The General Anti-Abuse Rule (GAAR)

Following extensive consultation, the Finance Act 2013 introduced a General Anti-Abuse Rule (GAAR) to counter abusive tax avoidance arrangements entered into (broadly) on or after 17 July 2013.

The legislation applies for the purposes of income tax, national insurance contributions, corporation tax, capital gains tax, petroleum revenue tax, inheritance tax, stamp duty land tax and the new ‘annual tax on enveloped dwellings’ that was also introduced in the Finance Act. It does not apply to VAT. The national insurance legislation is not included within the Finance Act but appears in the National Insurance Contributions Bill currently before Parliament.

The GAAR is intended to counteract tax advantages arising from tax arrangements that are abusive. Each of these terms is defined.

While the GAAR is aimed only at abusive transactions, it will be some time before we see how HMRC are interpreting it in practice. Even where it does not in the event apply, it has the potential to introduce considerable uncertainty, and will need to be considered for all but the most straightforward tax planning.

For further details see our factsheet here.


Jacquelyn Kimber
Gill Smith

Related links

Business tax
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