1 General anti tax-avoidance principle

(1) This Act has effect for the purpose of counteracting tax advantages arising
from tax arrangements that are considered to embrace tax avoidance.

(2) The principles included in this Act are collectively to be known as “the general
5anti-tax avoidance principle”.

(3) The general anti-tax avoidance principle applies to the following taxes—

(a) income tax,

(b) corporation tax, including any amount chargeable as if it were
corporation tax or treated as if it were corporation tax,

(c) 10capital gains tax,

(d) petroleum revenue tax,

(e) inheritance tax,

(f) stamp duty land tax,

(g) national insurance,

(h) 15value added tax, and

(i) any tax on ownership of high-value residential properties or dwellings
created in a Finance Act passed in 2013.

2 Meaning of “tax arrangements”

(1) Arrangements are “tax arrangements” if, having regard to all the
20circumstances, it would be reasonable to conclude that the obtaining of a tax

advantage as a result of tax avoidance was the main purpose, or one of the
main purposes, of the arrangements.

(2) Arrangements are not tax arrangements if—

(a) the arrangement was specifically permitted by legislation or regulation
5relating to any of the taxes referred to in section 1(3) or is clearly
consistent with principles on which the taxes referred to in section 1(3)
are based whether express or implied, or

(b) the advantaged party shows that the arrangement was neither
designed nor carried out with the intention of achieving a tax
10advantage and that no step or feature was included in or omitted from
it with that intention.

3 Meaning of “tax avoidance”

(1) Arrangements represent “tax avoidance” if, having regard to all the
circumstances, it would be reasonable to conclude that tax is not paid—

(a) 15by the right person, or

(b) at the right time, or

(c) in the right place, or

(d) under the charging provisions of the right tax, or

(e) at all when it would appear right that it was due, or

(f) 20in any combination of the circumstances noted in (a) to (e).

(2) In subsection (1) an arrangement is considered “right” when the economic
substance of that arrangement giving rise to a potential charge to tax under any
one or more of the taxes referred to in section 1(3) of this Act accords with the
form in which that arrangement is declared for assessment for taxation
25purposes whether in the United Kingdom or elsewhere, with non-declaration
of a potential charge to tax on the economic substance of a transaction in the
United Kingdom as a result of the form adopted for its completion being
considered a tax declaration for the purposes of this section.

(3) For the purposes of subsection (2) the economic substance of an arrangement
30does not accord with the economic form in which that arrangement is declared
for taxation purposes if having regard to all the circumstances—

(a) one or more of the parties to the arrangement cannot reasonably have
been included as a party to it without the securing of a tax advantage
having been an objective;

(b) 35the contractual form of the arrangement cannot reasonably have been
adopted without the securing of a tax advantage having been an
objective;

(c) the location in which the arrangement is recorded as having occurred
cannot reasonably have been decided upon without the securing of a
40tax advantage having been an objective;

(d) the timing of the arrangement cannot reasonably have been decided
upon without the securing of a tax advantage having been and
objective;

(e) the arrangement has as one or more of its objectives the declaration of
45a transaction for assessment under the provisions of one of the taxes
referred to in section 1(3), or none of them, when declaration under the
provisions of another of those taxes would seem more appropriate;

(f) the arrangement represents a transaction as relating to capital when it
would appear to relate to income;

(g) the arrangement represents a transaction as being income derived from
capital when it would appear to be derived from the profits of a trade
or employment,

(h) the arrangement appears to be without economic substance,

(i) 5the arrangement cannot be regarded as a reasonable course of action
having taken into consideration—

(i) any relevant tax provisions,

(ii) the substantive results of the arrangements, and

(iii) any other arrangements of which the arrangements form a part;
10or

(j) any party to the arrangement has stated that an objective of structuring
the arrangement in the form adopted was the securing of a tax
advantage.

(4) In subsection (3) “taxation purposes” includes—

(a) 15any action required to comply with the obligations of any legislation or
regulation relating to any of the taxes referred to in section 1(3) or their
administration or assessment notwithstanding any deficiency or
shortcoming in them that the arrangement is meant to exploit,

(b) any principles on which the taxes referred to in section 1(3) are based
20whether express or implied, and

(c) the policy objectives of the taxes referred to in section 1(3).

