The government has closed a tax avoidance scheme marketed as a way for companies to artificially reduce their corporation tax bills, which it says has robbed the Treasury of ‘tens of millions of pounds’.
HM Revenue & Customs (HMRC) was alerted to the scheme, which sought to exploit rules that automatically allow certain types of expenditure to be deducted from profits, this week.
The Treasury said it was a wholly artificial arrangement set up for no other purpose than to avoid tax and that HMRC would challenge any attempts made to use it before the new legislation comes into effect today.
Exchequer secretary David Gauke (pictured) said: 'This government has made it very clear that we will not put up with tax avoidance which uses artificial structures to aggressively exploit rules contrary to parliament’s intended purpose.'
The scheme sought to generate loss relief from a property business. It was intended that users of the scheme offset losses from the property business against their corporation tax profits.
Legislation specifically banning this arrangement will come into effect today.
The government will introduce a general anti-abuse rule (Gaar) next year which will give HMRC greater powers to shut tax avoidance arrangements.