As part of its policy to close down avoidance schemes as and when HMRC become aware of them, last month the Government announced that it will introduce new legislation to counter tax avoidance relying on post-cessation trade relief.

As is tradition, this will apply from the date of the Written Ministerial Announcement, 12 January, and brings the total number of schemes closed down in this manner since the last Budget to 5 in total with 1 announcement on anti-avoidance in the area of Tax Treaties withdrawn. It is clear that the Government will seek to act swiftly where it sees new schemes being developed though how this will sit in the context of the proposed (and still under consideration) General Anti Avoidance Rule remains to be seen.

The current scheme being closed down seeks to generate post-cessation trade relief for set-off by users of the scheme against their other income or capital gains. It is HMRC's view that this scheme relies on arrangements that have a tax avoidance purpose therefore the Government does not accept that these arrangements have the effect that is sought.

Draft legislation has been published and comments are invited on this by 12 March. More information is available at http://www.hmrc.gov.uk/budget-updates/march2011/index.htm#12Jan12