GAAR! Anti tax-avoidance rules almost here…

GAAR!

No, not the sound of tax lawyers dropping textbooks on their toes.

Rather, it is the new General Anti-Abuse Rule (GAAR).

The Government has now published a draft Finance Bill 2013 for consultation. The Bill will include a general measure to counteract abusive tax avoidance arrangements.

The GAAR will apply to income tax, corporation tax, capital gains tax, inheritance tax, petroleum revenue tax, stamp duty land tax and annual residential property tax with effect from 1 April 2013.

These schemes have been suggested for a while.

The problem is that accountants and tax lawyers spend their professional lives picking out the loop holes for their wealthy clients to take advantage off. Currently this ‘tax avoidance’ is legal and above-board

However, if the avoidance is taken too far, using artificial and abusive tax avoidance schemes, it can tip into ‘tax evasion’ which is a criminal offence.

The Government announced in its Budget 2012 that it had accepted the recommendation of the independent study by Graham Aaronson QC which had suggested the introduction of the GAAR.

So perhaps it will also be the sound tax avoiders make when caught.

On reflection, that’s not such a bad sound after all.

GAAR!

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The energy-saving (VAT) lightbulb’s blown.

The energy-saving (VAT) lightbulb.

It was good while it lasted, but now it’s blown.

The UK Government had introduced a reduced VAT rate for installing energy-saving materials in buildings that were solely used for a relevant charitable purposes. Unfortunately, that relief is now being withdrawn.

This is likely to mostly affect charities that use village halls or similar buildings. The big switch off will come into effect for materials supplied on and after 1 August 2013.

This not so bright idea was a response to the European Commission’s investigation of the UK’s reduced rate of VAT on the installation of energy-saving materials in residential accommodation and ‘charitable buildings’.

The Commission considered that there was no legal basis for such a reduced rate of VAT. The UK government, to give them their credit, disagreed but has now accepted that the VAT relief should only now apply to housing.

This means that from August 2013 it will not extend to ‘charitable’ buildings which are not housing, to ensure that UK legislation fully complies with EU law.

Which does leave the question hanging.

I wonder just how many civil servants it really took to change this particular VAT light bulb…

For more information, have a look at the HMRC paper, have a read of my Charity Tax Map summary, or contact me: andrewkmackay[at]gmail.com and @BetterCharity.