Gaar must have its own checks and balances: Thompson
The government must not use its new general anti-avoidance rule as a substitute for “shoddy tax legislation,” Paul Thompson has warned.
Responding to the Treasury’s consultation on introducing Gaar from next April to apply to income, corporation, capital gains, petroleum revenues, inheritance and stamp duty tax, the tax and estate planning consultant for Canada Life, said there should be effective checks and balances on the rule.
Mr Thompson said: “This proposal is a major change to the UK tax system. It is important that, if it is introduced, it has all the relevant checks and balances to ensure that it is not simply a tool to allow shoddy drafting of tax legislation.
“It could easily become a catch-all for HM Revenue & Customs to use to counter any genuine arrangement that they simply don’t like. The proposals in the consultation document need further development before we have a satisfactory Gaar.”
His comments came as exchequer secretary to the Treasury, David Gauke, unveiled plans to increase the pressure on advisers who market abusive schemes, and make it easier for taxpayers to identify such schemes.
The proposals include making the disclosure of tax avoidance schemes rules an even stronger and more effective weapon in the battle against tax avoidance.
Alistair Cunningham, director of Surrey-based Wingate Financial Planning, said he was against the introduction of such a rule as it could create more problems for IFAs and their clients as it did not improve transparency.
Mr Cunningham said: “The rule runs the risk of bringing HMRC into more legal battles and creating less clarity for advisers and clients. It could make the system more complicated and subjective.”
He said MPs were wrong to describe tax avoidance as ‘immoral’, adding: “Some of these schemes may be unpleasant, but if it is legal people can do it. If it is illegal, then it is up to HMRC to follow up.
“Anyone working in tax planning should be pushing back.”