Introduction Details of the Sections
2.Section 204 sets out the purpose of the GAAR, noting that it applies only to “tax arrangements” which are “abusive” (see paragraphs 4 and 5 below) and listing the various taxes covered by the GAAR (see paragraph 1 above).
3.Section 207 sets out how ‘tax arrangements’ and ‘abusive’ are defined for the purposes of the GAAR.
4.Subsection (2) defines “abusive” tax arrangements. Arrangements are “abusive” if entering into them or carrying them out cannot reasonably be regarded as a reasonable course of action in relation to the relevant tax provisions. Again, all circumstances must be taken into account and the section includes a non-exhaustive list of circumstances which must be considered.
5.Subsection (4) lists examples of things which might indicate that the tax arrangements are abusive. Tax arrangements may be abusive if they give rise to certain results (such as a tax result which differs from the economic result) but only if it is reasonable to assume that the result was not anticipated when the relevant tax provisions were enacted.
6.Subsection (5) notes that a possible indicator of non-abusive arrangements is that the tax arrangements accorded with established practice at the time they were entered into and HMRC had, at that time, indicated its acceptance of that practice.
7.Section 208 defines the term “tax advantage”. This is a similar meaning to other uses of the term elsewhere in the Tax Acts, and is not an exhaustive definition.
8.Section 209 explains that the tax advantages arising from abusive tax arrangements are to be counteracted by the making of just and reasonable adjustments, whether in respect of the tax in question or any other tax to which the GAAR applies. So, for example, an abusive arrangement may attempt to reduce or eliminate a charge to capital gains tax, but the counteraction may involve an adjustment to income tax.
9.Subsection (4) confirms that tax is to be charged in accordance with any adjustment that imposes or increases a liability to tax.
10.Subsection (5) provides for the various ways in which the adjustments that are required to be made (whether by HMRC or by the person to whom the tax advantage arises) may be made.
11.Subsection (6) confirms that: HMRC must comply with the procedural requirements set out in Schedule 41 before making any such adjustments; and that any time limits imposed elsewhere in the tax legislation apply to the power to make adjustments under the GAAR.
12.Subsection (7) notes that any adjustments made have effect for all purposes. This means that the adjustments are deemed to have effect for purposes other than just counteracting the tax advantage. They might, for example, adjust the base cost of an asset for a future capital gains disposal event.
13.Section 210 sets out the process by which consequential relieving adjustments may be made.
14.Subsection (1) sets out that the section is only applicable where the counteraction of a tax advantage is final. But, in a case where counteraction has been self-assessed, the section will not apply unless the taxpayer has notified HMRC of the counteraction. Subsection (8) explains when a counteraction is regarded as final for these purposes.
15.Subsection (4) explains that adjustments may be made in respect of any period and may affect any person. However, subsection (5) specifies that HMRC may not make consequential adjustments which result in an increased tax liability for any person.
16.Subsection (6) extends the application of existing administrative provisions for certain taxes to claims for consequential adjustments under the GAAR and so provides a consequential adjustments claim procedure in respect of each of the taxes covered by the GAAR.
17.Subsection (9) lists the means by which a consequential adjustment may be made and stipulates that time limits imposed by or under any other enactment do not constrain the making of consequential adjustments under the GAAR.
18.Section 211 sets out information relating to proceedings before a court or tribunal.
19.Subsection (1) imposes the burden of proof on HMRC in any proceedings before a court or tribunal in connection with the GAAR. HMRC must show that there are tax arrangements which are abusive and that the adjustments made to counteract the resulting tax advantages are just and reasonable.
20.Subsection (2) requires a court or tribunal, in determining any issue in connection with the GAAR, to take into account HMRC guidance (as approved by the GAAR Advisory Panel at the time the arrangements were entered into) and any opinion of the GAAR Advisory Panel about the arrangements.
21.Section 212 sets out how the GAAR fits with other parts of the tax code.
22.Subsection (1) provides that all priority rules, as defined in subsection (2), are to have effect subject to the GAAR. This means, for example, where a rule such as section 464 of CTA 2009 stipulates that tax may only be charged under that Part in respect of the relevant subject matter (in that case, loan relationships), the GAAR can override the effect of this rule, picking up the exception set out in section 464(2) of CTA 2009.
23.Subsection (3) lists examples of priority rules found in tax legislation.
24.Section 213 makes an amendment to the administrative provisions contained in Taxes Management Act (TMA 1970) to provide that the procedural requirements set out in section 42(2) of TMA 1970 in relation to certain claims do not apply to consequential adjustment claims under the GAAR.
25.Section 214 provides definitions.
26.Section 215 sets out the commencement and transitional rules.
27.Subsection (1) provides that the GAAR applies to any tax arrangements entered into on or after Royal Assent to Finance Act 2013 (“the Commencement Date”).
28.Subsection (2) specifies that, where the tax arrangements under consideration form part of other arrangements entered into before the Commencement Date, the other arrangements should be ignored in determining whether the tax arrangements in question are abusive. However, subsection (3) notes that the other arrangements may be taken into account as evidence that the tax arrangements under consideration are not abusive.