THE TREASURY has closed a “contrived and aggressive” tax avoidance scheme involving losses on investments in agricultural businesses.
The scheme, which was marketed to wealthy individuals as a way of reducing their tax bill, tried to use “highly artificial transactions” to generate tax relief from a property business that owns agricultural land, the Treasury said.
Although the land and the property business owning it exist, the transactions are not part of any genuine agricultural business and are generated only to create an artificial loss that investors can offset against their other income to reduce their tax bill, the Treasury said.
To close this scheme and protect the Exchequer from “significant losses”, which could have cost it £2bn of revenues over five years, according to the Financial Times, the government will introduce legislation in the 2012 Finance Bill 2012 to close the loophole. The legislation will have effect from today.
The agricultural tax scheme was the third contrived and aggressive avoidance scheme that has recently tried to target trading and property reliefs, the Treasury said.
David Gauke, Exchequer Secretary to the Treasury, said: “Today’s action will not affect legitimate agricultural businesses, but by acting swiftly, the Government has prevented this scheme being used by people who want to escape paying the tax they owe. We won’t hesitate to close other avoidance schemes down as we become aware of them.”
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