Market leading insight for tax experts
View online issue

New avoidance schemes targeted

printer Mail

The government has announced that two ‘highly abusive’ tax avoidance schemes, disclosed to HMRC recently, will be targeted in legislation to be brought forward in Finance Bill 2012.

The first measure will amend the loan relationships rules in CTA 2009 relating to ‘deemed debt releases on impaired debts becoming held by connected company’ to counter arrangements seeking to avoid the rules relating to deemed releases, where creditor and debtor companies become connected. The changes will apply retrospectively with effect in relation to debt acquisitions on or after 1 December 2011.

The second scheme to be closed uses authorised investment funds to create a repayable tax credit to secure repayment of tax that has not been paid.

In a written statement, HM Treasury said that the schemes had been disclosed by a bank to HMRC and that the government was taking immediate action to secure payment of ‘over half a billion pounds in tax, protect further billions of tax from being lost and maintain fairness in the tax system.’

Commenting on the announcement, David Gauke said: ‘The government wants to ensure that the tax system is fair for all and we will not allow those who seek to benefit from this aggressive avoidance to get an unfair advantage. We do not take [this] action lightly, but the potential tax loss from this scheme and the history of previous abuse in this area mean that this is a circumstance where the decision to change the law with full retrospective effect is justified.’

The Treasury has published the legislation in draft form, along with a tax information and impact note and explanatory guidance.