The General Anti-Avoidance Rule (GAAR) was recently used in the case of a company that had been paying directors in gold bullion. The scheme involved an offshore trust and the purchase and immediate sale of gold, with two directors each receiving around £150,000.
The arrangement was based on a theoretical obligation that the value of the gold assets would be paid to a trust in the future, making the payments non-taxable. The recipients were then able to release cash in the form of a loan secured on the gold.
The GAAR was introduced in the Finance Act 2013 and aims to combat abusive tax arrangements that result in tax advantages. The scheme in question was referred to the GAAR Advisory Panel, which said it was clearly attempting to “frustrate the intent of Parliament” by using intricate steps to exploit tax loopholes.
The panel ruled that HMRC will now be able to impose a “just and reasonable” tax liability on the company. HMRC said the decision had “wide-reaching impacts and reinforces the power of the GAAR in tackling abusive tax avoidance”. It added: “We’re delighted with the opinion of the GAAR Advisory Panel. HMRC has already made clear that gold bullion avoidance schemes don’t work and that we will challenge these schemes.”
Paula Steele, managing partner at John Lamb Financial Planning, says: “This news should serve as a reminder that it pays to shun aggressive tax avoidance schemes and instead rely on effective tax planning strategies. Advisers have an important role to play in reassuring their clients that just because a strategy is tax efficient doesn’t mean it is likely to be targeted.”