175 tax experts took part in our survey on the prospect of a general anti-avoidance rule. Here are the findings, together with a selection of (anonymised) comments.
Comments from readers and headline results to our survey:
What is needed is not a GAAR but a clearer approach from HMRC. They should say whether any schemes disclosed under DOTAS have been accepted as working. They should also Name Scheme Sellers and Promoters who sell unacceptable and artificial schemes. This would prevent anyone buying them in the first place! A GAAR will just muddy the waters further.
A GAAR would give HMRC a green light to continue with a system that clearly is not fit for purpose
This is a ridiculous proposal and would give HMRC officials the ability to simply deem any tax mitigation actions as illegal. Most tax avoidance is entirely legitimate and indeed it is right and proper that taxpayers should be able to minimise their tax liabilities in accordance with the law. HMRC continue to conflate "avoidance" and "evasion" - this must stop.
A GAAR is unnecessary and would lead to greater uncertainty, not less. Compliance costs would rise and disputes would become more commonplace.
As a VAT specialist, I have been amazed at the reluctance of HMRC to use existing powers to challenge the value of transactions, which have resulted in complex anti avoidance relating to property. No GAAR is practical until HMRC actually gain a proper understanding of how commercial organisations work.
There is insufficient HMRC staff to implement a GAAR, it takes long enough to get minor clearances now so it would not be workable in the current climate.
The problem with a GAAR is that it leaves too much to HMRC discretion - much better to have targeted rules which are (slightly) clearer.
HMRC have too far reaching powers already. They need to be reined in, not given additional powers.
The GAAR offends against the rule of law by replacing the certainty of a rules based system with the capricious and subjective judgments of anonymous state appointed quangocrats.
A fee to taxpayer [for pre-transaction clearances] may be appropriate for more complex or higher value clearances, but not for all cases. Repeal of current TAAR's is vital as part of implementation of a GAAR.
A GAAR has to be fairly all-encompassing to work and risks catching in its net entirely legitimate tax reduction/avoidance activities that may simply displease HMRC whether now or in the future.
As always it will depend upon the drafting. My main clients are charities and anti-avoidance tends to hit them when there is no intent to avoid tax. A GAAR should only be introduced if it can be targeted at actual avoidance, not genuine commercial transactions. Taxpayer certainty is key. Businesses will not locate to the UK or use the UK as a holding location if they cannot obtain certainty over their tax position.
Any pre transaction clearance is likely to be too cumbersome to administer.
GAAR would mean that accountants would have great difficulty advising their clients. I do not want to be in a position where I say to a client I will have to write to the Revenue first before I can comment on any particular course of action.
It is up to legislators to legislate clearly. Can you imagine a GAAR being considered in other areas such as criminal law. It would be considered oppressive and unjust in other areas so why is should it be considered acceptable in the tax sphere?
A GAAR will create uncertainty which will make the UK less competitive for the location of multi-national companies and groups. HMRC's response and approach to rulings is very questionable because of the subjective issue of a comparator transaction to decide whether there is any UK tax saving purpose.
It would be good to get away from the cycle of anti-avoidance legislation being introduced to close loopholes which then has unintended consequences for 'innocent' taxpayers.
Such a provision would be unworkable because by its nature it has to be so widely drafted to make it inevitably contentious - specific and targeted anti-avoidance legislation is the only sensible option.
In complex cases I can see a case for the taxpayer at least contributing to the cost of [any pre-transaction clearance] procedure, or for multiple applications by the same taxpayer.
We already have the longest tax code in the world: we do not need a GAAR. Instead, we should simplify the existing rules, so that the system can be operated efficiently by HMRC and understood by lay people.
A set of general principles, properly worded, is the only way forward. It is for the Courts to decide how to interpret those principles in a particular set of circumstances where taxes inter-react, or specific provisions appear to contradict the principles. It is then for Parliament to review the operation of the law and correct where necessary. We have in recent times lost sight of these concepts and sought to extend existing law in an unsatisfactory manner - for example HMRC's attempts to deal with MTIC by seeking to impose their idea of due diligence in opposition to accepted and existing trading practice.
Any new procedures should be enacted on a forward processing basis only - and not applied retrospectively.
It didn't work last time they tried something similar.
The problem with a GAAR is how all embracing the rule would be and would it give HMRC the power to impose its will on any reasonable steps the tax payer may take to reduce the tax burden on its businesss. Present experience seems to say that HMRC cannot be relied on to behave reasonably.
Whilst I support a GAAR in principle I am not confident that we can rely on parliament and HMRC to introduce fair and workable legislation given their past track record.
HMRC should be concentrating on getting their PAYE system up to date first.
Other jurisdictions that have gone down the GAAR route demonstrate that this is no magic bullet. To prevent avoidance happening you need simple law and low tax rates, say 15% flat rate across all taxable transactions.
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