2.6 Taxation - Anti-Avoidance Laws Flashcards
How does the General Anti-Abuse Rule (GAAR) apply?
1) Arrangement
- Agreement/Undertaking/Scheme/Transaction
2) Rises to tax advantage
- Income tax/NICs/Corp tax/IHT/CGT/SDLT
3) Satisfies ‘Main Purpose’ Test (objective)
- Main purpose of test > Obtaining tax advantage
4) Abusive arrangement
- NOT reasonably seen as reasonable course of action > HMRC sees balance of probabilities as abusive/Adjustments that counteract tax advantages are just and reasonable
5) Materials > Court
- HMRC’s guidance
- Guidance > Public domain
6) NO clearance procedures
- Taxpayer to assess tax liability based on GAAR
7) Penalties apply
- Arrangement made on/after 15 Sept 2016
- 60% of value that counteracts tax
How does the Criminal Finances Act 2017 (CFA) apply?
1) Failure to prevent tax evasion
- By individuals/corporate association persons
- In UK/foreign
2) Conviction
- Unlimited fine
- Order to confiscate assets (can lead to reputational damage)
3) Defence
- Reasonable prevention procedures
- NOT reasonable to expect such procedures
What is fraudulent evasion of income tax?
‘Knowingly concerned’ in fraudulent evasion of income tax (s. 106A Tax Management Act 1970)
1) Knowledge
- Wilfuly turning blind eye
- NOT mere suspicion
2) Actual involvement in offence
How does Finance Act 2017 work?
1) Arrangement
2) Tax advantage
- Relief
- Tax repayment
- Avoidance of tax possible settlement
3) Loss to person
=> Offence
How does Finance Act 2015 work?
1) Individual/PR/Trustee/Co/Fund
2) Non-resident in UK during disposal
3) Disposing UK residential property
=> CGT applies
How does Tax Anti-Avoidance Regime (TAAR) apply?
1) WU > Distribution on/after 6 April 2016
2) Either
- Receiver had +5% interest in Co immediately before WU
- Co privately owned by less than 5 persons within 2 years ending w/ start of WU
- Receiver carries on same trade as CO within 2 years of distribution
- Reasonable to assume WU main purpose > Avoid/Reduce charge to income tax
