The GAAR Commandments

I was fortunate to speak with Graham Aaronson QC just before his talk at a CIOT Commerce & industry event last night. Graham is Chairman of the official UK GAAR study group set up in January by David Gauke the Exchequer Secretary to the Treasury. (GAAR stands for General Anti-Avoidance Rule).

I told Graham of the conclusion I had reached after listening to him on the recent radio programme Unreliable Evidence. I also mentioned that I had heard from others who had heard him speak elsewhere and concluded precisely the opposite. Graham told me and later repeated to the wider audience that his position is absolutely clear. He knows what a GAAR should achieve but he doesn't know if it's achievable.

It is clear that he hopes his committee will be able to formulate a workable GAAR but does now yet know if this will be possible.

During his talk Graham set out a number of key principles which, due to the way he referenced them I think we can fairly describe as the GAAR commandments:

1. Thou shalt not create more uncertainty.
2. Thou shalt not increase executive (HMRC) discretion.
3. Thou shalt not increase the burden on taxpayers or on HMRC .
4. Thou shalt not damage the competitiveness of the UK for international business.
5. Thou shalt adopt drafting that is intelligible and generally acceptable to all interested parties.
6. Thou shalt not catch transactions that would be regarded as legitimate tax planning (by sane, sober and sensible people in practice and in HMRC).
7. Thou shalt incorporate the rule in the legislation.

The third commandment means there can be no clearance procedure - which will surprise many commentators. It is only realistic if the GAAR satisfies the sixth commandment which is a pretty fundamental challenge.

As previously noted the committee's report will be published by the end of October. At this stage I wouldn't place any bets as to whether or not it will recommend a GAAR. I simply hope it will.