Tax avoidance

Legislative tools to challenge tax avoidance

Revenue can challenge a tax avoidance scheme under the General Anti-Avoidance Rule (GAAR) or one of the Specific Anti-Avoidance Rules (SAARs).

General Anti-Avoidance Rule (GAAR)

The GAAR is set out in section 811C of the Taxes Consolidation Act 1997. It applies to transactions which commenced after 23 October 2014. The GAAR is intended to defeat tax avoidance schemes which:

  • have little or no commercial purpose
  • are primarily entered into to obtain a tax advantage. 

The taxpayer is not entitled to claim the tax advantage when submitting their tax return if the transaction falls under GAAR.

In the case of a tax avoidance transaction or benefit of a tax advantage contrary to the GAAR Revenue may investigate the taxpayer. There is no time limit on when Revenue can:

  • carry out enquiries as to whether or not the transaction is tax avoidance 
  • withdraw the tax advantage by, for example, amending an assessment
  • collect or recover any amount of tax.

Specific Anti-Avoidance Rules (SAAR)

In addition to the GAAR there are many targeted anti-avoidance rules throughout tax legislation. These rules are intended to deny the benefit of a loss, relief or exemption which may otherwise be available. When a particular type of transaction or series of transactions are undertaken. Targeted anti-avoidance rules are used by Revenue for more specific or limited types of transactions than those to which the GAAR applies.

Schedule 33 of the Taxes Consolidation Act 1997 classifies a number of these provisions as specific anti-avoidance provisions.  The classification of these targeted anti-avoidance provisions as SAARs does not have any impact on how they apply to taxpayers.

A tax avoidance surcharge applies where a person seeks to obtain the benefit of any tax advantage which is withdrawn by:

  • section 811C
  • or
  • one of the SAARs.

The surcharge can be up to 30%.

Next: The consequences of engaging in tax avoidance