Partner Article

Need to know: General Anti-Avoidance Rules

George Hardley, tax expert at Hartlepool-based Waltons Clark Whitehill, shares his views on on General Anti-Avoidance Rules (GAARS).

More than a month on from the Budget and the prospect of General Anti-Avoidance Rules (GAARs) is still something which is being discussed with a great deal of trepidation.

GAARs will be of concern to a lot of people who are simply using existing, legitimate ways to protect their income, but who are being targeted by a Government keen to show it is not too close to the wealthy to make tax fair.

The anti-avoidance measures from the Budget included the introduction of a 15% rate of Stamp Duty Land Tax on property purchases carried out through corporate envelopes since stories of the wealthy avoiding SDLT have been circulating in the press of late.

However, business owners should be cautious of the announcement of a possible General Anti-Avoidance Rule being introduced into UK tax laws.

A GAAR would potentially be very wide ranging and could allow HMRC to try to counter any arrangements that allow taxpayers to reduce their overall tax liabilities. This could range from relatively straightforward arrangements between married couples through to complicated arrangements involving many parties.

For a number of years, many individuals have operated their businesses through limited companies from which they take the majority of their income as dividends. In connection with such arrangements, there has been talk from time to time of whether the government would ever try to counter this because of the availability of sharing income with spouses and other family members to reduce potential higher rate tax liabilities, as well as the significant savings in National Insurance that can be acheived.

The period of consultation and eventual publication of the draft and final legislation will, therefore, be very interesting and of concern to some. Therefore, business owners should keep a wary eye on proceedings so that if changes to their business structures and arrangements are subsequently required they can be planned in advance and then made at the most suitable times.

This was posted in Bdaily's Members' News section by George Hardey .