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Wednesday, 12 March 2008
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As had been hoped, HMRC announced in the Budget that the
“principles-based approach” to financial avoidance, which has been the
subject of much debate since December 2007, will be further developed
with a view to introduction in Finance Bill 2009.
Further consultation will now be held on this approach, which is
intended to ensure that arrangements which are intended to produce, in
substance, an interest return are taxed in the same way as
interest-bearing investments.
HMRC have listened to responses to the December consultation, which
indicated what HMRC say was “a strong desire for more time to get the
legislation right” and have, in the meantime, continued the trend of the
last 3-4 years of releasing specific legislation targeted at certain
disclosed transactions.
The result is a further dozen or so specific anti-avoidance measures –
given HMRC’s continued focus on simplification, it will be interesting
to see whether these specific measures will be repealed once the
principles-based approach is finalised.
On the subject of simplification, HMRC issued a report as part of the
Budget releases on “simplifying anti-avoidance legislation”, which
comments on the various approaches to anti-avoidance legislation. These
approaches range from specific, prescriptive “black letter” legislation
at one end of the spectrum to the “principles-based approach” at the
other, with “Targeted Anti-Avoidance Rules” (several of which HMRC have
introduced recently) in the middle, which “aim to strike a balance
between generality and specificity”.
HMRC conclude that the more generic approaches to anti-avoidance “appear
to provide scope for simplifying existing legislation whilst protecting
revenues” and therefore, the principles-based approach to “financial
products avoidance” may be indicative of a trend. |
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