The Government has moved to immediately close an ‘aggressive’ income tax avoidance scheme involving property business loss relief.
The scheme is the third to come to light recently that has targeted trading and property reliefs, as the Government ramps up its anti-avoidance measures.
According to the Financial Times, the scheme is believed to have threatened £2 billion worth of revenues over the last five years, which is why the Treasury moved to snap it shut immediately, rather than waiting for next week’s Budget.
The loophole was being marketed to high net worth individuals as a way of reducing their end of year tax bill, the Treasury claims. Members of the scheme were involved in artificial transactions designed to generate tax relief from a property business that owns agricultural land. The goal of the transactions was to create an artificial loss that could be offset against other income, or be used to reduce a participant’s tax bill.
Commenting, on the move, David Gauke, Exchequer Secretary to the Treasury, 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.”
The Chancellor is due to respond to a report on the introduction of a General Anti Avoidance Rule (GAAR) in next week’s Budget, and may launch a consultation, following the report, which claimed that a GAAR would be a useful weapon against abusive tax avoidance schemes.
We will be covering the Budget live on Wednesday 21 March.
