11. Barclay Review Recommendation 20 – General Anti-Avoidance Rule (GAAR)
11.1 Question 17 relates to Recommendation 20, "A General Anti-Avoidance Rule (GAAR) should be created to reduce avoidance and make it harder". This recommendation is intended to close known loopholes and stop any future loopholes from being exploited.
Question 17 - When the General Anti Avoidance Rule is introduced, do you have any recommendations or principles that this should encompass?
11.2 There were 65 responses to Question 17. The largest response categories were Local Authorities and Representative Bodies. A breakdown of respondent categories can be found in the table below.
Table 17: Respondents Categorised
|Number of Responses
|Chartered Surveyor (Private Sector)
|Independent Education Sector
|Local Authority / Local Authority Association / Local Community
|Other Public Sector and Third Sector
|Private Sector Professional / Representative / Trade Body
|Valuation Boards / Assessors / Related Representative Organisation
11.3 General support for the GAAR came from across all respondent categories. Only one response was explicitly against the introduction of the GAAR. UNISON reasoned that the "GAAR at a UK level has not been an effective tool in deterring or countering tax avoidance."
11.4 A number of Local Authorities recommended that GAAR should include a statement that indicated who the liable party was for any potential avoidance. Suggestions included the Director of the business or the property owner. This would "override the ordinary principles of beneficial occupation to hold the owners of the building, individual company directors or other party instigating the avoidance to be liable" (Glasgow City Council). There is a perception that, if it is possible to hold someone personally responsible for any disregard to the GAAR, this will deter blatant violations.
11.5 Furthermore, a number of Local Authorities, advocated strongly for measures against known loopholes to be included in the GAAR, such as phoenix companies and misuse of the Small Business Bonus Scheme. To counter these loopholes Local Authorities, such as the City of Edinburgh Council, advocated for a framework to be created whereby data and details of avoidance tactics could be shared amongst them. Moray Council, along with others, advocated for annual reviews of this feedback which could then be used to update the GAAR to target new loopholes. South Ayrshire Council suggested that data sharing with other agencies such as Her Majesty's Revenue and Customs (HMRC) would help prevent avoidance.
11.6 Alongside the above, COSLA highlighted "pertinent principles […] similar to principles which underlie other taxes" which should apply to the GAAR. These include:
- local taxation should be fair and easy to pay,
- should be administratively efficient, and
- difficult to avoid.
11.7 Some respondents advocated that penalties for avoidance should include disclosure of businesses to the public, significant financial penalties to be enforced and seizure of property as a last resort.
11.8 Concerns were raised over clarity of definitions and the GAAR procedures. There were calls for guidance on the general rules that would be implemented under the GAAR. It was highlighted that the GAAR "should differentiate between those that cannot find occupiers for property and those that do deliberately leave property vacant" (Scottish Business Ratepayers Group). Furthermore, East Dunbartonshire Council highlighted the necessity to define in the GAAR when avoidance is and is not "reasonably regarded as reasonable".
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