Overview

This bill introduces a General Anti-Tax Avoidance Principle (GAAP) to prevent individuals and companies from using financial arrangements primarily to avoid paying tax. The GAAP will allow HMRC to counteract tax advantages gained through avoidance schemes, ensuring fair tax contributions.

Description

The bill establishes a GAAP that applies to various taxes including income tax, corporation tax, capital gains tax, inheritance tax, and VAT. It defines "tax arrangements" as those where obtaining a tax advantage through avoidance is a main purpose. "Tax avoidance" is defined as not paying tax at the right time, by the right person, or in the right amount, according to the economic substance of the transaction. "Tax advantage" encompasses situations where a lower tax liability arises through an arrangement.

The bill empowers HMRC to counteract these tax advantages on a "just and reasonable" basis, making consequential adjustments to tax assessments. It outlines procedures for court or tribunal proceedings concerning the GAAP, considering various factors including HMRC guidance and parliamentary intent.

The bill also provides a mechanism for taxpayers to apply for clearance of transactions, subject to providing full details and paying a fee of at least £1000 or 5% of the estimated tax due (whichever is greater). HMRC can then issue a notification stating whether the transaction is deemed to comply with the GAAP. HMRC is granted powers to obtain information from individuals or entities suspected of tax avoidance.

Government Spending

The bill states that any expenditure incurred by a Minister of the Crown or a government department under this Act, and any increase in sums payable under any other Act due to this Act, shall be paid out of money provided by Parliament. No specific figures are provided.

Groups Affected

• Companies and individuals: Those engaging in tax avoidance schemes will be directly affected, potentially facing increased tax liabilities and penalties.
• HMRC: Will have enhanced powers to investigate and counteract tax avoidance, increasing their workload.
• Tax advisors and lawyers: May need to adapt their strategies to ensure compliance with the new GAAP.
• Courts and tribunals: Will handle disputes arising from the application of the GAAP.

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