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The government has shut down another contrived and aggressive tax avoidance scheme, in a move that follows the recent, well-publicised closure of arrangements being exploited by Barclays bank.
The latest scheme to be axed involved property business loss relief, and was marketed to high net-worth individuals as a way of reducing their end-of-year income tax bills.
It sought to use a series of highly artificial transactions to generate relief from a property business that owns agricultural land.
Although the land and its owner were real, the deals were not part of a genuine agricultural business. They were generated only to create an artificial loss that could be set off by users of the arrangement against other income.
Ministers have introducing legislation in Finance Bill 2012 to prevent property business loss relief arising from tax-motivated arrangements – and it has effect from today.
There will also be rules in the Bill to prevent post-cessation property relief being used artificially to avoid tax. They too will be effective from today.
The measures come soon after officials put a stop to two corporate avoidance set-ups that Barclays had made known to HMRC under the disclosure of tax avoidance schemes regime. As a result, the high street bank was left with an estimated £500 million debt to the Revenue.
The Exchequer secretary to the Treasury, David Gauke, said, ‘At a time when our top economic priority is reducing the deficit, it is unacceptable for anyone to try to avoid paying a fair share.
‘Today’s action will not affect legitimate agricultural businesses, but by acting swiftly, the government has prevented this scheme being used by people who want to escape paying the tax they owe. We won’t hesitate to close other avoidance schemes down as we become aware of them,’ added Mr Gauke.
