This week's opinion: 16 May 2019

Readers will recall the dialogue I had with Pete Miller (‘All wound-up’, Taxation, 3 August 2017, page 15) about whether selling a company as a cash box rather than winding it up could be caught by the targeted anti-avoidance rule (TAAR). We both concluded that it was outside its scope. HMRC’s very different view was published on 4 February 2019 in Spotlight 47 (tinyurl.com/hmrcspotl47).

The issue still divides opinion and recently the professional bodies met HMRC to see whether a common understanding could be reached. The relevant papers are available on the Chartered Institute of Taxation’s website at tinyurl.com/ciotsl47. HMRC’s view remains that the TAAR is relevant and that the general anti-abuse rule (GAAR) might also apply.

I understand why HMRC would want to stamp out the use of money-box companies in this way and would have no problem if specific counteraction legislation was introduced. But I am concerned about talk of the GAAR being used here. The GAAR is designed to counter abusive tax arrangements: it was deliberately not introduced as a general anti-avoidance measure. I can’t see how a sale of a company in these circumstances is an abuse of the legislation – on the contrary it would fall squarely within the rules for share disposals.

So far the GAAR has worked well and is achieving its objectives. Let’s not muddy the waters by attempting to turn it into something that can attack any planning which HMRC does not like.

If you do one thing…

My piece this week was written on the Shanghai-Beijing express. While reading up in preparation for a trip to the Great Wall I discovered that the labourers who built it included people sent there as a punishment for tax evasion. However far away I go in the world taxation always seems to follow me.