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Brace yourselves: here comes GAAR!

Well, it looks like all our worst fears and nightmares have been realised: the General Anti-Avoidance Rule just received Royal Assent.

It was just a few days ago when the Finance Bill 2013, which contained GAAR, was enacted into the new law of the land. Now we have a definitive, easy-to-understand list of just what exactly you can do and can’t do when it comes down to what kind of behaviour will get you in hot water in regards to tax avoidance.

Yes, that was a bit of sarcasm to start you off on your day. Unfortunately any contractors out there now have to keep an eye on these convoluted new rules when they’re planning their tax payments, as every measure under the sun now has to pass a test that has to be ‘doubly’ reasonable, whatever in the world that means.

Actually the onus isn’t technically on the freelance worker, as Her Majesty’s Revenue & Customs has to prove that the tax measure is unreasonable. HMRC needs to seek a second opinion as well – hence the ‘double reasonable’ part of the test – now don’t ask me who this independent second opinion is going to be or where it’s going to come from mind you – and only if the tax measure has been determined to be underhanded or to be making use of a legal loophole will GAAR come down like a shedload of bricks on the head of the poor contractor, adjusting his or her tax liability by a commensurate amount (in other words, your taxes will go up).

All of this sounds awfully good on paper, but if you ask me it seems rather laden with bureaucratic red tape. Doesn’t it seem to just be complicating the issues of tax evasion and tax avoidance? It used to be you could simply point to the bastards who funneled their cash out of the country – say to the Cayman Islands or, if they’re less exotically-minded, Jersey – in an attempt to pay only a fraction of their fair share, but now you’ve got to go make sure you’re not hurting anyone’s feelings before you go accusing someone of tax avoidance.

Here’s a clue for the taxman: I’m rather sure that the shenanigans that multinationals such as Amazon and Google are up to qualify as tax avoidance, whether or not it will pas the ‘double reasonableness’ test. Maybe you should just close the damned tax loopholes instead of putting more laws in place that I’m sure a rather crafty accountant will be able to navigate eventually?

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