6 December 2007
Principles-based approach to financial products avoidance: a consultation document
The use of tax avoidance schemes has led to ever increasing complexity in tax legislation. This leads to even more complex attempts by some businesses to avoid the legislation, and also impacts on other businesses who need to ensure they do not unintentionally fall foul of any anti-avoidance rules. This is the subject of one of the simplification reviews announced by the Chancellor in the Pre-Budget Report, which has a specific focus on anti-avoidance legislation.
The consultation document will explore the possibility of replacing existing detailed anti-avoidance rules in two areas with legislation which instead applies a principles-based approach. The two areas concerned involve disguised interest - where taxable interest is converted into exempt income or a capital gain - and sales of income streams - where taxable income is converted into something that may be treated by tax law as capital.
The consultation is available in Adobe Acrobat Portable Document Format (PDF). If you do not have Adobe Acrobat installed on your computer you can download the software free of charge from the Adobe website. For alternative ways to read PDF documents and further information on website accessibility visit the HM Treasury accessibility page.
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At PBR 07 the Government announced separately the introduction of three simplification reviews, to evaluate how a range of tax policies can be simplified. One of these reviews is concerned with how anti-avoidance legislation can best meet the aims of simplicity and revenue protection. Views expressed by interested parties in the context of the principles-based consultation will complement the anti-avoidance review.