What is a general anti-abuse rule?
Answered 17 March 2026
Here is a comprehensive answer based on the retrieved sources.
What is the General Anti-Abuse Rule (GAAR)?
What the law says
The General Anti-Abuse Rule (GAAR) is a set of rules contained in Part 5 of the Finance Act 2013. Its purpose is to counteract tax advantages arising from tax arrangements that are abusive.
Taxes covered
The GAAR applies to the following taxes:
- Income tax
- Corporation tax (including amounts chargeable or treated as corporation tax)
- Capital gains tax
- Petroleum revenue tax
- Diverted profits tax
- Apprenticeship levy
- Inheritance tax
- Stamp duty land tax
- Annual tax on enveloped dwellings
- Multinational top-up tax
- Domestic top-up tax
It also extends to national insurance contributions.
What are "tax arrangements"?
Arrangements are "tax arrangements" if, having regard to all the circumstances, it would be reasonable to conclude that obtaining a tax advantage was the main purpose, or one of the main purposes, of the arrangements.
What does "abusive" mean?
Tax arrangements are "abusive" if they are arrangements the entering into or carrying out of which cannot reasonably be regarded as a reasonable course of action in relation to the relevant tax provisions, having regard to all the circumstances including:
- (a) whether the substantive results are consistent with the principles and policy objectives of those provisions;
- (b) whether the means of achieving those results involves one or more contrived or abnormal steps; and
- (c) whether the arrangements are intended to exploit any shortcomings in those provisions.
Indicators that arrangements may be abusive include:
- Income/profits/gains for tax purposes are significantly less than for economic purposes;
- Deductions or losses for tax purposes are significantly greater than for economic purposes;
- A claim for repayment or crediting of tax that has not been, and is unlikely to be, paid.
Conversely, arrangements that accord with established practice that HMRC had accepted at the time are an example of something that might indicate the arrangements are not abusive.
Relationship with priority rules
Any priority rule (e.g. rules giving certain provisions exclusive effect, such as the loan relationships rules in CTA 2009 or double taxation arrangements under TIOPA 2010) has effect subject to the GAAR, despite the terms of the priority rule.
Proceedings before courts and tribunals
In proceedings, HMRC must show (a) that there are abusive tax arrangements, and (b) that the adjustments made to counteract the tax advantages are just and reasonable. Courts and tribunals must take into account HMRC's GAAR guidance approved by the GAAR Advisory Panel and any opinion of the GAAR Advisory Panel.
Commencement
The GAAR has effect in relation to tax arrangements entered into on or after the day the Finance Act 2013 was passed (17 July 2013).
HMRC guidance / practice
HMRC describes the GAAR as providing "an additional means for HMRC to tackle abusive tax avoidance schemes". Importantly, HMRC notes that all forms of tax avoidance — including avoidance that does not fall within the GAAR's definition of "abusive" — will continue to be challenged and counteracted using existing means.
Where the GAAR Advisory Panel has concluded that arrangements are not a reasonable course of action and a designated HMRC officer has given a notice of proposed counteraction, undertaking or promoting such a transaction is treated as a breach of the Code of Practice on Taxation for Banks.
The GAAR also applies to Diverted Profits Tax, but HMRC guidance states it should not be raised with a taxpayer or their advisors until Counter-Avoidance have been consulted and given express approval.
Citation sources
PART 5 General anti-abuse rule Meaning of “tax arrangements” and “abusive” 207 1 Arrangements are “tax arrangements” if, having regard to all the circumstances, it would be reasonable to conclude that the obtaining of a tax advantage was the main purpose, or one of the main purposes, of the arrangements. 2 Tax arrangements are “abusive” if they are arrangements the entering into or carrying out of which cannot reasonably be regarded as a reasonable course of action in relation to the relevant ta
PART 5 General anti-abuse rule General anti-abuse rule 206 1 This Part has effect for the purpose of counteracting tax advantages arising from tax arrangements that are abusive. 2 The rules of this Part are collectively to be known as “ the general anti-abuse rule ”. 3 The general anti-abuse rule applies to the following taxes— a income tax, b corporation tax, including any amount chargeable as if it were corporation tax or treated as if it were corporation tax, c capital gains tax, d petroleum
PART 5 General anti-abuse rule Relationship between the GAAR and priority rules 212 1 Any priority rule has effect subject to the general anti-abuse rule (despite the terms of the priority rule). 2 A “ priority rule ” means a rule (however expressed) to the effect that particular provisions have effect to the exclusion of, or otherwise in priority to, anything else. 3 Examples of priority rules are— a the rule in section 464, 699 or 906 of CTA 2009 (priority of loan relationships rules, derivati
The General Anti-Abuse Rule (GAAR) (gov.uk) provides an additional means for HMRC to tackle abusive tax avoidance schemes. All forms of tax avoidance, including both abusive tax avoidance to which GAAR may apply, and tax avoidance that does not fall within the meaning of abusive tax avoidance that is the target of the GAAR will continue to be challenged and counteracted using existing means, including the transfer of assets provisions. The GAAR applies to abusive tax arrangements entered into on
For arrangements: that the General Anti-Abuse Rule (GAAR) Advisory Panel have concluded are not a reasonable course of action, and where the designated officer of HMRC has given a notice of proposed counteraction under FA13/SCH43/PARA12; then as set out in the Governance Protocol, undertaking or promoting such a transaction is a breach of the Code, and HMRC will not need to look any further at the intentions of Parliament. Examples of when the GAAR might or might not apply can be found via the f
PART 5 General anti-abuse rule Commencement and transitional provision 215 1 The general anti-abuse rule has effect in relation to any tax arrangements entered into on or after the day on which this Act is passed. 2 Where the tax arrangements form part of any other arrangements entered into before that day those other arrangements are to be ignored for the purposes of section 207(3), subject to subsection (3). 3 Account is to be taken of those other arrangements for the purposes of section 207(3
PART 5 General anti-abuse rule Proceedings before a court or tribunal 211 1 In proceedings before a court or tribunal in connection with the general anti-abuse rule, HMRC must show— a that there are tax arrangements that are abusive, and b that the adjustments made to counteract the tax advantages arising from the arrangements are just and reasonable. 2 In determining any issue in connection with the general anti-abuse rule, a court or tribunal must take into account— a HMRC's guidance about the
The General Anti-Abuse Rule (GAAR) applies to DPT. The GAAR should not be raised with a taxpayer or their advisors until Counter-Avoidance have been consulted and given their express approval. The definition of tax advantage at CTA 2010 s1139 has been widened to include the avoidance or reduction of a charge to DPT. This means that various targeted anti-avoidance rules such as the loan relationship unallowable purpose rule at section 441 of CTA 2009 can apply in relation to DPT.