The GAAR Advisory Panel issues its fifth Opinion Notice


The GAAR (General Anti Abuse Rule) was enacted in FA 2013 following a long period of consultation, between 2010 and 2013, in which ICAEW was actively involved.

The GAAR is designed to bring to an end abusive tax arrangements which fall foul of a double reasonableness test i.e. “arrangements which cannot reasonably be regarded as a reasonable course of action in relation to the relevant tax provisions.”

Cases are referred by HMRC to the GAAR Advisory Panel to ensure that they do genuinely fall foul of the double reasonableness test.

Paragraph B14.1 of the GAAR guidance states:

“The procedure for applying the GAAR to any arrangement requires that the proposed application of the GAAR should be put before an advisory panel, independent of HMRC, who will give their opinion (or opinions if they are not unanimous) as to whether the arrangements in question constitute a reasonable course of action.”

You can read our reports on the earlier, 2017, Opinion Notices by clicking here

The latest Opinion Notice

The latest Opinion Notice concerned what the advisory panel considered to be “abnormal and contrived” arrangements involving an employer-financed retirement benefit scheme (EFRBS) funded through multiple tripartite deeds. The Opinion Notice can be viewed by clicking here.

The scheme in this case was funded through two deeds of covenant, with the benefit of these covenants subsequently assigned by way of three sets of tripartite deeds involving the employer, the employee beneficiaries, and a company registered in the British Virgin Islands. These arrangements resulted in what the panel considered to be, in substance, loans to the employees.

The scheme was intended to avoid an immediate charge to income tax on the employee benefits, and obtain an immediate corporation tax deduction for the full amount contributed to the EFRBS.

The panel could see no reason, other than for tax purposes, for the steps involving undertakings to pay, assignments of benefits of undertakings, and releases of obligations to pay, in order to provide funding to the EFRB and money to the employees.

The panel’s view was that, had the EFRBS been funded in the normal way, with cash from the employer and the trustee lending funds to the employees concerned, none of the parties would have been in a substantially different economic or commercial position. There would also have been no need to involve the BVI-registered company in the arrangements.

The opinion also stated that a comparable commercial transaction without the tax avoidance element would have resulted in an upfront corporation tax deduction for the employer, linked to the income tax charge on the loan from the EFRBS under the disguised remuneration legislation.