A recent decision of the French Conseil d'Etat displays the contrast between the two systems, and the long road ahead for those seeking some form of Europeanisation of Corporation tax in Europe.  The European political attempt at this without having managed to achieve any prior form of harmonisation or even approximation does not merit the description of a heroic failure, but perhaps rather one of a permanent car crash.

The main public actions of the GAAR Advisory Panel consists in giving out guidance as to what might be avoidance that is abusive, i.e. doubly unreasonable . See its  Report of November 2014.

There is an effective procedural requirement that the British GAAR Advisory Panel be seised, not just consulted, where adjustments are made under s.209 FA 2013, in cases of perceived abusive avoidance. The Inspector is required to base any such adjustments on a s. 209 notice which triggers the procedure under Schedule 43 Finance Act 2013.

s. 209 (6)

But-

(a) no steps may be taken by an officer of Revenue and Customs by virtue of this section unless the procedural requirements of Schedule 43 have been complied with, and

(b) the power to make adjustments by virtue of this section is subject to any time limit imposed by or under any enactment other than this Part.

HMRC does not sit on the Advisory Panel, for constitutional reasons. The French Comités do not have this disadvantage. There is a significant difference in culture, which is reflected in both the procedure and in fact the law.

The practical difference lies in the manner in which "abus" is defined and treated in France. The abus de droit mechanism is related to the setting aside of a contractual or other document on the basis that it does not reflect the underlying transaction. It has been extended to include artificial steps which are purely intended to obtain a tax advantage. If the French Administration does not give the Taxpayer the opportunity of a hearing before the competent Comité d'abus de droit and goes straight to an abus de droit (abuse of law) reassessment, it is at risk of having its decision overturned, not only as a matter of law, but also bearing  the full burden of proof. In short, it has to prove that the arrangement it is seeking to overturn and  requalify is an abus de droit, with the fiscal connotation recently included.

In its  decision of 8th July, 2015, the French Conseil d'Etat rejected the administration's contention that Peugeot could have proceeded by a different legal route to pursue its otherwise legitimate aim, albeit of course paying more tax, and that the Court of Administrative Appeal of Versailles had erred in law. This was a fairly straightforward issue of the treatment cessions of shares in a dormant group company to a subsidiary also within Tax Integration perimeter in the internal French tax consolidation (Intégration fiscale). Peugeot had acted strictly in accordance with the terms of the applicable legislation, but had taken the less expensive fiscal route. The Peugeot subsidiary transferred was dormant, and was therefore transferred at a loss to the Peugeot group company whose purpose was  to hold dormant companies.  It was not the Holding company's business object to hold dormant companies.   Peugeot needed free treasury, and the mechanism put in place ensured that, without any form of dissemblance or lack of transparency.  The active holding company's balance sheet was lightened up by the removal of a heavily depreciated and dormant subsidiary. The relevant movements and long term capital losses were compensated for under the specific provisions of the CGI (Tax Code) relating to long term capital gains.  There is no equivalent to that régime in the UK.

The administration attempted to set the convention of cession aside arguing that the Peugeot "active" holding company could have simply absorbed the subsidiary, and paid more tax.  In other words the French administration changed the contract. Under s 209, HMRC can do that, but only if it serves a s.209 notice, having decided that there is an abuse.

The French administration had gone straight to reassessment on the basis of abus de droit without first going to the Comité d'abus de droit for an opinion.   The Comité is made of a mixture of Tax inspectors accountants lawyers and people from business.  The administration's ideas as to how a business should be run are therefore confronted with those of real management.

The Conseil d'Etat upheld the Court of Administrative Appeal's decision that the Administration's failure to consult the Comité rendered it liable to prove the abus de droit, which it had failed to do.  The administration can only overturn a written agreement if it can prove it not to reflect the economic reality which it covers.

The Clerk at the Conseil d'Etat made a  memoire of an unreported judgement n°  95513 of 16th July 1976 of the Conseil d'Etat available to a French colleague, Patrick Michaud  setting aside a judgement of the Grenoble Administrative Tribunal on the basis that the Tax administration cannot set aside a transaction and establish a new one on the basis that a taxpayer has chosen a legitimate method of achieving his objective, which is fiscally more favourable to him.  That decision predates the 1981 and subsequent legislative changes in the definition of what a fiscal abus de droit consists.  However, the fundamental principle remains the same.

Whilst the French system functions very differently to the British, it remains to see how far the First Instance Tax Tribunal might consider that HMRC may need to work harder on evidential and balance of proof were it not to serve a notice under s 209 or seek the GAAR Advisory Panel's guidance on a specific case.  However, it is only when a section 209 Notice is made that the GAAR Advisory Panel's immanent jurisdiction is crystalised, and the Tax payer can seize the Panel.

The Panel's 2014 Report illustrates this:

"D1.1 ... As an overarching comment it is important to remember a key policy objective of the GAAR - that it is targeted at abusive tax avoidance schemes, but does not delineate in any way what may or may not be regarded as tax avoidance in a broader sense and which HMRC might want to challenge outside the context of the GAAR in any event."

However, the 2015 Guidance Notes provide further more detailed comments and in effect discloses the fundamental constitutional difference between Parliament, the appropriator, and the Courts, the protectors of the subject's rights, at B.2. .