Top ten tax understatements in GAAR Study report

Regular readers will know I have long awaited the outcome of Graham Aaronson's review. I have been referencing it on this blog since July 2010.

The Report has now been published and the media is awash with commentators rushing to offer their immediate conclusions. Suffice it to say that, as expected, the report offers an intelligent, practical and commercial way forwards. I look forward to hearing how the Government propose to move things on from here.

In the meantime I have identified my top ten tax understatements in the GAAR study report dated 11 November:

1. [A GAAR] would deter (and, where deterrence fails, counteract) contrived and artificial schemes which are widely regarded as an intolerable attack on the integrity of the UK’s tax regime. Para 1.7(i)
2. Judges inevitably are faced with the temptation to stretch the interpretation [of tax law], so far as possible, to achieve a sensible result; and this is widely regarded as producing considerable uncertainty in predicting the outcome of such disputes. Para 1.7(iii)
3. The tax rules in many areas have become extremely complex and in practice can give rise to very anomalous results. Para 1.10
4. In some cases the Courts, under the guise of purposive interpretation, have been prepared to stretch the interpretation of tax legislation in order to thwart tax avoidance schemes which they regard as abusive. Para 3.13
5. It is still early days to determine the value of the DOTAS scheme as a whole. However, it is plainly a useful source of information for HMRC. Para 3.17
6. It is clear that purposive interpretation, specific anti-avoidance rules and DOTAS are not capable of dealing with some of the most egregious tax avoidance schemes. Para 3.20
7. [A GAAR] should target those highly abusive contrived and artificial schemes which are widely regarded as intolerable, but that it should not affect the large centre ground of responsible tax planning. Para 5.1
8. The UK tax rules offer, and indeed in many instances positively encourage, the opportunity for taxpayers to reduce their tax liability. Taking advantage of this can be described as a form of tax avoidance, but clearly it is not something to be criticised and therefore it should not be counteracted by a GAAR. Para 5.14

And my two favourite tax understatements:

9. There are some areas of taxation, such as trusts, where the present statutory rules are extremely complex and can give rise to many anomalous consequences. Para 5.30

10. The UK’s tax legislation is notoriously long and complex. In many places it is virtually impenetrable. Para 1.7(iv)

Have you identified any other understatements in the report? Do add your observations as comments below.