What anti-avoidance and anti-abuse tax provisions apply in the context of private client wealth management?
A general anti-abuse rule (GAAR) was introduced in the UK with effect from 17 July 2013. The principal taxes it applies to include income tax, CGT, IHT, corporation tax, petroleum revenue tax, SDLT, ATED, diverted profits tax and national insurance contributions.
The GAAR is intended to target abusive tax arrangements. HMRC guidance on the rule states that it will only come into effect when the course of action taken by the taxpayer aims to achieve a favourable tax result that Parliament did not anticipate when it introduced the tax rules in question and, critically, where that course of action cannot be regarded as reasonable. There are a number of safeguards built into the legislation to ensure that the taxpayer receives the benefit of any reasonable doubt.
In addition to the GAAR, there are many specific anti-avoidance rules written into the legislation relating to the taxes covered by the GAAR. Some of these are referred to as targeted anti-avoidance rules (TAARs), and some may take the form of less explicit anti-avoidance protection. The GAAR effectively sits above these rules and may be used to target an abusive course of action that itself exploits a TAAR or other anti-avoidance rule.
Certain anti-avoidance rules are mentioned in the previous questions dealing with individual taxes. However, in many cases, the level of complexity involved puts discussion of anti-avoidance provisions beyond the scope of this publication, and specialist advice should be taken.
England & Wales Guide
The England & Wales guide answers the principal questions for Private Clients relating to the law in this jurisdiction.
