“No man in this country is under the smallest obligation, moral or other, so as to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores. The Inland Revenue is not slow – and quite rightly – to take every advantage which is open to it under the taxing statutes for the purpose of depleting the taxpayer’s pocket. And the taxpayer is, in like manner, entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue.”

This delicious quote from the judgment of Lord Clyde (Ayrshire Pullman v CIR (1929) 14TC 754)  has always been the foundation on which accountants like me, who help their clients with legal tax avoidance have built their arguments.

 

Parliament has rejected this judgement by enacting the general anti-abuse rule or GAAR. Taxation it is argued is not to be treated as a game where taxpayers can indulge in any ingenious scheme in order to eliminate or reduce their tax liability.

So watch out Jimmy Carr!

 

But what does it mean for those of us who do arrange their affairs to avoid tax but not in such an aggressive way?

Well the good news is that those who feared that it would be a charter for HMRC to crush and penalise anything it didn’t like have not materialised. Instead we have a reasoned argument that making the most of the rules is just fine but taking steps which are artificial, abnormal or simply to escape tax will be caught by GAAR. The downside is that what you consider to be fair and reasonable may not be quite the same as that of your local Tax Inspector!

So what does that mean in the property world:

•   Giving assets to your spouse or children to reduce tax while it may avoid tax isn’t abusing the rules
•  Switching the capital gains tax relief between main residences is allowed; that will no doubt keep a few MP’s happy

That said few of us are engaged in the aggressive tax planning used by the likes of Jimmy Carr so in the real world nothing really changes.

Or as the neighbours might say plus ca change J

 If you would like a strategic session to review your affairs please email Iain@iainwallis.com