By Daniel Hunter

The Government has launched a formal consultation on a new general anti-abuse rule (GAAR) to tackle artificial and abusive tax avoidance schemes. This follows the Budget 2012 announcement that such a rule will be introduced in 2013.

The Government is introducing the GAAR following an independent review led by Graham Aaronson QC, who concluded that the introduction of a targeted rule would deter artificial tax avoidance schemes and contribute to providing a more level playing field for business.

As well as considering Mr Aaronson’s report in detail, the Government has held informal discussions with business, tax practitioners and representative bodies in order to hear their views prior to drawing up the consultation and draft legislation.

In line with Graham Aaronson’s recommendations, the proposed GAAR will apply to the main direct taxes and National Insurance. As announced at the Budget, it will be expanded to cover Stamp Duty Land Tax (SDLT). The consultation also proposes an extension of the GAAR to Inheritance Tax and makes clear that the Government will consider including further taxes if appropriate.

The consultation confirms that the Government is to establish an advisory panel, members of which will come from both HMRC and business, to give opinions on cases where HM Revenue & Customs proposes to apply the GAAR and to develop, update and approve guidance on its use.

“The introduction of a GAAR will strengthen our anti-avoidance strategy, complementing the tools HMRC already has at its disposal and acting as a deterrent to those engaging in artificial and abusive avoidance schemes," David Gauke, Exchequer Secretary to the Treasury, said.

"The rule we are consulting on from today will effectively tackle such schemes, while minimising the impact on the vast majority of taxpayers who pay a fair share,” David Gauke, Exchequer Secretary to the Treasury, said.

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