Taxation System in the UK and the Role of GAAR in Preventing Tax Avoidance

Running Head: Tax
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Advanced Taxation
10/8/2019

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The tax system of the UK is applied to the Scotland, England, Northern Ireland, Wales and many
other small islands which is around the coast of the British. In the UK there are the certain taxes
which are applied to the person such as capital gains, individual taxes, property taxes, VAT, etc.
In UK the spouses are treated as the separate entity and they have to pay their taxes as an
individual (Debelva and Luts, 2015). The person has to take the national insurance number
before paying the tax in the UK. The person who is the national from the EU member nation,
Switzerland and from the European Economic Area then they have to apply for the Tier 2 Visa
fir paying the tax.
There are the three different levels of the government in the UK which is local government,
central government and the devolved government. All the income of the individual is collected
by the central government (Christians, 2014). Other taxes also such as value added tax, national
insurance contribution, corporation tax, etc. In international taxation every system has their own
tax laws which are the subject of the different countries.
There are many individual who do tax avoidance and minimizes their tax liability within the law.
The financial income of the person modified so that their financial situation shows lower. By
claiming the credits and the permissible deductions tax avoidance is generally accomplished. To
minimize the tax liability it is done which is the legal way for the people. IRC (Internal Revenue
Code) is built to avoid the tax (Taboada, 2015). The financial affairs are adjusted so that the tax
which will pay to the government can be avoided. For the personal benefit, the individual uses
the shortcomings and the loopholes. The major aim of the tax avoidance is to dodge the payment
of the tax by taking the advantages of the law in the loopholes.
The benefits of tax avoidance is only get for some short period of time as if any changes or
amendments made by the government then the benefits will no longer be existed. Tax avoidance
is legal but to traditional definition contrasted with the tax evasion then it became illegal as it
consists of fraudulent (Freedman, 2016). The parliament never intended this system as it was
bending the rules of the tax. The tax advantages can be gained by the people which often
involves on the artificial transactions and in the contrived things.
In UK the tax avoidance is illegal as everyone can avoid the tax in the legitimate manner to save
from the tax liability. If the amount of the tax is reduced as per the law then the tax avoidance is

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legal of the tax regime. It was found that tax avoidance schemes were widespread and there were
63% of the respondent which felt that (Picciotto, 2012). There were also 61% respondents from
the majority that was not accepting the scheme of the tax avoidance. There were many schemes
of the tax avoidance which doesn’t work and the person who uses the scheme has to face major
problem of paying the higher tax. So they also try to avoid the tax avoidance schemes as many
penalties were also included in that.
To market the tax avoidance, the government has introduced the GAAR which is the general
Anti Abuse Rule. It is the anti-tax avoidance law which is made to raise the concern related to
the tax avoidance (Dharmapala, 2014). Every country has their own rules which are ratified so
that avoidance of the tax can be checked. As per the law and the rules of the GAAR, if any
transactions which are conducted for the primary purpose to obtain a tax benefit then only they
will get the reduction otherwise the consequences of the tax may be invalidated.
Public scrutiny is the good thing as per the democratic societies as it helps in maintain the ethics
and the governance in the company. As per the criminal law, public scrutiny is the subject matter
for the police officers (Birks and Downey, 2015). Officers are the public servant so they are the
subject to deeds with the legitimate public scrutiny. The public scrutiny was increasing as it was
getting many media attention and the also reinforce global emphasis. The tax scrutiny is the
notice for the scrutiny where the action is taken by the ITR if the scrutiny is limited.
GAAR is the tool that has the many essence In the country as this provision codify the doctrine
of the Substance over form. As pre this doctrine the main purpose of the parties is to determine
or evaluate the tax consequences and they are not much concerned with the transactions of the
legal structure (Frecknall-Hughes, 2014). In UK, the GAAR was introduced by the Finance Act
2013 but this act and rule become effective from the 17 July. The commission of the HMRC has
established the GAAR advisory panel in 2018 June.
The General Anti- Avoidance Rule (GAAR) is an anti-tax ignorance. It was come in the Finance
Act, 2013 and effect from 17 July, 2013 (Kubick, et al., 2014). It is created to prevent the tax
advantages increasing from the tax arrangements that are cruel. The main purpose of the
transactions is because of the tax arrangements that exist where creating a tax advantages. It is
essential where the transactions or sequences of the transactions that achieves a depreciation,