The effectiveness of the UK GAAR

Abstract

Although Ramsay Doctrine has significantly modified the directions in which HMRC will tackle tax avoidance schemes whether used as a judicially established general anti-avoidance rule (GAAR) or equivalent, its application is associated with a number of controversial problems that have restricted its possible impact. Therefore, in 2013, the United Kingdom introduced its general anti abuse rule (GAAR). This Rule was proposed by the study group set up by the government, to consider whether anti-avoidance legislation could be structured to be successful in the UK tax system. This GAAR has been criticized for not being as successful as was expected, due to the Rule’s narrow scope. Proof of this is that having a very narrow GAAR has resulted in few cases being caught by the Rule; when many tax avoidance arrangements escape oversight and cannot be countered by the Rule, there can be no real deterrence. The current GAAR is thus not a substantial addition to the UK tax system. Yet these moves should be welcomed. However, more measures could be taken to make a GAAR more effective, and the UK GAAR should definitely be improved.