Graham Aaronson QC is currently leading a study into the desirability and feasibility of a general anti-avoidance rule (GAAR). He has indicated that he believes any future GAAR should be targeted at "flagrant" tax schemes that it is readily apparent would never be carried out in the real, commercial or family, world.
In a recent interview with Tax Journal, Aaronson QC talks of his concern that judges are straining the boundaries of purposive interpretation of tax statutes in order to defeat what they see as tax avoidance schemes. He sees a key advantage of a GAAR as being that the uncertainty and litigation risk arising from the courts' current approach to anti-avoidance would be confined to schemes where there is genuine debate as to whether the scheme in question goes against the intended purpose of the legislation.
The working group has not yet concluded whether it will be possible to frame a GAAR in workable legislative terms. Even if it is, it is unlikely that there would be the confidence in the GAAR to abolish existing targeted anti-avoidance legislation for some time. The GAAR would therefore be an additional tool available to HMRC and the judiciary rather than having any simplification benefits.
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