Fears That Anti Tax Abuse Rules Could Hamper Growth

Submissions to a consultation by HM Revenue & Customs (HMRC) by business leaders and professionals on the new general anti-abuse rule (GAAR) and draft legislation have suggested that the proposed rule could be too broad and could actually harm economic growth.

The consultation, which ran for three months and ended on Friday, sought the views of businesses, individuals, tax advisers, professional bodies and other interested parties on the proposals to introduce GAAR.

Graham Aaronson QC, who led an independent review last year, recommended the introduction of a targeted GAAR. His report concluded that the rule would deter artificial tax avoidance schemes and contribute to a more level playing field for business.

However, submissions to the consultation have generally expressed concern that the proposed GAAR is too nebulous and could leave taxpayers and professional advisers unclear about specific schemes in an already complex tax environment.

Some business leaders argue that such a broad anti-avoidance rule could compromise the stability that is vital to give businesses the confidence they need to make and maintain investments in the UK, which currently boasts the most competitive corporate tax system in the G20.

While others say that it would be very easy to damage the reputation of the UK as an attractive place to do business through introducing tax uncertainty around normal commercial business planning decisions.

Other concerns are that the new GAAR would give too much power to HMRC, while other gripes are that the emphasis is too much on large companies rather than on the small and medium-sized enterprises (SMEs), which make up the backbone of the country. And some go so far as to say that the rule is not required at all.