4 Meaning of “tax advantage”

(1) A “tax advantage” may be considered to have arisen for the purposes of this
Act if—

(a) 25the arrangement results in an amount of income, profits or gains for tax
purposes that is significantly less than the amount for economic
purposes,

(b) the arrangement results in deductions or losses of an amount for tax
purposes that is significantly greater than the amount for economic
30purposes,

(c) the arrangement results in a claim for the repayment or crediting of tax
(including foreign tax) that has not been, and is unlikely to be, paid,

(d) the arrangements involve a transaction or agreement the consideration
for which is an amount or value significantly different from market
35value or which otherwise contains non-commercial terms,

(e) the arrangement results in an amount of income, profits or gains for tax
purposes being assessed for tax purposes upon a person who appears
to have less economic claim upon that income, profit or gain than
another person who would have greater taxation liability due upon it if
40they were assessed to that income, profit or gain for tax purposes,

(f) the arrangement results in an amount of income, profit or gain being
subject to a tax other than that which the economic substance of the
arrangement would suggest appropriate with less tax being due as a
result,

(g) 45the arrangement results in an amount of income, profit or gain being
subject to tax assessment in a jurisdiction other than the United
Kingdom when the economic substance of the arrangement would
suggest that inappropriate whether or not more or less tax is due in that
other place or not,

(h) the arrangement results in a lower rate of tax being applied to the
income, profit or gain than might otherwise have been the case,

(i) the arrangement results in tax being paid later than might otherwise
have been the case,

(j) 5any combination of the circumstances referred to in paragraphs (a) to
(i).

(2) Subsection (1) is not to be read as limiting in any way the cases in which tax
arrangements might be giving rise to a tax advantage.

(3) A tax advantage may, without limitation, be indicated to have arisen by the
10existence of—

(a) relief or increased relief from tax,

(b) repayment or increased repayment of tax,

(c) avoidance or a reduction of a charge to tax or an assessment to tax,

(d) avoidance of a possible assessment to tax,

(e) 15a deferral of a payment of tax or an advancement of a repayment of tax,

(f) avoidance of an obligation to deduct or account for tax, and

(g) the passing of an obligation to make declaration of a liability to be
assessed to tax to another party.

5 Counteracting the tax advantages

(1) 20If tax arrangements meeting the definition of section 2(1) of this Act are
identified then the tax advantages arising from the arrangements are to be
counteracted on a just and reasonable basis.

(2) The counteraction may be made in respect of each or any tax to which the
general anti-tax avoidance principle applies.

(3) 25An officer of Revenue and Customs must make, on a just and reasonable basis,
such consequential adjustments in respect of any tax to which the general anti-
avoidance rule applies as are appropriate.

(4) These consequential adjustments—

(a) may be made in respect of any period, and

(b) 30may affect any person (whether or not a party to the arrangements) so
long as they are connected to the party that has enjoyed the benefit of a
tax advantage, such connection being as defined in section 993 of the
Income Tax Act 2007.

6 Proceedings before a court or tribunal

(1) 35In proceedings before a court or tribunal in connection with the general anti-
tax avoidance principle, HMRC must show—

(a) that there are tax arrangements that give rise to a tax advantage as a
result of tax avoidance, and

(b) that the counteraction of the tax advantages arising from the
40arrangements is just and reasonable.

(2) In determining any issue in connection with the general anti-tax avoidance
principle, a court or tribunal must take into account—

(a) explanatory notes that cast light on the objective setting or contextual
scene of the specific Taxing Act or this Act;

(b) the clear statements by a Minister or other promoter of the specific
Taxing Act or this Act together if necessary with such other
Parliamentary material as was necessary to understand such
statements and their effect;

(c) 5HMRC’s guidance about the general anti-tax avoidance principle;

(d) guidance, statements or other material (whether of HMRC, a Minister
of the Crown or anyone else) that is in the public domain at the time the
arrangements were entered into as to the principles on which the taxes
referred to in section 1(3) are based whether express or implied, the
10nature of tax avoidance, and those matters considered to fall within
section 2(2)(a) of this Act (on which matter HMRC shall issue periodic
guidance);

(e) evidence of established practice at that time; and

(f) evidence as to the intent of the parties, irrespective of the outcome of
15the arrangements.

7 Application for clearance of transactions

(1) A person may provide the Commissioners for Her Majesty’s Revenue and
Customs with particulars of a transaction or transactions effected or to be
effected by the person in order to obtain a notification about them under this
20section.

