2023] UKFTT 17 (TC) is the first case in which a decision of the GAAR has been relied on by HMRC at a tribunal.
There may be a reason for that. FA 2013 s 212A provides that if HMRC charges tax on the basis of an opinion from the GAAR Panel that a certain course of action should not be allowed to work on the grounds that it is contrived or abnormal and not a reasonable course of action etc., you challenge it at your peril.
If you challenge it and win, that’s fine. But if you do not succeed, there is a penalty of 60% of the tax. It is therefore hardly a surprise that there has been a certain reluctance to take such matters to appeal.
In essence, this was a tax scheme involving the purchase of gold for employees in a manner intended to provide them with a substantial sum of money without a charge to income tax or NICs. The GAAR Panel said it did not or should not work.
HMRC issued determinations charging tax on the basis that the scheme was not effective and argued that if they were wrong, the GAAR applied, and the intended tax advantages should be counteracted.
The FTT held that the arrangements did not work under the law so the GAAR aspects did not need to be considered. I expect the taxpayer had mixed feelings about all that.
It is interesting to note that although the provision of the gold to the employees was regarded as earnings in their hands (and would therefore have been assumed to have been a deductible expense) the FTT held that it was not deductible on the grounds of duality of purpose.
A good deal has been written about the general anti-abuse rule and the decisions of the GAAR Panel to whom HMRC can refer cases where it feels that the taxpayer has entered into a transaction which involved contrived or abnormal steps and that the arrangements did not represent a reasonable course of action – with the intention of securing a tax advantage.
Such a reference to the GAAR Panel is of course only made if the transactions are in accordance with the law. If they are not in accordance with the law, then HMRC would obviously challenge them before the tribunal.
Decisions of the GAAR Panel are not binding and have no particular force – but the Panel is comprised of tax professionals of impeccable skill and reputation, so their decisions will always be taken seriously.
However, they do not interfere with the right of the taxpayer to appeal against an assessment or counteraction notice issued by HMRC.
It is therefore interesting to find that although it has been operational since 2013, the case of Wired Orthodontics Ltd and others v HMRC [2023] UKFTT 17 (TC) is the first case in which a decision of the GAAR has been relied on by HMRC at a tribunal.
There may be a reason for that. FA 2013 s 212A provides that if HMRC charges tax on the basis of an opinion from the GAAR Panel that a certain course of action should not be allowed to work on the grounds that it is contrived or abnormal and not a reasonable course of action etc., you challenge it at your peril.
If you challenge it and win, that’s fine. But if you do not succeed, there is a penalty of 60% of the tax. It is therefore hardly a surprise that there has been a certain reluctance to take such matters to appeal.
In essence, this was a tax scheme involving the purchase of gold for employees in a manner intended to provide them with a substantial sum of money without a charge to income tax or NICs. The GAAR Panel said it did not or should not work.
HMRC issued determinations charging tax on the basis that the scheme was not effective and argued that if they were wrong, the GAAR applied, and the intended tax advantages should be counteracted.
The FTT held that the arrangements did not work under the law so the GAAR aspects did not need to be considered. I expect the taxpayer had mixed feelings about all that.
It is interesting to note that although the provision of the gold to the employees was regarded as earnings in their hands (and would therefore have been assumed to have been a deductible expense) the FTT held that it was not deductible on the grounds of duality of purpose.
