A new creature

KEY POINTS

• The background to the proposals
• The aims of the new approach
• Will future legislation be more certain and fair?
• What are the problems with principles-based legislation?
• The need for clarification and consultation.

In December 2007 HMRC and HM Treasury issued a consultation document entitled Principles-based approach to financial products avoidance.

The consultation — the period of which ends on 28 February 2008 — is ostensibly in respect of two proposed pieces of legislation designed to tackle avoidance activity involving disguised interest arrangements and schemes to convert income streams into items taxed as capital.

However it also heralds a fundamental shift in approach to the drafting of anti-avoidance legislation. If followed through this would lead to significant changes in the nature of future legislation and the replacement of many...