I was at a meeting earlier this week where there was a very interesting discussion around tax policy and consultations. Almost inevitably, the discussion eventually turned (albeit briefly) to the question of a GAAR and whether we should have one.
So, should we have one? That’s a very emotive question but before we can answer that question, I believe we should be asking a slightly different one – do we need a GAAR?
What have we got at the moment? A complete hotchpotch of complex legislation, TAARs, HMRC guidance and interpretation, and the courts. Apart from the mess that this creates, it also – and much more importantly – creates uncertainty, which does nothing to encourage investment in the UK.
If we were designing the UK tax system from a blank sheet of paper, I feel pretty sure that a GAAR would be a part of it. A well designed and operated GAAR would go a long way to enabling a tax system that was less complex and did not need a raft of TAARs. The courts would also benefit from not having to perform the sort of interpretive gymnastics we sometimes see as they try to get the “right” result.
The problem is that we aren’t starting from a blank sheet of paper. Even those who, like me, believe that a well designed GAAR would obviate the need for TAARs, are realistic enough to see that their repeal is unlikely. And a GAAR in addition to TAARs is pointless and dangerous.
So, do we need a GAAR? Yes, I believe that we do need one if we are to simplify the tax system and increase certainty whilst protecting against abuse.
Should we have a GAAR? Only if it replaces the TAARs and complexity that we currently have. And I don’t see that happening any time soon.