In December 2012 the government introdduced new targeted anti-avoidance rules (TAARs) in its latest bid to combat business transactions designed to avoid tax.
The trade and business property deduction rules target trades and property businesses that engage in "arrangements intended to produce a tax advantage" by exploiting the priority rules for deductions from profits to generate artificial loss relief to reduce corporation tax profits.
Effective from 21 December, the TAARs will be enacted in the 2013 Finance Act.
The measure will bring an extra £10m a year into the Exchequer and is expected to only affect firms engaging in "abusive" tax avoidance schemes.
These will apply to transactions defined as "tax avoidance arrangements" from 21 December 2012.
The new measures will alter income tax and CT provisions governing the deductions from profits of a trade or property business. Where an avoidance arrangement is found, the law will reverse the order of priority in cases where a deduction would have arisen.
Currently, the law for both individual income tax payers and companies carrying on a trade gives priority to rules allowing relief for a deduction. The TAARs are the result of HMRC being notified of avoidance schemes carried out in property businesses to exploit the deduction rules.
Under legislation in the Finance Bill 2013 however, the order of priority in cases where a deduction would be given for an amount which arises in connection with tax avoidance arrangements.
The Income Tax (Trading and Other Income) Act 2005 and sections 51 and 214 of the CT Act 2009 will be changed to introduce TAARs.
Arrangements, according to the Revenue, are "widely defined".
ICAEW's tax faculty technical manager Ian Young said the new rules are part of the government's clampdown on tax avoidance, which are not widely known about.
"Not enough people are aware of these schemes," he said. "There's just not enough done to raise their profile from HMRC," he said.
"Of course, the tides are changing when it comes to such schemes," he added.
Last year as part of Finance Bill 2012, the government introduced a raft of TAARs effective from 21 March 2012.
For more information, see HMRC's information page on the changes, while draft legislation and a TIIN are also available here.
