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UK Accountants Warn On Legality Of GAAR

By Amanda Banks,, London

09 April 2013

The Institute of Chartered Accountants in England and Wales (ICAEW) has reiterated its criticisms of draft legislation for a General Anti-Avoidance Rule, claiming that the proposed GAAR is confusing and that it could be in breach of international obligations by overriding double taxation treaties.

The ICAEW draws attention to Article 27 of the Vienna Convention, which the UK signed in 1971 and which states that "a party may not invoke the provisions of its internal law as justification for its failure to perform a treaty." ICAEW argues that the GAAR may therefore be unlawful, particularly in the case of around 100 agreements with non-OECD countries.

The head of ICAEW's Tax Faculty, Frank Haskew, was quoted as saying that the ICAEW supports the idea of a GAAR, but that there was "considerable uncertainty" about what arrangements would be affected by the draft legislation. He argued that it could take up to 20 years to test the GAAR’s provisions in court, and suggested that a clearance procedure would have addressed the issue.

The GAAR is due to be implemented from July 2013, following the passing of the 2013 Finance Bill. ICAEW has called for the date to be deferred, or for clear examples of acceptable and non-acceptable arrangements to be published.

ICAEW has also criticised GAAR draft legislation for including inheritance tax, arguing that non-commercial arrangements made for family reasons may be affected.

TAGS: tax | investment | tax avoidance | United Kingdom | legislation | HM Revenue and Customs (HMRC) | HM Revenue and Customs (HMRC)

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