Government to review anti-avoidance rules in a bid to battle UK tax evasion

THE GOVERNMENT pledged yesterday to crack down on high earners who avoid paying UK tax.

Yesterday chancellor George Osborne said that avoidance activity was “not fair” because some of Britain’s wealthiest individuals paid less tax than “the people who clean for them”.

In the emergency Budget, the government said that it is committed to “developing strategic responses to address long-standing avoidance risks” and will examine whether there is a case for developing a “one size fits all” anti-avoidance rule.

The government said that it will consult with “interested parties” over the summer to explore the possibility of a General Anti-Avoidance Rule (GAAR), which law makers warn could have a negative impact.

A GAAR could give the tax authorities wide-ranging powers to assess individual transactions and unilaterally decide the consequential liability.

And many financial advisers believe a GAAR would be unworkable because it would give the tax authorities too much power to intervene in taxpayers’ affairs.

“The government is going to investigate whether there should be one general anti-avoidance rule in the tax code. This may cause problems for business as tax will always be a consideration in major transactions,” said Norton Rose tax lawyer Matthew Hodkin.

The GAAR measure was scrapped by the Labour government in 1999 as unworkable.