(2) If the Commissioners consider that the particulars, or any further information
provided under this subsection, are insufficient for the purposes of this section,
they must notify the person what further information they require for those
purposes within 30 days of receiving the particulars or further information.

(3) 25If any such further information is not provided within 30 days from the
notification, or such further time as the Commissioners allow, they need not
proceed further under this section.

(4) The Commissioners must notify the person whether they are satisfied that the
transaction or transactions, as described in the particulars, were or will be such
30that they ought not to be counteracted under the provisions of section 5 of this
Act.

(5) The notification must be given within 30 days of receipt of the particulars, or,
if subsection (2) applies, of all further information required but subject to the
conditions of subsection (6) having been met.

(6) 35The person making application for a notification under this section shall—

(a) specify the amount of tax that they estimate might be due as a result of
making the arrangement,

(b) specify whether that arrangement shall continue during the two year
period following its commencement, and

(c) 40pay a fee in respect of the notification to be supplied under section (4)
prior to that notification being supplied of not less than—

(i) £1,000, or

(ii) 5 per cent of the estimated tax due as a result of making the
arrangement, whichever shall be the greater,

45such charge to be subject to Value Added Tax and to be due whether or
not the requested notification can be supplied or not.

(7) HMRC shall have power to substitute such other sum that they think
appropriate for those sums notified under subsections (6)(a) and (b) if they
think those estimates unrealistic.

(8) If HMRC makes use of the powers in subsection (6)(d) they shall notify the
5person within thirty days of their intent to do so and provide their estimate of
the tax that might be due under the arrangement with reasons stated, with the
person having thirty days thereafter to appeal against the same or let their
application lapse.

(9) HMRC may publish their notifications issued under this section so long as the
10taxpayer’s identity is anonymised.

8 Effect of clearance notification under section 7

(1) This section applies if the Commissioners for Her Majesty’s Revenue and
Customs notify a person under section 7 that they are satisfied that a
transaction or transactions, as described in the particulars provided under that
15section, were or will be such that no counteraction of section 5 of this Act ought
to be taken in respect of the transaction or transactions.

(2) No such action may then be taken in respect of the transaction or transactions.

(3) But the notification does not prevent such action being taken in respect of
transactions including not only the ones to which the notification relates but
20also others.

(4) The notification is void if the particulars and any further information given
under section 7 about the transaction or transactions do not fully and
accurately disclose all facts and considerations which are material for the
purposes of that section.

9 25Power to obtain information

(1) This section applies if it appears to an officer of Her Majesty’s Revenue and
Customs that a person may be a person to whom section 5 applies in respect of
one or more transactions.

(2) The officer may serve a notice on the person requiring the person to give the
30officer information in the person’s possession about the transaction or, if there
are two or more, about any of them.

(3) That information must be information about matters that are relevant to the
question whether counteraction should be taken.

(4) Those matters must be specified in the notice under subsection (2).

(5) 35That notice must require the information to be given within such period as is
specified in it.

(6) That period must be at least 30 days.

10 Interpretation

In this Act—

• 40“arrangements” includes any agreement, understanding, scheme,
  transaction or series of transactions (whether or not legally
  enforceable),

General Anti-Tax Avoidance Principle BillPage 7

• “connected” is defined by section 993 Income Tax Act 2007,

• “the general anti-tax avoidance principle” has the meaning given by
  section 1,

• “HMRC” means Her Majesty’s Revenue and Customs,

• 5“notification” has the meaning given by section 7(1),

• “tax advantage” has the meaning given by section 4,

• “tax arrangements” has the meaning given by section 2(1),

• “tax avoidance” has the meaning given by section 3, and

• “taxes” has the meaning given to it by section 1(3).

11 10Financial provisions

There shall be paid out of money provided by Parliament—

(a) any expenditure incurred under or by virtue of this Act by a Minister of the
Crown or a government department, and

(b) any increase attributable to this Act in the sums payable under any other Act
15out of money so provided.

12 Short title, commencement and extent

(1) This Act may be cited as the General Anti-Tax Avoidance Principle Act 2012.

(2) This Act comes into force on the day on which this Act is passed.

(3) This Act extends to England and Wales, Scotland and Northern Ireland.