The government has struck its first anti-avoidance blow ahead of next week’s pre-Budget report by shutting down two schemes that avoided tax through the sale of leasing companies.

HM Revenue & Customs said the pre-Budget report would introduce rules to block the schemes, which had escaped chancellor Gordon Brown’s original attempts to prevent avoidance in this area.

The sale of leasing companies has always been a hot area for avoidance because of the way leases are structured. Advisers said companies leasing heavy machinery, such as aircraft, helicopters and bulldozers, were being used as part of the arrangements.

Leasing businesses usually claim capital allowances creating tax losses for the first few years following a deal, which then moves into profit as the lease progresses.

In order to take advantage of this, leasing companies would attract the relief for the initial tax losses. The companies would then be purchased by another group carrying losses in order to shelter profits.

The government clamped down on this practice in Schedule 10 of the Finance Act 2006 by imposing a charge on leasing companies that benefited from tax losses in the initial years of a lease and were then sold.

Since then two schemes had been designed to skirt the provisions of Schedule 10, but after they were brought to HMRC’s attention as part of the disclosure regime government has moved to shut them down by introducing the new rules.

The two schemes reduced or eliminated the Schedule 10 charge by implementing arrangements that changed the ownership of leased equipment with an accounting value higher than its tax value.

‘There were a few clever people who managed to find a way around Schedule 10,’ said Chiltern tax director Bernard Sweet. ‘They would have put these schemes through once or twice, but they have been picked up by the disclosure regime.’

Advisers were unsure about the details of the rules, which will be announced in the pre-Budget report and became effective from 22 November.