Primarolo warns on tax avoidance

Paymaster general Dawn Primarolo has won unprecedented Tory backing for outlawing rent factoring designed to secure excessive tax relief and announcing swift counter-action if any similar schemes emerge.

And she warned those engaged in ‘a game of cat-and-mouse’ between tax planners and the Revenue that the government would stop the abuse.

She told MPs on the Finance Bill Committee: ‘This is the warning: we will not hesitate to act against any equivalent schemes that are designed to obtain a tax deduction that is not justified by the true substance of the transaction.’

And shadow finance minister Oliver Letwin said: ‘The government is absolutely right and it is astonishing this action has not been taken before.’

He said the Opposition would support similar action against analogous activities – particularly against distortions involved in leasing schemes – and a future Conservative government would do the same.

The crackdown will apply only to schemes entered into after Budget Day.