Action to counter avoidance that relies on using sideways loss relief has been announced. Legislation will be included in the Finance Bill 2010 but will be effective from 21 October 2009.

The new rules will prevent sideways relief and capital gains relief (‘sideways loss relief’) given for a loss from a trade, profession or vocation where the loss arises from tax avoidance arrangements.

This measure targets those who enter into arrangements for the purpose of obtaining a reduction in tax liability by means of sideways loss relief. It does not impact on loss-makers who have not entered into avoidance arrangements.

HMRC has published draft legislation, explanatory note and guidance on this measure which is available on the HMRC website; www.hmrc.gov.uk