The draft Finance Bill 2013 : 1st report of session 2012-13

Following detailed consultations based on the findings of an independent study group, the draft Finance Bill includes proposals for a GAAR (General Anti-Abuse Rule), narrowly targeted at abusive transactions which fail a stringent "double reasonableness" test.

The provisions also include the formation of an Advisory Panel to agree guidance and give its opinion on the application of the double reasonableness test to a given set of tax arrangements.

Most agree the narrow focus was appropriate. Some witnesses argued that HMRC should set up a clearance system to reduce uncertainty about where the GAAR would apply.

Many witnesses were very concerned at the application of the GAAR to transactions involving inheritance tax planning.

The Bill also includes an Annual Residential Property Tax Package (ARPT) which is part of a package of measures to address Stamp Duty Land Tax avoidance by using companies to buy expensive residential properties ("enveloping").

The Government's proposals might have been more appropriately designed had it consulted interested parties at the outset however the Government did respond to the need to exempt certain businesses and other organisations. There are also concerns of witnesses about the practical workability of the ARPT and HMRC should set out in detail how they will implement these provisions and recommend a review after 3 years.

The development of the cap on income tax reliefs followed an inadequate consultation process leading to ill-thought through proposals.

These proposals risk disadvantaging business by restricting reliefs for genuine trading and other losses.