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Back to basics: The GAAR

Unsure how the ‘double reasonableness’ test works? Sukhbir Binning and Ian Robotham (Pinsent Masons) provide a refresher guide to this ground-breaking legislation.

The general anti-abuse rule (GAAR) was introduced by FA 2013 Part 5 and applies to arrangements entered into on or after 17 July 2013. It is designed to deter taxpayers from using tax avoidance schemes and provides a statutory mechanism for HMRC to counteract tax avoidance arrangements which although within the letter of the law are not what was intended by Parliament.

Where the GAAR applies HMRC can make a just and reasonable tax adjustment to counteract the abusive tax advantage that the taxpayer is seeking to obtain. The regime contains a number of taxpayer safeguards including the fact that before a final GAAR counteraction notice can be issued the proposed application of the GAAR has to be put before the GAAR advisory panel...

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