PLC - GAAR Flashcards
What are the four requirements for the GAAR to be engaged?
There must be an arrangement that gives rise to a tax advantage. The tax advantage must relate to a tax to which the GAAR applies. The arrangement must satisfy the “main tax purpose” test, and the arrangement must be abusive.
According to section 206 of the Finance Act 2013, what is the purpose of the GAAR?
To counteract tax advantages arising from tax arrangements that are abusive.
Is a deferral of payment of tax or advance repayment of tax an ‘advantage’ for the purposes of the GAAR?
Yes.
Pursuant to section 206(3) FA 2013, which taxes does the GAAR apply to?
Income tax, NICs, corporation tax, the bank levy, CGT, PRT, SDLT, annual tax on enveloped dwellings (ATED), and IHT.
Is the GAAR capable of counteracting abusive arrangements that result in UK tax advantages being obtained under double tax treaty provisions?
According to HMRC, yes.
In the context of the GAAR, what is the test for determining whether an arrangement is a tax arrangement?
According to section 207 FA 2013, an arrangement is a tax arrangement if, having regard to all the circumstances, it would be reasonable to conclude that the obtaining of a tax advantage was (one of) the main purpose(s) of the arrangement.
In HMRC’s view,does the GAAR “main purpose” test have a high or low threshold?
Low - HMRC consider it is the ‘abusive’ limb of the test that narrows the scope of the GAAR.
Does HMRC have to establish that the taxpayer has a subjective purpose of avoiding tax in order for the GAAR to apply?
No.
If an arrangement has been reshaped or significantly altered in order to secure a tax advantage, does HMRC consider that the main purpose test is met?
Yes.
Does the obtaining of tax advice of itself indicate that obtaining a tax advantage was a main benefit for the purposes of the GAAR?
Not unless the advice results in a reshaping or significant alteration to the project.
How is ‘abuse’ defined for the purposes of the GAAR?
According to section 207(2) FA 2013, a tax arrangement is abusive if entering into or carrying out the arrangements cannot reasonably be regarded as a reasonable course of action in relation to the relevant tax provisions, having regard to all the circumstances.
Who has the burden of proof in relation to the concept of abuse under the GAAR?
HMRC must show on the balance of probabilities that tax arrangements are abusive (section 211(1)(a) FA 2013). It is not for the taxpayer to show that the arrangements are not abusive.
If tax legislation reflects a clear policy of providing tax relief, will a taxpayer that takes reasonable steps to obtain the relief be held to within the scope of the GAAR?
Not according to HMRC’s guidance.
In the context of the GAAR, what is the ‘double reasonableness test’?
To be abusive, the arrangements cannot reasonably be regarded as a reasonable course of action. The idea is that HMRC are obliged to determine the range of reasonably held views on a particular course of action.
Under the GAAR guidance, if relevant tax legislation contemplates that a taxpayer can exercise a range of choices, each involving different tax consequences, is it reasonable for the taxpayer to take tax consequences into account?
Yes.
What circumstances must be taken into account when applying the ‘double reasonableness test’ under the GAAR?
The policy objectives behind the tax provisions, whether contrived or abnormal steps were used, and whether the arrangements are intended to exploit any shortcomings in the relevant tax provisions.
According to HMRC, is the issue of narrowly held quoted eurobonds to avoid withholding tax abusive for the purposes of the GAAR?
No.
According to HMRC, is the inclusion of provisions in loan notes to ensure they are non-QCBs in order to obtain CGT ‘no-disposal’ treatment abusive for the purposes of the GAAR?
No.
What is the status of the HMRC GAAR guidance before a court or tribunal?
The court or tribunal must take account of the guidance, as approved by the Advisory Panel, and all opinions of the members of the Advisory Panel about the tax arrangements in question.
According to HMRC, are arrangements that deliberately bring a company within the late paid interest rules to ensure interest is deductible on a paid rather than accruals basis abusive for the purposes of the GAAR?
No (but note the late paid interest rules for connected companies have been repealed by the FA 2015).
For the purposes of the GAAR, is a court or tribunal obliged to take into account materials in the public domain at the time arrangements were entered into and evidence of established practice if they show that HMRC had, at the time arrangements were entered into, indicated its acceptance of that practice?
No, but it can do if it so wishes.
Who is obliged to counteract the tax advantage of any abusive arrangements?
The person to whom the tax advantages arise or HMRC by the making of such adjustments as are ‘just and reasonable’.
How will HMRC effect any adjustments required to counteract an abusive tax advantage?
By HMRC’s normal administrative powers and within the normal time limits (including the use of discovery assessments). The taxpayer then has the normal rights of appeal against the adjustments.
Is any GAAR counteraction of an abusive tax advantage confined the same tax as gives rise to the advantage?
No, the counteraction can take effect by way of any other tax to which the GAAR applies.
