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General Anti-Abuse Rule (GAAR) - What is it and Why is it Important to Property Investors?

Many property investors are facing an increasingly challenging tax regime, following the Finance Act 2015 - restricting residential mortgage interest relief - which has received Royal Assent.

There is now an added incentive for property investors to become more 'creative' with their financial affairs - however it is important to stay on the right side of the law. This article explains what the UK's General Anti-Abuse Rule (GAAR) is, how it affects property investors, and how to ensure compliance with it.  

General Anti-Abuse Rule - never heard of it! What is it exactly and why does it matter to me?

The UK's 'General Anti-Abuse Rule' - or 'GAAR' for short - is part of HMRC's anti-tax abuse framework, and came into force in July 2013. The purpose of the GAAR is to stop taxpayers from obtaining tax benefits arising from 'abusive' tax arrangements.  

Generally, the GAAR is an over-arching rule that takes priority over other parts of UK tax law - essentially, the GAAR is a 'test' to be 'passed' by a taxpayer when undertaking transactions or arrangements.  GAAR is therefore a deterrent measure designed to stop financial planning that has no genuine rationale other than to save tax.  

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