Treasury closes avoidance loophole

The Treasury has slammed the door on avoidance schemes in which individuals
claim tax relief on loans used to invest in partnerships or small companies.

The measures are intended to affect loans in which the deductibility of
interest means the investor is guaranteed a profit.

Financial secretary Stephen Timms said he was acting after HMRC received
notification of the avoidance arrangements.

In a statement to the Commons on the inclusion of a provision in the next
finance bill, he said that, in future, interest will not be eligible for tax
relief in these circumstances but undertook that the curb will not catch
‘genuine commercial arrangements’ where there is uncertainty as to the return on
the investment.

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