On 7 November 2012, HM Treasury announced that HMRC will not be represented on the General Anti-Abuse Rule (‘GAAR’) Advisory Panel (‘the Panel’).

Background

In our previous blog (General Anti-Avoidance Rule – will the ‘centre ground’ of tax planning be safe? December 2011) we reported on recommendations contained in the final report of the GAAR Study Group, a committee of the ‘great and the good’ of the tax world, chaired by Graham Aaronson QC and set up by the government to investigate whether a GAAR should be introduced into UK tax law.

The GAAR Study Group recommended a limited form of GAAR targeted at abusive arrangements designed to tackle ‘contrived and artificial schemes’ but one that would not apply to ‘the centre ground of responsible tax planning’ (see paragraph 1.7(vi) of their report).

In order to protect the hallowed centre ground of tax planning, the report recommended a number of safeguards including an Advisory Panel with a majority of non-HMRC members to advise whether HMRC would be justified in seeking counteraction under the GAAR.

No HMRC

HM Treasury has announced however that, although an ‘interim advisory group’ to oversee the development of guidance on the new GAAR will be appointed, this will not include HMRC. The announcement reads:

…HMRC will shortly begin the process of advertising for and appointing a Chair of the Advisory Panel who will then advise HMRC on appointing the other panel members.

This process will not be complete until early next year. Until this time an interim group of panel members led by Graham Aaronson QC will oversee the development of the new guidance, after it is published for public consultation in December ….

The Government anticipates that the Chair of the Advisory Panel will be in post by the end of January 2013 … HMRC will not be represented on the Advisory Panel (including the interim group), but will support both with administrative and secretariat resources.” (See HMRC Newsroom & speeches 108/12, 7 November 2012).

Independence

The announcement that HMRC will not be represented on what should be an independent Advisory Panel is welcome news. The GAAR, when introduced, is likely to represent a formidable weapon in HMRC’s already burgeoning arsenal and will no doubt assist the Government in its continuing battle with tax advisers who promulgate ‘unacceptable’ tax mitigation structures. David Gaulke, Exchequer Secretary to the Treasury, said:

HMRC already has a strong set of weapons to tackle tax avoidance, and the GAAR will be a valuable additional tool in tackling artificial and abusive avoidance schemes.

It is important, therefore, that the Advisory Panel is seen to be independent and free from HMRC influence and the lack of HMRC representation will go some way to achieving that aim. Given this, it is regrettable that HMRC will be “advertising for and appointing a Chair of the Advisory Panel” as well as providing “administrative and secretariat resources.” It would surely be preferable if the Advisory Panel were appointed and assisted by independent third parties. If it was the taxpayer who was going to appoint the Chair of the Panel and provide administrative assistance, HMRC might be vociferous in their objections!