Home > Legal Articles > How will the GAAR tax rule affect taxpayers?

How will the GAAR tax rule affect taxpayers?

Posted on Tuesday, 23rd April 2013 by

Photo Credit: Alan Cleaver via Compfight cc

Tax: The General Anti Abuse Rule (GAAR)

HMRC published its official guidance on 15 April 2013.  The GAAR will be effective from later in the year, when Finance Bill 2013 receives Royal Assent.

The GAAR rejects the previously adopted approach that taxpayers are free to use their ingenuity to reduce their tax bills by any lawful means, however contrived those means might be and however far the tax consequences might diverge from the real economic position.  Per the HMRC Guidance:

Taxation is not to be treated as a game where taxpayers can indulge in any ingenious scheme in order to eliminate or reduce their tax liability.

The GAAR imposes an overriding statutory limit on the extent to which taxpayers can go in trying to reduce their tax bill. That limit is reached when the arrangements put in place by the taxpayer to achieve that purpose go beyond anything which could reasonably be regarded as a reasonable course of action (the “double reasonableness test”).

The target of the GAAR

The primary policy objective of the GAAR is to deter taxpayers from entering into abusive arrangements, and to deter would-be promoters from promoting such arrangements. There may be tax avoidance arrangements that are challenged by HMRC using other parts of the tax code, but if they are not considered to be abusive they are not within the scope of the GAAR.

What the GAAR is not targeted at

Any reasonable choice of a course of action should be outside the target area of the GAAR.  Some examples given are:


  1. Deciding whether to trade as a sole trader or limited company
  2. Whether to invest in ISA’s or other investments
  3. Giving away assets to reduce a taxable estate for inheritance tax

Interaction with Tax Legislation

Where there are arrangements which cannot be described as abusive, but which HMRC regards as seeking to achieve some tax advantage and as falling outside the range of acceptable tax planning, they will seek to challenge this by relying on other parts of the tax code applied in accordance with the legal principles developed by the courts in recent years.

The GAAR is the overriding power to challenge abusive tax arrangements which would not otherwise be taxed.  It should be considered when planning any structuring to take effect after it is introduced.

If you are unsure as to how the GAAR could affect you and your tax bills call our expert Leanne Hathaway today on 01509 212108 for more information and support.

Leanne is a Chartered Tax Adviser, specializing in advising on UK tax matters but also including overseas tax as needed. Leanne is head of Taxation Services at EHL Solicitors in Leicester.

Keep up to date with our daily blogs through the Edward Hands & Lewis mobile app, just search Edward Hands on the iPhone or Android store to download our app for free.


Talk to our legal team

The information provided in all of our blogs reflects only a narrative of some elements to consider on the topic. The blogs do not contain considered legal advice and should not be relied upon as advice. Please see our website terms and conditions for full details of our disclaimer. If you are interested in obtaining advice, please contact one of our lawyers who will be happy and able to advise you on your own particular circumstances.

1 Step 1

Quick Quote

Your Nameyour full name
Contact Number
Post Codeyour full name
Your Messagemore details
0 /

Leanne Hathaway - Tax and Trusts
Leanne Hathaway - Tax and Trusts
leanne.h@ehlsolicitors.co.uk 01455 274 170
Related author articles
Article tags

Map and pin icon
Sign up to our newsletter
  ERROR: 8 - CURL error: