Guidance

How HMRC uses the GAAR Advisory Panel's opinions on tax avoidance

Find out how the GAAR Advisory Panel opinions are used by HMRC to decide whether tax arrangements are abusive.

• From: HM Revenue & Customs
• Published: 30 April 2018

Overview

The General Anti-Abuse Rule (GAAR) was introduced by Finance Act 2013 and applies to arrangements entered into on or after 17 July 2013.

For National Insurance contributions, the GAAR applies to arrangements entered into on or after 13 March 2014. The GAAR broadly follows the recommendations of Graham Aaronson QC’s study group.

An important recommendation was the use of an independent GAAR Advisory Panel to provide independent opinions on all cases before any counteraction could be made by HMRC under the GAAR.

The GAAR Advisory Panel is a committee established by the Commissioners for the purposes of the GAAR and is led by a Chair, also appointed by the Commissioners. All Panel members are completely independent of HMRC and so also provide an independent view.

This guidance should be read in conjunction with parts A to C, part D and part E of the GAAR guidance current at the time the arrangements are entered into.

The GAAR guidance provides detailed information about the GAAR, the GAAR Advisory Panel and the GAAR Advisory Panel procedure. Parts A to D of the GAAR guidance have been approved by the GAAR Advisory Panel.

Definitions and meanings

Paragraph 56(1) of schedule 16 Finance Act (No.2) 2017 provides the meaning of a designated HMRC officer (abbreviated in this guidance to designated officer) as an officer of HMRC who has been designated by the Commissioners for the purposes of schedule 16 Finance Act (No.2) 2017.

HMRC must not assess a penalty under the enablers legislation unless a designated officer has considered the relevant GAAR Advisory Panel opinion and has decided to assess a penalty.

Paragraph 24(1) of schedule 16 Finance Act (No.2) 2017 provides the meaning of a GAAR final decision notice as a notice given to the user of tax arrangements under:

• paragraph 12 of schedule 43 Finance Act 2013 - notice of final decision (see section E3.14 of the GAAR guidance), after considering the opinion of the GAAR Advisory Panel on a referral to the panel under schedule 43 Finance Act 2013
• paragraph 8 or 9 of schedule 43A Finance Act 2013 - notice of final decision where a pooling notice or notice of binding has been given (see section E3.20 of the GAAR guidance), after considering the opinion of the GAAR Advisory Panel in relation to tax arrangements in the pool referred to the Panel under schedule 43A Finance Act 2013
• paragraph 8 of schedule 43B Finance Act 2013 - notice of final decision in respect of tax arrangements (see section E3.23 of the GAAR guidance), after considering the opinion of the GAAR Advisory Panel on a generic referral to the Panel of pooled tax arrangements under schedule 43B Finance Act 2013

Paragraph 24(3) of schedule 16 Finance Act (No.2) 2017 explains when arrangements are equivalent. Arrangements are equivalent to other arrangements if they’re substantially the same as each other having regard to all of the following:

• their substantive results or intended substantive results
• the means of achieving those results
• the characteristics on the basis of which it could reasonably be argued, in each case, that the arrangements are abusive tax arrangements

‘Relevant arrangements’ means arrangements in relation to which a penalty under the enablers legislation could apply.

In this guide, reference to ‘a report prepared by HMRC of the GAAR Advisory Panel’s opinion…’ means either the published anonymised version of the opinion itself, or, exceptionally, where the opinion is not published, a sub-panel approved anonymised report of the opinion. Such a report would include all the salient points of the opinion.

Role of the GAAR Advisory Panel

One of the main roles of the GAAR Advisory Panel is to provide an independent view of tax arrangements that are referred to them by HMRC.

They do this by providing an opinion, or opinions, on the question of whether the entering into and carrying out of the tax arrangements is a reasonable course of action in relation to the relevant tax provisions having regard to all the circumstances.

When a case is referred to the GAAR Advisory Panel, the Chair will select a suitably experienced 3 member Panel to form a sub-panel to provide an opinion or opinions.

The sub-panel can produce one joint opinion, or, if the 3 members cannot agree, it can provide 2 or 3 different opinions. In this guidance, any reference to a GAAR Advisory Panel ‘opinion’ includes GAAR Advisory Panel opinions.

The GAAR Advisory Panel will also provide this role in relation to a penalty under the enablers legislation.

If a GAAR Advisory Panel opinion has already been obtained under Schedules 43 or 43B Finance Act 2013 in relation to the tax arrangements or equivalent arrangements which have now been defeated, then no further referral is needed to the Panel for the purposes of the penalty under the enablers legislation.

If no such opinion has been obtained then a referral of particular defeated arrangements must be made to the GAAR Advisory Panel in accordance with paragraph 26 of schedule 16 Finance Act (No.2) 2017.

The resulting GAAR Advisory Panel opinion is not binding on HMRC or the enabler, but must be taken into account in determining whether those arrangements or any equivalent tax arrangements are abusive for the purposes of the enablers legislation.

As is the case for the GAAR, a referral under the enablers legislation requires the Panel to opine on whether the entering into and carrying out of the tax arrangements is a reasonable course of action in relation to the relevant tax provisions, having regard to all the circumstances.

An important point to note is that, as with the GAAR, the GAAR Advisory Panel does not perform a judicial function and their process does not involve formal hearings where cases will be presented and heard. The Panel deliver an opinion, not a judicial decision. There’s no right of appeal against the Panel’s opinion.

However, if an enabler disagrees with HMRC’s decision to assess a penalty under the enablers legislation, they may appeal.

In the event of an appeal against a penalty, the GAAR Advisory Panel’s opinion is not binding on the tribunal or courts, although paragraph 36 of schedule 16 Finance Act (No.2) 2017 requires them to take the opinion into account during the penalty proceedings.

Requirement for opinion of GAAR Advisory Panel

Before HMRC is able to assess a penalty under the enablers legislation they must obtain and consider an opinion from the GAAR Advisory Panel in relation to the defeated arrangements, or arrangements that are equivalent to the defeated arrangements.

A GAAR Advisory Panel opinion may be obtained for these purposes through a referral under either schedule 43 or 43B Finance Act 2013 in relation to a taxpayer’s use of the arrangements, or Part 7 of schedule 16 Finance Act (No.2) 2017.

Part 7 explains the circumstances in which a referral under the enablers legislation is required and also outlines the procedure that must be followed when HMRC intends to either:

• rely on an opinion of the GAAR Advisory Panel that has been obtained under either schedule 43 or 43B of Finance Act 2013 in relation to the defeated arrangements or arrangements which are equivalent to the defeated arrangements
• under Part 7 of schedule 16 Finance Act (No.2) 2017, apply an opinion of the GAAR Advisory Panel that has already been obtained to the defeated arrangements - such an opinion must be in relation to arrangements which are equivalent to the defeated arrangements

Part 7 of schedule 16 Finance Act (No.2) 2017 recognises that arrangements that have been defeated by HMRC will have first been subject to a tax enquiry in respect of the arrangements entered into by the taxpayer.

Where a GAAR Advisory Panel opinion that relates to the defeated arrangements (or arrangements equivalent to the defeated arrangements) has already been obtained under schedule 43 or 43B Finance Act 2013, there’s no need for another referral to the GAAR Advisory Panel to be made for the purposes of a penalty under the enablers legislation.

This is because the GAAR Advisory Panel will already have considered whether the arrangements (or equivalent arrangements) are a reasonable course of action in relation to the relevant tax provisions, having regard to all the circumstances.

If a GAAR Advisory Panel opinion has been obtained under the GAAR legislation in relation to the defeated arrangements or equivalent arrangements, then HMRC may have issued a GAAR final decision notice to the user of the arrangements which were referred to the Panel and may also have issued a GAAR final notice to users of equivalent tax arrangements.

Where a GAAR final decision notice has been given after considering an opinion of the GAAR Advisory Panel obtained under the GAAR legislation in relation to the defeated arrangements or equivalent arrangements the enablers legislation states that:

• in the case of defeated arrangements - the GAAR Advisory Panel opinion to which the notice relates must be taken into consideration by the designated officer for the purposes of deciding whether to assess a penalty under the enablers legislation
• in the case of arrangements equivalent to the defeated arrangements - a notice under paragraph 25 of schedule 16 Finance Act (No.2) 2017 must have been given to the enabler before a penalty under the enablers legislation can be assessed and the enabler given an opportunity to make representations which, where made, must have been taken into account by the designated officer before the penalty can be assessed

Opinions given by GAAR Advisory Panel in relation to the relevant or equivalent arrangements

GAAR final decision notice

The arrangements to which a penalty under the enablers legislation relates are referred to as ‘relevant arrangements’.

Paragraph 23(2) of schedule 16 Finance Act (No.2) 2017 states that a penalty under the enablers legislation may be assessed if a GAAR final decision notice has been given under schedule 43, 43A or 43B Finance Act 2013 in relation to either:

• the relevant arrangements
• arrangements that are equivalent to the relevant arrangements

GAAR opinion given in relation to the relevant arrangements

Where a GAAR final decision notice has been given in relation to the relevant arrangements, a designated officer must consider the GAAR Advisory Panel opinion in respect of which the decision notice was given before deciding whether to assess a penalty under the enablers legislation on any enabler of the relevant arrangements.

If a designated officer decides to assess penalties on any enabler of the relevant arrangements then, under paragraph 23(4) of schedule 16 Finance Act (No.2) 2017, the notification of the penalty must be accompanied by a report prepared by HMRC of the GAAR Advisory Panel’s opinion in respect of the relevant arrangements.

GAAR opinion given in relation to arrangements that are equivalent to relevant arrangements

Where a GAAR final decision notice has been given in relation to arrangements that are equivalent to the relevant arrangements, the designated officer must take account of the opinion in relation to the equivalent arrangements before deciding whether to assess a penalty under the enablers legislation.

If the designated officer decides to assess penalties on any enabler of the relevant arrangements, the enabler will have an opportunity to make representations, which the designated officer must consider before deciding whether to assess the penalty, and must then notify the enabler, whether or not the penalty will still be assessed in light of the representations.

Notice where GAAR Advisory Panel opinion obtained in relation to equivalent arrangements but no GAAR final decision notice given

Paragraph 25 of schedule 16 Finance Act (No.2) 2017 sets out the procedure that must be followed before a penalty under the enablers legislation can be assessed for arrangements that have not been given a GAAR final decision notice, but an opinion of the GAAR Advisory Panel has been obtained in relation to arrangements equivalent to the defeated arrangements.

If, after considering such an opinion in relation to the relevant arrangements, the designated officer is of the view that:

• a person is liable to a penalty in relation to the relevant arrangements
• no GAAR final decision notice has been given in relation to the relevant arrangements
• the relevant arrangements are equivalent to arrangements in respect of which a GAAR Advisory Panel opinion has been obtained
• that opinion can apply to the relevant arrangements then a designated officer must give that person a notice in writing that:
• explains that the designated officer is of the view that paragraph 25 applies
• specifies the relevant arrangements
• describes the material characteristics of the equivalent arrangements in relation to which the opinion of the GAAR Advisory Panel was obtained
• includes a report prepared by HMRC of the GAAR Advisory Panel’s opinion, in relation to the equivalent arrangements
• explains that a person who has been given the notice has 30 days, beginning with the day on which the notice is given, to send any written representations to the designated officer as to why the relevant arrangements are not equivalent to the arrangements in respect of which the opinion of the GAAR Advisory Panel was obtained
• explains that a designated officer may extend the period in which that person can make representations, if the person who has been given a notice makes a written request for an extension, which will only be granted in exceptional circumstances for a period the designated officer considers is appropriate in the circumstances

Referral of relevant arrangements or equivalent arrangements to the GAAR Advisory Panel under the enablers legislation

Paragraph 23(3) of schedule 16 Finance Act (No.2) 2017 explains that a GAAR Advisory Panel opinion that has been that has been given on a referral under paragraph 26 of schedule 16 Finance Act (No.2) 2017 can be applied to the relevant arrangements where either of the following apply:

• the opinion is in relation to the relevant arrangements
• the opinion is in relation to arrangements that are equivalent to the relevant arrangements, and the conditions of paragraph 35 of schedule 16 Finance Act (no. 2) 2017 have been met

Again, if the designated officer decides to assess penalties on any enabler of the relevant arrangements, the enabler will have an opportunity to make representations, which the designated officer must consider before deciding whether to assess the penalty, and must then notify the enabler, whether or not the penalty will still be assessed in light of the representations.

Notice where GAAR Advisory Panel opinion under the enablers legislation is in relation to arrangements which are equivalent to the relevant arrangements

Paragraph 35 of schedule 16 Finance Act (No.2) 2017 applies where:

• an opinion of the GAAR Advisory Panel has been given on a referral under paragraph 26 of schedule 16 Finance Act (No.2) 2017
• a designated officer is of the view that a person is liable to a penalty in relation to relevant arrangements that are equivalent to the arrangements to which the opinion of the GAAR Advisory Panel applies
• that person is not a person who has been given a notice under paragraph 28 of schedule 16 Finance Act (No.2) 2017 in connection with the referral

This means that the person who must receive a notice under paragraph 35 is either an enabler:

• of defeated tax arrangements that are equivalent to arrangements referred to the GAAR Advisory Panel
• in relation to the arrangements referred, but HMRC did not become aware of the fact that the person was an enabler until after the referral had been made and who therefore did not receive a notice under paragraph 28 of schedule 16 Finance Act (No.2) 2017

Before a designated officer can assess a penalty under the enablers legislation on any such person the designated officer must give that person a written notice under paragraph 35 of schedule 16 Finance Act (No.2) 2017 that covers all of the following:

• explains that the officer is of the view that paragraph 35 applies
• specifies the defeated tax arrangements enabled by that person
• provides a report prepared by HMRC setting out the relevant opinion of the GAAR Advisory Panel
• explains that the person has 30 days, beginning with the day on which the notice is given, to send the designated officer any written representations as to why the arrangements to which opinion relates are not equivalent to the arrangements concerned
• a designated officer may extend the period in which that person can make representations, if the person who has been given a notice makes a written request for an extension, which will only be granted in exceptional circumstances for a period the designated officer considers is appropriate in the circumstances

Referral to GAAR Advisory Panel under the enablers legislation

A referral to the GAAR Advisory Panel of particular defeated tax arrangements can be made under paragraph 26 of schedule 16 Finance Act (No.2) 2017 if all the following conditions are satisfied:

• a designated officer considers that a person is liable to a penalty under the enablers legislation in respect of those defeated tax arrangements
• no opinion of the GAAR Advisory Panel has been obtained under the GAAR legislation in relation to those arrangements or arrangements that are equivalent to those arrangements
• the procedures in paragraph 28 of schedule 16 Finance Act (No.2) 2017 have been complied with

A referral to the GAAR Advisory Panel can only be made by a designated officer. The referral is made on the question of whether the entering into and carrying out of the tax arrangements described in the referral statement is a reasonable course of action in relation to the relevant tax provisions, having regard to all the circumstances.

The referral statement must include a general statement of the material characteristics of the arrangements in question and meet all of the following requirements:

• contain a factual description of the arrangements in question
• set out HMRC’s view as to whether those arrangements are in accordance with the established practice at the time those arrangements were entered into
• explain why the designated officer is of the view that a tax advantage described in the statement and arising from tax arrangements with the characteristics described in the statement would be a tax advantage arising from abusive tax arrangements for the purposes of schedule 16 Finance Act (No.2) 2017
• set out any matters the designated officer is aware of which may suggest any view of HMRC or the designated officer expressed in the statement is not correct
• set out any other matters which the designated officer considers are required so that the GAAR Advisory Panel’s functions can be carried out under paragraphs 33 and 34 of schedule 16 Finance Act (No.2) 2017

The referral statement will also have regard to the information the GAAR Advisory Panel has indicated that they’ll require from HMRC, as set out in the GAAR Advisory Panel’s procedures for dealing with referred cases.

Notice before decision whether to refer

A referral of the arrangements in question to the GAAR Advisory Panel must not be made under paragraph 26 of schedule 16 Finance Act (No.2) 2017 unless all of the following apply:

• a designated officer has given each relevant person a notice under paragraph 28 of schedule 16 Finance Act (No.2) 2017
• for each relevant person, the time for making representations has expired
• before deciding to make a referral, a designated officer has considered all representations that have been made by relevant persons within the time allowed and remains of the view that a referral should be made

A relevant person is any person who, at the time of the referral, a designated officer considers is liable to a penalty under the enablers legislation in relation to the arrangements in question.

Where defeated arrangements have been enabled by more than one person, HMRC will notify each enabler of those defeated arrangements that they are aware of at the time of making the referral.

A notice given to a person under paragraph 28 of schedule 16 Finance Act (No.2) 2017 must be in writing and explain all of the following:

• that the designated officer considers that the person is liable to a penalty under the enablers legislation in relation to the arrangements in question
• why the designated officer considers those arrangements to be abusive tax arrangements for the purposes of schedule 16 Finance Act (No.2) 2017
• that HMRC is proposing to make a referral under paragraph 26 of schedule 16 FA (No.2) 2017 on the question of whether the entering into and carrying out of tax arrangements that have the characteristics of the arrangements in question is a reasonable course of action in relation to the relevant tax provisions, having regard to all the circumstances
• that that person has 45 days, beginning with the day on which the notice is given to that person, to send written representations to the designated officer in response to the notice
• that a designated officer may extend the period in which that person can make representations, if the person who has been given a notice makes a written request for an extension, which will only be granted in exceptional circumstances for a period the designated officer considers is appropriate in the circumstances

Notice of decision whether to refer

If a designated officer decides to make a referral under paragraph 26 of schedule 16 Finance Act (No.2) 2017, paragraph 29 of schedule 16 Finance Act (No.2) 2017 requires the designated officer, as soon as reasonably practicable, to give written notice of that decision to each person who was given a notice under paragraph 28 of schedule 16 Finance Act (No.2) 2017.

This will be each enabler that enabled the defeated arrangements that HMRC is aware of at the time of the referral.

Information to accompany referral

A referral under paragraph 26 of schedule 16 Finance Act (No.2) 2017 must be accompanied by the referral statement under paragraph 27 of schedule 16 Finance Act (No.2) 2017 and all of the following:

• a declaration that as far as HMRC is aware, nothing material to the GAAR Advisory Panel’s consideration has been omitted from that statement
• a copy of each notice that has been given by HMRC in relation to the referral to a relevant person, under paragraph 28 of schedule 16 Finance Act (No.2) 2017
• a copy of any representations received under paragraph 28 of schedule 16 Finance Act (No.2) 2017 together with any comments HMRC has in respect of those representations
• a copy of each notice given on the making of a referral under paragraph 31 of schedule 16 Finance Act (No.2) 2017

Notice on making of referral

At the same time as making a referral under paragraph 26 of schedule 16 Finance Act (No.2) 2017, a designated officer must give each relevant person a notice in writing which:

• notifies that person of the referral
• is accompanied by a copy of the referral statement
• is accompanied by a copy of any comments provided to the GAAR Advisory Panel in respect of representations made by that person only under paragraph 28 of schedule 16 Finance Act (No.2) 2017
• notifies that person of the period for making representations to the GAAR Advisory Panel under paragraph 32 of schedule 16 Finance Act (No.2) 2017
• notifies that person of the requirement to send a copy of any representations made by that person to the GAAR Advisory Panel, to the designated officer

Right to make representations to GAAR Advisory Panel

This is explained in section E3.12 of the GAAR guidance.

Once a referral has been made to the GAAR Advisory Panel under paragraph 26 of schedule 16 Finance Act (No.2) 2017, a person who has received a notice of the referral under paragraph 31 of Schedule 16 Finance Act (No.2) 2017 can send the GAAR Advisory Panel written representations.

A person has 21 days, beginning with the day on which that notice is given, to make representations. The representations can be about the notice given to the person under paragraph 28 of schedule 16 Finance Act (No.2) 2017 or about any comments provided to the GAAR Advisory Panel by HMRC under paragraph 30 of schedule 16 Finance Act (No.2) 2017 in respect of the representations made by that person.

The GAAR Advisory Panel may extend the period in which a person can make representations, if the person makes a written request for an extension.

A copy of any representations that a relevant person sends to the GAAR Advisory Panel must be sent to the designated officer at the same time.

If a relevant person sends representations to the GAAR Advisory Panel under paragraph 32 of schedule 16 Finance Act (No.2) 2017 but did not make any representations to HMRC under paragraph 28 of schedule 16 Finance Act (No.2) 2017, a designated officer may provide the GAAR Advisory Panel with comments on those representations, providing a copy of any such comments to that person at the same time.

