Autumn Budget 2017: Targeted Anti-Avoidance for Double Tax Relief

The current legislation for the Targeted Anti Avoidance Rule (TAAR), which applies to prescribed schemes and arrangements that artificially create or enhance double taxation relief for taxpayers, is to be strengthened. Under the current rules it is necessary for HMRC to issue a counteraction notice in order to apply the legislation to deny the benefit of the double tax relief under any scheme or arrangement that arises.

Two changes are proposed in order to modernise the TAAR. The first change, which will be effective from 1 April 2018, will remove the necessity for HMRC to issue a counteraction notice. Instead the burden will be on the taxpayer to assess whether the TAAR actually applies to their position under self-assessment. This eases the burden on HMRC and aligns this TAAR with more recent TAARs.

The second change, effective from Budget Day, extends the definition of the schemes in the Act to include any scheme where the total foreign tax payable reduces not just the taxpayers UK liability but the liability of any connected person under the scheme or arrangements in question.

This measure will not impact on compliant individuals and businesses. It will take the burden away from HMRC to counter avoidance and place the burden on the non-compliant taxpayers to assess their own positions. By extending the definitions within the legislation, connected parties will now be caught where they too are non-compliant.