Posted Aug 19, 04:37 PM
We now have a General Anti Abuse Rule to consider when advising clients or preparing tax returns.
It should be noted that this is anti abuse and not anti avoidance legislation. It is targeted at arrangements which abuse the legislation and there are various steps to test whether an action is abusive. The simple fact that tax is avoided is not enough to catch arrangements. There are of course many reliefs and exemptions which encourage taxpayers to make certain types of arrangements and as a result avoid tax by benefiting from those reliefs. This kind of “normal” tax planning is unaffected.
However a client may have bought into a “scheme” promoted by another company and will then need to self assess whether that scheme is abusive under the legislation. If it is the taxpayer should self assess the counteraction adjustment or risk a penalty for not doing so.
The difficulty is therefore in determining what is and isn’t an abusive arrangement. HMRC have given some guidance but there will be a transitional period while the body of case law and HMRC practice is built up. A quick review of history shows us that what is normal practice today could be seen as abusive in a few years time.
The Chartered Institute of Taxation are recommending that tax advisers should have procedures in place to review any client arrangements in this context and where necessary a second opinion should be sought from a suitably qualified expert.
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