The legislation in respect of the General Anti Abuse Rule (GAAR) in the Finance Bill 2013 provides for the appointment of a GAAR advisory panel. The panel is to consider and approve HMRC’s guidance on the GAAR. It is also required to consider opinions on cases referred to it by HMRC. HMRC announced on its website in an update on 24 May 2013 that it has issued the terms of reference for the GAAR advisory panel and that the Chair of the advisory panel, appointed in April 2013, is recruiting the other members to sit on the panel.

The legislation provides that where a designated HMRC office considers that a taxpayer has gained a tax advantage from an abusive arrangement and this arrangement should be counteracted by HMRC a notice to that effect is to be supplied to the taxpayer. This notice will specify the relevant tax arrangements and the tax advantage gained by the taxpayer, why the HMRC officer considers the arrangement to be abusive and the type of counteraction that will be taken by HMRC. The taxpayer will be given 45 days to make written representations about the proposed counteraction.

If the taxpayer does not respond to the notice, or if after considering the taxpayer’s written representations the HMRC officer still wishes to proceed with the counteractions, the matter must be referred to the GAAR Advisory Panel. The HMRC officer should provide the GAAR advisory panel with a copy of the notices sent to the taxpayer and the representations made by the taxpayer. The taxpayer should be sent a notice that the matter has been referred to the advisory panel and informed of any comments made by the HMRC officer in respect of the taxpayer’s representations. The taxpayer then has fourteen days following this notice in which representations may be made to the advisory panel in respect of the counteraction proposed by the HMRC officer.

Where a case is referred to the GAAR advisory panel, the terms of reference of the advisory panel require the Chairman of the panel to appoint a sub panel consisting of three experienced members of the panel, taking into account any possible conflicts of interest. These may include additional persons recommended by the Chair and appointed to the panel for the duration of that case. The sub panel may also include the Chair. The sub panel would aim to issue a decision within 60 days of referral of the issue. The panel is to be assisted in this process by guidance on the GAAR drafted by HMRC and approved by the panel.

The GAAR advisory panel is to be supported by a secretariat within HMRC that will supply draft guidance to the panel and ensure that panel recommendations are considered in drafting guidance.  The secretariat would also assist the Chair in producing an annual report for the Commissioners and would perform secretarial functions in respect of cases referred to the advisory panel for consideration.

The advisory panel is accountable to the Commissioners who will appoint panel members. The core panel members are to be appointed for a period of three years. The Chair is to be part time and recruited in line with Cabinet Office rules. The members of the panel are to be paid expenses only.