Although the news has been dominated by accounts of multinationals avoiding millions of pounds through tax avoidance schemes, work is going on to counter tax arrangements that are entered into simply to avoid UK tax via the Government’s General Anti-Avoidance Rules (GAAR).
On Monday, the House of Lords Economic Affairs Committee Sub-Committee on the Finance Bill held its final evidence session of the current inquiry with senior officials from The Treasury and HM Revenue and Customs (HMRC).
The Committee looked in detail at the new GAAR and tried to identify how effective it is likely to be in addressing the various types of tax avoidance recently highlighted in the media.
The Lords heard that a more widely-targeted anti-avoidance principle would cause uncertainty and would give HMRC too much discretion, while taking in too many ordinary tax planning measures.
In addition, the Committee heard that the GAAR is very unlikely to affect the use of tax avoidance schemes, such as the transfer pricing used by multinationals such as Starbucks and the consensus was that the GAAR will not be a cure-all for tax avoidance but “just one of a range of methods open to HMRC” to tackle it.
There is also concern that the complexity of the UK tax system already imposes a disproportionate burden on the small and medium sized enterprises (SMEs) which make up the majority of UK businesses.
Critics are opposed to the imposition of any further uncertainty or complexity on such businesses and insist that there must be clarity around the application of the rule removing the threat of the GAAR from the vast majority of everyday transactions undertaken by such an organisation.
Rob Chedzoy specialises within providing tax planning advice, support and guidance to owner-managed businesses.