Opinion of GAAR Advisory Panel and opinion notices

This is explained in section E3.13 of the GAAR guidance.

When a referral is made to the GAAR Advisory Panel under paragraph 26 of schedule 16 Finance Act (No.2) 2017, the Chair of the Panel must arrange for a sub-panel consisting of 3 members (one of whom may be the Chair) to consider the referral.

The sub-panel may invite both the designated officer and any relevant person who was given a notice under paragraph 28 of schedule 16 Finance Act (No.2) 2017 to supply further information to the sub-panel within the period the sub-panel specifies in the invitation.

There’s no obligation on either any relevant person or the designated officer to supply any further information, although it’ll help inform the sub-panel’s opinion if it’s provided.

An invitation to a person to provide information to the sub-panel must explain that if the person provides information to the sub-panel, they must provide it to the designated officer at the same time.

Equally, an invitation to the designated officer must explain that if the designated officer provides information to the sub-panel, the designated officer must provide this information to each person who has been given a notice under paragraph 28 of schedule 16 Finance Act (No.2) 2017 at the same time.

After the sub-panel has considered the referral, they must produce an opinion notice stating the joint opinion of all the members of the sub-panel. Alternatively, they can produce 2 or 3 opinion notices which taken together state the opinions of all the members.

A copy of the opinion notice or notices must then be given to the designated officer.

It’s expected that in most cases, shortly after each opinion is given, an anonymised version of the opinion which has been approved by the sub-panel will be published by HMRC.

HMRC will give very careful consideration to the form in which opinions are published to ensure that confidentiality is protected, and it may be necessary to withhold publication in some instances if it is not possible to publish the opinion in a form that ensures that confidentiality is maintained.

An opinion notice is a notice which states the opinion of either all or one or more of the members of the sub-panel, and the reason for that opinion. The opinion could be any of the following:

• the entering into and carrying out of the tax arrangements described in the referral statement is a reasonable course of action in relation to the relevant tax provisions, having regard to all the circumstances
• the entering into or carrying out of such tax arrangements is not a reasonable course of action in relation to the relevant tax provisions, having regard to all the circumstances
• on the information available, it is not possible to reach a view on the matter

Before forming their opinion, members of the sub-panel must have regard to all the matters set out in the referral statement and to the matters in paragraphs 3(3)(a) to (c) and 3(4) of schedule 16 Finance Act (No.2) 2017.

They must also take account of paragraphs 3(5) to (7) of schedule 16 Finance Act (No.2) 2017. You can find out more about this in the Abusive and defeated tax arrangements guidance.

For the purposes of giving an opinion under paragraph 34 of schedule 16 Finance Act (No.2) 2017, the arrangements are assumed to be tax arrangements.

An opinion of the GAAR Advisory Panel on a referral under paragraph 26 of schedule 16 Finance Act (No.2) 2017 is to be treated as having been given when an opinion notice or notices has been given under paragraph 34 of Schedule 16 Finance Act (No.2) 2017 in respect of the referral.

Any requirement to consider the opinion of the GAAR Advisory Panel given on a referral under paragraph 26 of schedule 16 Finance Act (No.2) 2017 is a requirement to consider the contents of the opinion notice or, if more than one, all the opinion notices, given on the referral.

Requirement for court or tribunal to take the GAAR Advisory Panel opinion into account

When a court or tribunal is hearing proceedings in relation to a penalty under the enablers legislation and is considering whether the tax arrangements in question are abusive, they must take account of the relevant Panel opinion.

The relevant Panel opinion is the opinion of the GAAR Advisory Panel that the designated officer was required to consider before deciding whether or not to assess the penalty.

The court or tribunal may also take account of any guidance, statements, or other material in the public domain at the time the arrangements were entered into and evidence of established practice at that time in determining whether the enabled defeated tax arrangements were abusive.

It may do so whether or not such material would be admissible in court proceedings under the normal rules of evidence. Such material would cover anything relevant that was in the public domain at the time the arrangements were entered into.

There’s no limit to the nature of this material, provided only that it’s relevant. Accordingly it may be official (for example HMRC, ministerial or Parliamentary) or non-official (for example text books, articles in professional journals, correspondence with representative bodies of the various professions).

The tribunal or court can decide what weight, if any, to give to such material.

Published 30 April 2018