Guidance

Compliance checks: protective GAAR notices – CC/FS36a

Updated 31 May 2022

This factsheet tells you about protective GAAR notices given under the general anti-abuse rule (GAAR). For more information about the GAAR please read factsheet CC/FS34a, ‘Information about the general anti-abuse rule’.

Where this factsheet refers to ‘tax’, this means the taxes, levies and contributions to which the GAAR applies. You can find details of these in factsheet CC/FS34a.

This factsheet is one of a series. For the full list, go to www.gov.uk and search for ‘HMRC compliance checks factsheets’.

If you need help

If you have any health or personal circumstances that may make it difficult for you to deal with us, please tell the officer who has contacted you. We’ll help you in whatever way we can. For more information, go to www.gov.uk and search for ‘Get help from HMRC if you need extra support’.

You can also ask someone else to deal with us on your behalf, for example, a professional adviser, friend or relative. We may however still need to talk or write to you directly about some things. If we need to write to you, we’ll send a copy to the person you’ve asked us to deal with. If we need to talk to you, they can be with you when we do, if you prefer.

About protective GAAR notices

If we consider that a tax advantage might have arisen to you from tax arrangements that are abusive,
we may give you a protective GAAR notice. We may do this if we consider any tax advantage that arises should be counteracted under the GAAR.

If we give you a protective GAAR notice, we’ll then remove (‘counteract’) the tax advantage by making the adjustments shown in that notice. For example, by making an assessment or amending your tax return.

The protective GAAR notice will tell you:

• which tax arrangements and tax advantage it relates to
• about some or all of the adjustments we consider may be needed to counteract the tax advantage
• that you cannot appeal against the protective GAAR notice
• that, once we have made the adjustments, you’ll be able to appeal against them if you disagree
• that, if you do not appeal, you’ll have to pay the additional tax due that results from us counteracting the tax advantage shown in the notice

You can find more information in the section headed ‘Appeals against us counteracting the tax advantage’.

A protective GAAR notice allows us to make the adjustments before all the GAAR procedures have been completed.

We’ll not send you a protective GAAR notice if we’ve given you one of the following notices on or after 22 July 2020:

• notice of proposed counteraction (under paragraph 3 of Schedule 43)
• pooling notice (under paragraph 1 of Schedule 43A)
• notice of binding (under paragraph 2 of Schedule 43A)

If we’ve given you one of the notices above on or after 22 July 2020, we’ll have told you that this will allow us to make adjustments before the GAAR procedure is completed.

You can find more information about how we make the adjustments in the section headed ‘Making the adjustments’.

What to do when you receive a protective GAAR notice

When you receive a protective GAAR notice there’s nothing specific you need to do about it. However, if you have a tax adviser, you may want to discuss the notice with them.

You may also want to consider settling your tax affairs. If you want to settle, let us know as soon as possible so that we can tell you what to do next. If you do not want to settle, we’ll continue with any action we may take – including any action under the GAAR.

Making the adjustments

We’ll usually make the adjustments quite soon after giving you a protective GAAR notice. We may do this, for example, by making an assessment or amending your return, or by amending or disallowing a claim.

Appeals against us counteracting the tax advantage

You cannot appeal against a protective GAAR notice. However, if we make the adjustments that are shown in the notice, you’ll be able to appeal against the adjustments if you disagree. We’ll tell you about your appeal rights when we make the adjustments.

If:

• you do not appeal
• you appeal and later withdraw your appeal
• your appeal is settled by agreement

and we do not give you a notice of final decision, then the protective GAAR notice is treated (for all purposes other than penalties) as if it were a notice of final decision. The GAAR legislation refers to a notice of final decision as a final GAAR counteraction notice. You can find out what we mean by a final GAAR counteraction notice below.

If you do not appeal, you’ll have to pay the additional tax that results from us having made the adjustments.

If you appeal against us having made the adjustments, your appeal cannot proceed until the earliest of the following 2 dates:

• the date that we give you a final GAAR counteraction notice for the adjustments
• 12 months after the date we have given you the protective GAAR notice

A final GAAR counteraction notice is one of the following:

• notice of final decision after considering the opinion of the GAAR Advisory Panel (under paragraph 12 of Schedule 43 to the Finance Act 2013)
• pooled arrangements notice of final decision (under paragraph 8(2) of Schedule 43A to the
  Finance Act 2013)
• generic referral notice of final decision (under paragraph 8 of Schedule 43B to the Finance Act 2013)
• bound arrangements notice of final decision (under paragraph 9(2) of Schedule 43A to the
  Finance Act 2013)

Each of these notices will tell you whether the tax advantage from your tax arrangements is to be counteracted under the GAAR.

You can withdraw your appeal or settle it by agreement if you change your mind and decide that you want to settle your tax affairs.

Penalties under GAAR

We can charge penalties for arrangements entered into on or after 15 September 2016. We can charge a GAAR penalty of 60% of the value of the counteracted advantage.

We can only charge a GAAR penalty if we have given you a notice of final decision and the tax advantage is counteracted under the GAAR, rather than in any other way.