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TAX MATTERS GAAR


DOES NOT MEAN


THE END OF TAX PLANNING


A new General Anti-Abuse Rule (GAAR) is to be introduced into UK tax law this July. Te GAAR is designed to target ‘abusive’ tax avoidance and particularly artificial transactions designed to achieve a tax benefit. However, it should not prevent taxpayers from structuring their commercial affairs in a tax-efficient manner. How do you tell whether or not tax planning


is abusive? Firstly there is a “double reasonableness” test – if planning can “reasonably be regarded as a reasonable course of action” then it is not abusive.


In conjunction with


Taxation advice from the award-winning UK member firm of the BDO International network, the world’s fifth largest accounting organisation


But what is “reasonable”? It is clear that


benefiting from a Government tax incentive such as R&D tax relief is perfectly acceptable. So is choosing to run your business through a company instead of a partnership to save tax. What is not acceptable are arrangements with no commercial rationale solely aimed at securing tax breaks. Helpfully, the GAAR guidance sets out a


number of examples of tax planning that does and does not fall within the GAAR. For example, moving home to take advantage of the principal private residence exemption from capital gains tax is acceptable. By contrast, an arrangement that allows a business asset to be sold and then leased back by way of a long funding lease so that capital allowances can be claimed twice is described as abusive. If you only engage in appropriate tax


planning that is clearly aligned with your commercial and economic activity, the GAAR should be of litle concern. As always, you should take expert advice in advance – plans purporting to save tax aſter the event are much more likely to fall within the GAAR.


Martin Bell, Tax Partner, BDO LLP


The specialist


Martin Bell, Partner


T: 0141 249 8488 E: martin.bell@bdo.co.uk


FIND OUT MORE...


Worried about a tax issue? If you have any concerns in relation to an ongoing tax enquiry or would like to speak to us about resolving an issue you may have, please contact Martin Bell on a confidential basis who would be pleased to explore the potential options available to your business.


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