HMRC’s presence on the Advisory Panel that will operate the proposed new General Anti Avoidance Rule (GAAR) should be banned or tightly restricted. Otherwise it would be like putting barbers in control of setting and implementing new legislation on hair length – we’d all end up bald and barbers would earn nothing!
Our analogy might seem absurd, but then so is the prospect of the nation’s tax-gathering authority ruling on whether a contractor’s tax management strategy should fall within the scope of GAAR, as the panel will be charged to do.
Of course HMRC will try to widen the scope of the GAAR: if it did not, then it would be failing in its duty to maximise tax revenues.
And we’re not alone in having this view. In its response to the GAAR consultation, the Confederation of British Industry (CBI) has highlighted its concerns about GAAR in general, and the Advisory Panel specifically. CBI Taxation Committee chairman Will Morris wrote to Chris Davidson of HMRC’s Anti-Avoidance Group Policy team saying:
“We are…concerned about the independence of the GAAR Panel. We feel that there should be a majority of non-HMRC members and that those members should have tax experience. Otherwise there will be the – again unsettling – perception that HMRC is acting as “judge and jury” with the GAAR, writing the interpretation of the rules, and then having a quasi-judicial role on the panel.”
And the Chartered Institute of Taxation (CIOT), arguably an organisation that can claim the most impartiality and expertise over matters pertaining to the GAAR, agrees. Its president Patrick Stevens warns that, in order for the Advisory Panel “to help taxpayers and HMRC identify the borderline of where the GAAR applies” it must be “genuinely independent, drawing on those with current practical tax experience and with no HMRC representatives.”
In its full response to the GAAR consultation, the CIOT’s technical team highlights that there is a “risk of too much discretionary power being given to HMRC”, which is “why the Advisory Panel…is so important.”
Let’s hope that the government heeds the warnings by CBI, the CIOT and other consultation respondents by ensuring that HMRC’s participation in the GAAR Advisory Panel is curtailed, if not completely cut.
Otherwise, the government that brought us the Office for Tax Simplification (OTS) may inadvertently hand HMRC a set of general anti-avoidance clippers that will give a scalping to any taxpayer not already neatly fitting the taxman’s preferred short back and sides tax style.