Personal Tax Avoidance - Government taking further action to prevent artificial avoidance scheme

HMRC has become aware of an artificial and aggressive avoidance scheme that seeks to abuse tax reliefs available for employment-related losses incurred by employees and former employees.

The Government does not accept that any of these highly contrived arrangements have the effect that is sought, however to put the matter beyond doubt a Written Ministerial Statement will be made to Parliament today confirming that the Government proposes to introduce appropriate legislation in the 2009 Finance Bill that will be effective from 12th January 2009. This legislation will prevent loss relief being allowed where liabilities relating to an employment are incurred by employees and former employees for the main purpose of the avoidance of tax.

The legislation will not affect genuine cases where tax avoidance arrangements are not involved.

Details of this action are contained in a Technical Note(PDF 24k). The draft legislation (PDF 43K) relating to this announcement is also available, as is the draft legislation relating to the earlier HMRC announcement on 12th January 2009.