Treasury closes £1bn loss relief loophole
27 May 2009, Paul Grant, AccountancyAge
http://www.accountancyage.com/aa/news/1771755/treasury-closes-gbp1bn-loss-relief-loophole
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.
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Visitor comments
Funny what difference a month makes.
Given the chancellor's Budget speech on 22 April said "But today I want to do more to help firms with cash flow problems.
Many viable companies face temporary difficulties because of the shortage of credit.
So today I am extending the help which allows loss-making companies to reclaim taxes on profits made in the last three years.
This help, which will lead on average to repayments worth £4,000 each year, will now be available for two years until November 2010.
Well over 100,000 businesses will have their full current losses wiped out. " http://www.hm-treasury.gov.uk/bud_bud09_speech.htm
Nothing to do with companies that weren't genuinely closing down - and everything to do with viable companies facing cash flow issues.
Yet more muddled thinking from the Treasury. One wonders where they find their advisors from 'cos it is clear none of them know the first thing about tax.
Posted by: David N , 27 May 2009 | 00:00