ABSTRACT
This chapter provides the central provisions of the UK GAAR in order to ascertain the extent to which a taxpayer’s motive, intention or purpose can be subjectively examined by the judiciary. The GAAR states that it is aimed at “counteracting tax advantages arising from tax arrangements that are abusive”.1 The GAAR has various stages to determine whether an arrangement is abusive. The GAAR dissected the term “abusive arrangement”32 and provided definitions for both words for tax purposes. A tax arrangement is described as “obtaining of a tax advantage was the main purpose, or one of the main purposes, of the arrangements”. Judges are at liberty creatively to interpret the facts to ascribe a purpose to the arrangements. However, this could also extend to scrutinising the taxpayer’s purpose in embarking on the transactions, although Lord Clyde in McGuckian proclaimed that the taxpayer’s purpose is irrelevant. The concepts of reasonableness and the reasonable person are commonly used in tort law.
