General Anti Avoidance Rule

At present, the way tax legislation works is that the Government passes a law to say you can or can't do something. Some clever barrister finds a way around the rule and a tax scheme is born. it gets peddled by the big firms, millions of tax is avoided and then the Government is forced to bring in some specific anti avoidance legislation to stop the abuse (because they didn't draft the rules properly in the first place).

Usually therefore anti-avoidance legislation is not that relevant to most businesses.

However, the study group is now proposing a general anti avoidance rule.

This would work differently. Basically under a general anti avoidance rule, if the Taxman thinks you've done something to avoid tax then he can attack it.

Of course this potentially will hit quite common tax planning such as husbands and wives being in business together and splitting the profits, taking dividends instead of salary, making pension contributions instead of taking a salary etc.

Watch this space as this could be a very important development in tax legislation.