ACCA ATX ^UK Syllabus A6. Value Added Tax - Offshore Matters - Notes ^{1 / 1}

Abusive tax arrangements

A penalty has been introduced to the general anti-abuse rule (GAAR). 

It applies where the GAAR has been used to counteract tax advantages arising from abusive tax arrangements entered into by the taxpayer. 

The penalty is 60% of the amount of the tax advantage counteracted by the GAAR.

Examples of abusive arrangements are ones that result in less income, profits or gains, greater deductions or losses, or a claim for a repayment of tax that is unlikely to be paid.

Examples of a tax advantage are:

• relief or increased relief from tax

• repayment or increased repayment of tax

• avoidance of possible assessment to tax

• avoidance or reduction of charge to tax

• deferral of a payment or advancement of a repayment

• avoidance of an obligation to deduct or account for tax.

HMRC may counteract these tax advantages by increasing the amount of tax due from the taxpayer but these adjustments must be made on a ‘just and reasonable’ basis.

Offshore Matters

Finance Act 2015 increased the penalties for failure to notify chargeability to tax, late filing and errors in respect of offshore matters. 

The level of the penalty depends on the categorisation of the overseas country concerned (as determined by the Treasury) and the behaviour involved.

Finance Act 2016 has increased the minimum penalty for these offences, and introduced further penalties for both the taxpayer and for those who have enabled the offence to be carried out.

You are expected to know that these regimes exist but do not need to know the precise amounts of the penalties that may be charged or the categorisation of particular countries.