GANTIP - goodbye

Blink and you would have missed it, but two backbenchers tabled an amendment to the Finance Bill for the inclusion of a clause enacting a General Anti Avoidance Principle (GANTIP).

The proposed clause was as follows:

(1) If, when determining the liability of a person to taxation, duty or similar charge due under statute in the United Kingdom, it shall be estimated that a step or steps have been included in a transaction giving rise to that liability or to any claim for an allowance, deduction or relief, with such steps having been included for the sole or one of the main purposes of securing a reduction in that liability to taxation, deduction or similar charge with no other material economic purpose for the inclusion of such a step being capable of demonstration by the taxpayer, then, subject to the sole exception that the step or steps in question are specifically permitted under the terms of any legislation promoted for the specific purpose of permitting such use, such step or steps shall be ignored when calculating the resulting liability to taxation, duty or similar charge.

(2) In the interpretation of this provision a construction that would promote the purpose or object underlying the provision shall be preferred to a construction that would not promote that purpose or object.’.

Unsurprisingly, the clause did not merit a hearing.

That is not necessarily because a GANTIP is a bad thing per se but because to overlay the present UK tax code with a general purposive, after the event, interpretation would cause chaos and render the system unworkable. To the extent that any of them noticed, the judiciary, whose job it would be to unravel the unholy mess that would ensue, must be breathing a collective sigh of relief.

With the workings of parliament being as they are, and with a change of government now in prospect, this can probably now be said to be the last time the notion of a GANTIP or GAAR will surface for a long while.

It remains to be seen whether a Conservative government will introduce its proposed Office of Tax Simplification and, if so, the context in which a GANTIP might then be considered. Optimists might say that if an OTS is successful in meeting its objectives, it will obviate any need for a GANTIP.

The IFS published a discussion paper on the use of a GAAR/GANTIP in 2003, which can be downloaded here.

This piece by one of the clause's promoters is not up to much but, for anyone who enjoys a good scrap between the authoritarians and libertarians, the comments are worth a quick read.