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Tax planners stand to be targeted under GAAR rules

According to recently published guidance, any tax planner that exploits loopholes in shoddily drafted legislation stands to be targeted for tax avoidance.

No more games, says the taxman, as HMRC is tired of people treating taxation as a puzzle to be solved in order to weasel out of paying their fair share by using technically legal tax avoidance strategies. It’s part of why the new General Anti-Abuse Rule was drafted, and the GAAR seeks to specifically put an end to this ‘morally repugnant’ behaviour as Chancellor George Osborne called it.

However, there are some of these loopholes right in GAAR itself, as the new legislation aims to take down egregious fringe cases of tax avoidance well before it will come to bear on other tax planning schemes such as avoiding capital gains by ‘flipping’ a second home. In fact ‘reasonable’ choices of action when it comes to reducing your tax burden will slip through the cracks according to the new guidance.

Of course what can you expect when the details of the legislation were worked on by business representatives, accountants, and lawyers along with tax avoidance campaigners? The so-called advisory panel was stacked with people and firms who have a vested interest in diminishing the reach of any law that would place them at risk of prosecution for tax avoidance after all, and the ‘extreme avoidance’ that will be targeted by GAAR is more of a bone thrown to the campaigners and designed to skew public perception in the new rule’s favour than to actually effect any real change in the amount of tax avoidance going on in the UK – all you have to do, if you’re under investigation for a GAAR violation, is to prove that the choice you made was a ‘reasonable’ one.

Still, I suppose it’s better than nothing in that it will cut down on at least some particularly egregious instances of tax avoidance. The real test will be whether or not GAAR will be able to be applied effectively to massive multinationals doing business in the UK, as these firms are absolutely notorious for their tax avoidance schemes that – while technically within the letter of the law – result in millions of missed taxes every year.

I don’t know about you but we absolutely need that money flowing into the government’s coffers. I’d rather it come out of the deep, deep pockets of a firm such as Amazon or Google than the pockets of those that are already paying ridiculous amounts of money in taxes, especially since every penny counts in the current economy!

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