Treasury closes £1bn loss relief loophole
Finance bill amended to stop healthy companies claiming relief meant for closed businesses
The Treasury has moved to block a loophole in business tax relief that could
have cost the exchequer up to £1bn.
Changes have been made to the finance bill that will stop companies using a
scheme to claw back taxes paid when they were profitable by ‘artificially
engineering a deemed cessation of trading’, reported the
Financial
Times.
Last week, financial secretary Stephen Timms told MPs that HMRC believed the
scheme ‘is capable of being used by a large number of companies with the
consequent risk of a significant loss of revenue’.
Without the amendments to the bill, companies would have been able to
reorganise in order to make themselves eligible for terminal loss relief, which
allows companies to offset losses made in the year before a business closes
against profits made in the previous three years.
Further reading: