Where this factsheet refers to ‘tax’, this means the taxes, levies and contributions to which the GAAR applies. These are listed at the end of this factsheet.

This factsheet is one of a series of compliance checks factsheets.

About the general anti-abuse rule

The GAAR helps to make sure that people pay the right amount of tax by enabling us to tackle ‘abusive’ tax arrangements. The GAAR legislation sets out what ‘abusive’ tax arrangements are, and what we can do to counteract the tax advantages that people try to gain from using such arrangements. The GAAR also aims to deter people from entering into abusive tax arrangements.

The GAAR enables us to make ‘just and reasonable’ adjustments that counteract the tax advantage that a person has tried to gain from using abusive tax arrangements.

The GAAR came into force on 17 July 2013 and applies to arrangements entered into on or after that date. It was extended to cover National Insurance contributions with effect from 13 March 2014. Further amendments were made to the GAAR on 15 September 2016, which:

• allow us to give provisional counteraction notices
• introduce the concepts of ’pooling’, ’binding’ and ‘generic referrals’ where we’re applying opinions obtained from the GAAR Advisory Panel to users of equivalent arrangements
• introduce penalties for people who entered into abusive tax arrangements on or after 15 September 2016

If ‘pooling’, ‘binding’ or ‘generic referrals’ apply to your arrangements, Government will give you information about that separately.

You can find more information about the GAAR Advisory Panel later in this factsheet.

What tax arrangements are

Arrangements are ‘tax arrangements’ if, considering all the circumstances, it would be reasonable to conclude that the main purpose, or one of the main purposes of the arrangements was to obtain a tax advantage.

When tax arrangements are considered to be abusive

The GAAR states that tax arrangements are abusive if they are arrangements, the entering into or carrying out of which, can’t reasonably be regarded as a reasonable course of action in relation to the relevant tax provisions – taking into account all the circumstances. This is often referred to as the ’double reasonableness test’. The circumstances that will be taken into account include the following:

• the principles and policy objectives of those tax provisions
• whether the results of the arrangements are consistent with the principles on which those tax provisions are based
• whether the way in which those results are obtained involves one or more contrived or abnormal steps
• whether the arrangements are intended to exploit any shortcomings in those tax provisions
• whether the arrangements produce a tax loss which is significantly greater than the economic loss, or a taxable profit or gain which is significantly smaller than the economic profit or gain
• whether the arrangements enable a claim to be made for a repayment or credit in respect of tax, that has not been paid
• whether the arrangements are consistent with established practice that had been accepted by HM Revenue and Customs (HMRC)

You can find more information about when tax arrangements may be considered abusive in Parts A and B of our current GAAR guidance.

The GAAR Advisory Panel

The GAAR Advisory Panel is a committee of independent tax specialists, whose purpose is to provide a safeguard for our customers. Their role includes giving us an independent opinion on certain matters. No HMRC staff are on the panel.

We refer tax arrangements to the panel so it can give us its opinion. We ask the panel whether it considers the entering into and carrying out of those tax arrangements is a reasonable course of action in relation to the relevant tax provisions. If different panel members have different opinions, the panel will give us all the opinions. We then take into account the panel’s opinion, or opinions when we decide what action to take under the GAAR, if any.

The panel’s opinion, or opinions will be relevant to the particular tax arrangements that we referred to the panel, and, where appropriate, to other equivalent arrangements.

Government will give you more information, and tell you what we mean by ‘equivalent arrangements’, if this applies to you.

GAAR Advisory Panel gives more information about how the panel considers cases.

General information

Customers with particular needs

If there is anything about your health or personal circumstances that may make it difficult for you to deal with this matter, please let us know. Telling us will mean that we can help you in the most appropriate way. There’s more information at Dealing with HMRC if you have additional needs.

The taxes, levies and contributions to which the GAARrelates

Unless otherwise stated below, the GAAR has effect for any tax arrangements entered into on or after 17 July 2013 for the following:

• Annual Tax on Enveloped Dwellings
• Apprenticeship Levy (with effect from 15 September 2016)
• Capital Gains Tax
• Corporation Tax (including any amount chargeable as if it were Corporation Tax, or treated as if it were Corporation Tax)
• Diverted Profits Tax (on profits arising from 1 April 2015)
• Income Tax (including Income Tax collected through the PAYE system)
• Inheritance Tax
• National Insurance contributions
• Petroleum Revenue Tax
• Stamp Duty Land Tax

The GAAR relates to National Insurance contributions (NICs) with effect from 13 March 2014 in relation to arrangements entered into on or after that date. This includes NICscollected through the PAYE system, Class 4 NICs that are collected through Self Assessment and, from the tax year 6 April 2015 to 5 April 2016 it also includes most Class 2 NICs that are collected through Self Assessment.