Examples of how the GAAR applies to tax arrangements

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HMRC’S GAAR GUIDANCE- CONSULTATION DRAFT PART B EXAMPLES OF HOW THE GAAR APPLIES TO TAX ARRANGEMENTS 1. Background to the examples To be approved by the GAAR Advisory Panel 1.1 How are the examples structured? 1.2 Reasonable… having regard to all the circumstances? 2. Corporation tax examples to which the GAAR applies 2.1 Shares as debt 2.2 Capital allowances- Double Dip 2.3 Unauthorised Unit Trusts 3. Capital gains tax and income tax examples to which the GAAR applies 3.1 Working wheels 3.2 Blumenthal- QCB/Non-QCB 3.3 Astall- Relevant discounted securities 3.4 Huitson- DTAs 4. Inheritance tax examples to which the GAAR applies 4.1 Reservation of benefit 4.2 Property excluded from charge 5. SDLT examples to which the GAAR applies 5.1 Sub-sales 6. Corporation tax examples to which the GAAR does not apply 6.1 Using equity funding to avoid the group relief restriction on carried forward non-trade loan relationship debits 6.2 Late paid interest rules 7. Income tax and CGT examples to which the GAAR does not apply 7.1 Unconditional contract 7.2 Simple QCB/NQCB 8. IHT examples to which the GAAR does not apply 8.1 Agricultural property relief Annex: Relevant tax provisions and certain other provisions mentioned in the examples Comments are invited on all parts of the guidance and must be made by 6 February 2013 to: study.gaar@hmrc.gsi.gov.uk 2
1. Background to the examples 1.1 How are the examples structured? In all of the examples below it is assumed that the schemes are tax arrangements for the purposes of the GAAR. Normal technical challenges against the schemes are not considered. The only question is whether the tax arrangements are abusive tax arrangements. All of the examples are based on real schemes. The relevant tax provisions mentioned in the examples are those which were in force at the time of the arrangements. The examples are used to illustrate the principles and broader considerations that will be relevant to the application of the GAAR. In some cases, the conclusion is that whether the GAAR will or will not apply depends on subtle nuances of fact that are described in the context of the example. Each example follows a similar structure: • Some relevant background to the scheme and relevant tax rules is first given to set the scene. • The scheme itself is then summarised. • The relevant tax provisions are listed and then provided in full normally in the Annex (the Annex also sets out certain other tax provisions which are mentioned in the examples). • The tax analysis of the scheme provided by the taxpayer in support of the claimed treatment is then provided. • Finally the GAAR analysis is given. 1.2 Reasonable ...having regard to all the circumstances? The GAAR analysis in each case takes into account a wide range of relevant circumstantial evidence. This is justified by the terms of the double reasonableness test which provides that whether arrangements can reasonably be regarded as a reasonable course of action must have regard to all the circumstances. The legislation sets out that a court or tribunal may take into account any guidance, statements or other material that was in the public domain at the time the arrangements were entered into. Examples of matters that may be taken into account include: Hansard, Explanatory Notes, Written Ministerial Statements, academic literature, external practice, HMRC guidance and evidence as to how particular arrangements are normally structured in the market place (so as to compare or contrast such practice with the arrangement under consideration). 3
Page 1: HMRC’S GAAR GUIDANCE- CONSULTATIO
Page 5 and 6: 2. Corporation tax examples to whic
Page 7 and 8: does it represent almost the whole
Page 9 and 10: 2.2 Capital Allowances - Double Dip
Page 11 and 12: 2.2.5 What is the GAAR analysis und
Page 13 and 14: 2.3 Unauthorised Unit Trusts 2.3.1
Page 15 and 16: The scheme in detail On or before 3
Page 17 and 18: • to result in the UK exchequer g
Page 19 and 20: 3. Capital gains tax and income tax
Page 21 and 22: 3.1.5 What is the GAAR analysis? 3.
Page 23 and 24: 3.2 Blumenthal - QCB/Non-QCB 3.2.1
Page 25 and 26: underlying principle is that the ac
Page 27 and 28: chance that it would be met in the
Page 29 and 30: 3.3.5.4 Does the arrangement includ
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Page 41 and 42: If the A to B transaction completes
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The substantive results of the tran
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The substantive result of the arran
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Section 942: Income tax to be colle
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(iii) not a transitional serial int
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(2) Companies shall be chargeable t
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(8) In this section— “interveni
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(5) So far as the relevant transact
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(A1) For the purposes of corporatio
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Finance Act 1996 Section 91B: Non-q
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(2) For the purposes of this Schedu
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(6) For the purposes of this paragr
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145. Since then, these proposals ha
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(a) given by or on behalf of any on
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(b) paid after the withholding from
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Case 1 This case applies if the tru
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(1) The basic rule is that the defi
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(c) income which arises from a sour
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those profits by the Island but onl
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Examples of how the GAAR applies to tax arrangements

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