TAX NEWS - 2010

UK Tax: Treasury steps up anti-avoidance plans

HMRC and Treasury plans forGeneral Anti-avoidance Rule (GAAR) draws criticism from businesses, advisers and MPs

UK Treasury and taxman are ploughing on with plans for a one-size-fits-all anti–avoidance rule, despite opposition from individuals, businesses, advisers and even an accountant MP.

Ever since the idea of a General Anti-Avoidance Rule (GAAR) was unveiled by the Labour government there have been warnings from the profession about the ramifications of such a plan – namely that it would it raise significant uncertainty as to whether activities seen as legitimate planning will be treated as tax avoidance. It could leave accountants poten- tially being taken to task by HM Revenue & Customs for advice honestly given, but treated as helping their clients sidestep their tax obligations.

In efforts to preserve the UK's tax take, this further blurring of the lines will not only affect the 4.8m SMEs which form the foundation of the UK economy but also any individuals or new businesses thinking about a move to the UK, advisers say.

In kicking off the informal consultation this month, HMRC said it will be exploring "whether there is a case for developing a general anti- avoidance rule. This will be part of wider work on improve- ments to the tax policy making process. "However, advisers maintain the GAAR will lead to uncertainty for individuals and businesses.

Even MPs have been at loggerheads over the prospect of the GAAR. One claimed that top accountants' primary objective was to help clients sidestep their tax obligations.

Lib Dem MP John Pugh suggested last month that the life of some City accountants "is almost entirely dedicated to some form of tax avoidance or tax planning whatever they want to call it".

However, Conservative MP Nigel Mills, an accountant, hit back at the claims, warning that it would damage efforts to spur inward investment to the UK and keeping entrepreneurs and businesses within our borders. "A general anti-avoidance rule in principle may not be a brilliant way of doing that," Mills warned.